Description
Creative Entrepreneurship in Asia
From:
Creative Entrepreneurship in Asia
©APO 2005, ISBN: 92-833-7035-X
Report of the Study Meeting on
Creative Entrepreneurship held in Taipei, Republic
of China, 18–21 May 2004
Edited by Prof. Tan Wee Liang
Published by the
Asian Productivity Organization
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ASIAN PRODUCTIVITY ORGANIZATION
Objective
The Asian Productivity Organization (APO) is an inter-governmental regional
organization established by Convention in 1961 to increase productivity in the countries of
Asia and the Pacific through mutual cooperation.
Membership
APO membership is open to all Asian and Pacific Governments that are members of the
Economic and Social Commission for Asia and the Pacific (ESCAP) of the United
Nations. Governments outside Asia and the Pacific may become Associate Members.
APO member countries are: Bangladesh, Republic of China, Fiji, Hong Kong, India,
Indonesia, Islamic Republic of Iran, J apan, Republic of Korea, Malaysia, Mongolia,
Nepal, Pakistan, the Philippines, Singapore, Sri Lanka, Thailand and the Socialist
Republic of Vietnam.
Organization
The supreme organ of the APO is the Governing Body. It comprises one Director for each
member country designated by their respective governments. The Governing Body
decides on the policies and strategies of APO programs, and approves its budgets,
finances, and matters relating to membership.
The Secretariat, based in Tokyo, comprises the Secretary-General and Secretariat staff
who execute the annual programs approved by the Governing Body. It has established
operational networking with the designated National Productivity Organizations (NPOs)
which act as national change agents for productivity promotion and as implementing
agencies for APO programs in member countries. It also has close working relationships
with other international organizations.
Roles
The APO serves as think tank, catalyst, regional advisor, institution builder and clearing
house for productivity information to member countries. It assists member countries
through human resource development, technical expert assistance and dissemination of
knowledge and know-how on productivity.
Programs and Activities
APO's programs cover the industry, service and agriculture sectors, with special focus on
socio-economic development, small industry development, human resources management,
productivity measurement and analysis, quality management, production and technology
management, information technology, development of NPOs, green productivity,
integrated local community development, agribusiness, agricultural development and
policies, resources and technology, and agricultural marketing and institutions.
Its activities include basic research studies, surveys, symposia, study meetings, training
courses, seminars, fellowships, technical expert services, study missions, publications, and
audio-visual training materials.
Report of the Study Meeting on Creative Entrepreneurship held in Taipei, Republic of China
from 18 to 21 May 2004.
This report has been edited by Prof. Tan Wee Liang.
The opinions expressed in this publication do not reflect the official view of the APO. For
reproduction of the contents in part or in full, the APO’s prior permission is required.
©Asian Productivity Organization 2005
ISBN: 92-833-7035-X
FOREWORD
The APO co-organized the Study Meeting on Creative Entrepreneurship in Taipei,
ROC, 18–21 May 2004, with the China Productivity Center. Since its inception in 1961, the
APO has consistently placed great importance on the productivity and quality improvement
programs and activities of its member countries. Small and medium enterprise (SME)
development constitutes one of the APO’s thrust areas, and one key aspect of SME
development is the fostering of entrepreneurs.
The study meeting, with the theme “Creative Entrepreneurship” was a timely event.
Entrepreneurs often create significant breakthroughs and bold innovations in all fields of
business. Entrepreneurial organizations similarly create new value and contribute to the
economic growth of nations. The study meeting offered a valuable opportunity to examine
not only creative entrepreneurship in SMEs but also in large corporations and how to foster
creative entrepreneurs in the business sector.
The event brought together a panel of distinguished speakers, both from the ROC and
overseas, to cover a broad range of issues ranging from the key success factors for
entrepreneurial creativity in firms to implementing creative entrepreneurship in established
firms, incubation of innovative enterprises, and new product development, which is an
important aspect of value creation. The panel was chaired by Professor Tan Wee Liang,
Singapore Management University, to discuss the following themes at the study meeting:
• Relevance of creative entrepreneurship for business growth and economic
prosperity
• Critical examination of success factors for entrepreneurs
• Role of stakeholders, especially the government or NPOs, in promoting
entrepreneurship
• Measures available to access entrepreneurial activities in an economy and their
economic impact
• Development of enterprise “ecosystems”
This volume is a compilation of the papers and views presented at the study meeting.
The APO greatly appreciates the efforts of Professor Tan in editing this volume. We hope
that the contents will provide information on policies, best practices, and current
developments that will be of use to policymakers, entrepreneurs, and enterprises engaged in
fostering creative entrepreneurship.
Shigeo Takenaka
Secretary-General
Tokyo
December 2005
CONTENTS
Foreword
Integrated Summary …………………….……………………………………...... 3
Resource Papers
An Interface between Entrepreneurship, Creativity and
Innovation: The Malaysian Experience………….......... Dato’ Mustafa bin Mansur
13
Implementing Creative Entrepreneurship in Corporations …….…. Tan Wee Liang
19
Product Innovation and Business Model: The Case of
OKWAP Phone ………….…………………………………..…….. J ackson Chang
28
The Strategy to Create an Entrepreneurial Incubator — The
NTU Case …………….. Kuang-Chao Fan, Helen Y.C. Hsiao and Lee H.S. Luong
40
Selected Country Papers
Indonesia ………………………………………………………….. Susanto Joseph
51
Malaysia …………………………………………….…Zainal Abidin bin Othaman
64
Philippines …….……………………………………….……… J ustino R Arboleda
71
Singapore (1) ……………………………………….…..... Aloysius Tay Ban Hock
79
Singapore (2) ………………………………..………….… Adrian Lim Meng Yan
86
Sri Lanka ……………..… Samantha Sathischandra Wanniarachchi Kumarasinghe
103
Thailand (1) …………………………………………...… Waleeporn Thanathikom
112
Thailand (2) ………..………………………………..… Wiwat Chutiwanichayakul
119
Vietnam …………………………………………….…………….. Pham Gia Minh
130
Appendices
List of Participants ….……………………………………………………………....
139
List of Resource Persons …………..……………………………………………….
142
Program and Schedule ……………………………………………………………...
143
- 3 -
INTEGRATED SUMMARY
BACKGROUND
Entrepreneurship is the driving force bringing innovations to the marketplace and
establishing a community of high-growth firms. A creative entrepreneurial sector or
community within an economy can contribute significantly to its prosperity. With change
as the constant in today's globalized world, entrepreneurs constantly seize any arising
opportunities to create new wealth. Peter Drucker in his book Innovation and
Entrepreneurship noted that: “Entrepreneurs see change as the norm and as healthy. He or
she always searches for change, responds to it, and exploits it as an opportunity.”
Embracing creativity and innovation, an entrepreneur’s products or services can
bring about business growth, productivity improvement, job and wealth creation, an
enhanced image for the economy, and ultimately a better quality of life for all. Policy
makers have recognized that creative entrepreneurship needs to be encouraged through
appropriate policies that foster entrepreneurship, innovation, and technological
development. Some countries have introduced science parks in the hope that the provision
of infrastructure will spark the development of high-tech ventures leading onto new
innovations and inventions which can become global products and services.
Within enterprises, there is a need for creative entrepreneurship. Some enlightened
corporations have fostered creative entrepreneurship within their organizations by
providing opportunities for innovation, intraorganization venture financing, and ownership
of employee-initiated projects. More needs to be done in this area to motivate the
involvement of incumbents in a corporation through tangible and intangible means. This
study meeting sought to promote the exchange of knowledge of, experience in, and
approaches to creative entrepreneurship and creativity and innovation as a strategy for
business excellence and growth in APO member countries.
Sixteen participants from the 12 member countries India, Indonesia, Islamic
Republic of Iran, the Republic of Korea, Malaysia, Mongolia, Nepal, Philippines,
Singapore, Sri Lanka, Thailand, and Vietnam contributed to the deliberations of the
meeting. Three APO resource persons from Malaysia, the Republic of Korea, and
Singapore provided resource inputs in addition to two local resource persons. To
supplement the learning with practical examples, a field visit was organized to the
National Taiwan University Innovation Incubation Centre (NTUIIC), where two of its
successful tenants, Universal Vision Biotechnology and Genozyme Biotech, were
introduced to the participants.
PROCEEDING OF THE STUDY MEETING
What is Creative Entrepreneurship?
Professor W.L. Tan of Singapore Management University introduced the meeting to
the coverage of the study meeting; namely:
a. Spheres of creative entrepreneurship:
• Who—new ventures, serial entrepreneurs, existing ventures (by
themselves), existing ventures (together with others), regions, and
networks.
• What—new products/services based on innovations or technology, new
markets, new processes, or new business models.
Creative Entrepreneurship in Asia
- 4 -
b. Challenges hindering the growth of creative entrepreneurship and how
enterprises overcame them on their own or with assistance from the private
sector and/or government.
The main themes to be covered were:
• Creative entrepreneurs
• Public policies driving creative entrepreneurship
• International creative entrepreneurs
• Technology and innovation
• Corporate entrepreneurship
Corporate Entrepreneurship
Professor Tan highlighted the potential that most enterprises neglect when they
consider ways to be creative and entrepreneurial, is that, they fail to engage the creativity
of their workforce. Corporate entrepreneurship spans a continuum of possibilities,
beginning with an R&D department, to involving only middle managers, to permeating the
whole organization.
Whatever the level or extent of the organization one wishes to engage in corporate
entrepreneurship, there is a need to change organizational factors. Certain factors have
been identified by researchers as important for fostering corporate entrepreneurship. The
most important are the attitudes of the intended employees. The proper attitudes toward
corporate entrepreneurship will lead to objectives and subsequent actions. Other factors
include organizational culture, practices, flexibility, and sponsorship of employee
innovation projects. An organizational culture that results in creative entrepreneurship
allows employees to remain with their projects (continuity), encourages communication
across areas and levels of the firm, creates cross-functional teams, encourages decision
making by all even at the lowest level of the organization, and permits project teams
multiple options so that they are not confined to procurement from limited sources. It does
not encourage risk aversion or conformity. Such organizations train and develop their
workforces, encourage creative decision making, do not frown upon projects with small
beginnings, and spread any innovation throughout the whole organization. There is
flexibility in the operation of the teams and the organization sponsors projects. In his study
of Singapore middle managers, Professor Tan found that organizational culture, flexibility,
and sponsorship influenced middle managers to become internal corporate entrepreneurs
(intrapreneurs).
Product Innovation and Business Model (the Case of OKWAP Phone)
Mr. J ackson Chang, Chairman of Inventec Appliances Corporation, expanded on
Professor Tan’s presentation by showing how his company was able to involve its project
teams in developing Taiwan’s most popular locally produced mobile telephones, with the
brand name of OKWAP. The phones have the same features as the internationally known
brands Samsung, Nokia, and Sony Ericsson.
He introduced the participants to the various considerations of an effective product
innovation process and business model: strategy (positioning, entry segment, competing
edge), execution (resources, process, and integration), and deployment (marketing and
promotion, community service, and sustaining competitiveness). Taking these into
consideration, Inventec developed its unique mobile phones with local content functions
such as the Taiwan personal digital assistant and dictionary; culture-related content such as
Integrated Summary
- 5 -
Web site support for free downloads; and access to local customized services and features
such as promotional events, community and special interest groups.
Entrepreneurship Development in Taiwan
Professor C.T. Wen explained how he developed a program at National Cheng-chi
University to develop creative entrepreneurs and entrepreneurial teams. He made a study
of overseas programs including the MIT e-Lab, University of Southern California Student
Incubator Hatchery, University of Washington New Venture Creation Lab, Osaka Venture
Factory, and Innocamp of Norway. He concluded that to foster creative entrepreneurship
in the university environment, there is a need to create activities and an environment
within which the students can develop ideas, work through those ideas, and involve
university programs and resources to refine them, and interact with the mentors provided
by the university to result in new ventures (Figure 1).
At his university, he has encouraged entrepreneurship through the mentoring of
business plan teams for the Taiwan Innovation Competition that is based on the MIT 50k
Business Plan competition. He shared his conviction that for creative entrepreneurship to
occur, a suitable milieu must be created wherein individuals can choose the combinations
that work for them. Business plan competitions by themselves do not lead to
entrepreneurship but often only create gamesmanship. He noted that there has been a
decline in student interest in such competitions.
Figure 1: Facilitating Creative Entrepreneurship at
National Cheng-chi University
Strategy for Creating an Entrepreneurial Incubator: The National Taiwan
University Case
Taiwan is a showcase for successful ecosystems for creative entrepreneurship in its
incubators. There has been an increase in the number of incubators established after the
international success of firms incubated at the Hsinchu Industrial Park, in particular at the
Industrial Technology Research Institute (ITRI). ITRI is a primary R&D center for
Seminar in Entrepreneurship
Workshop Saloon
New Venture Development Seminar
Technological Enterprise
Entrepreneurial Finance
Digital Content
Summer Camp Creativity Generation
and Practice
TIC
WE
WIN
New Venture in the
Service Industry
Academic Practical
College
Ph.D.
Master’s
YEF
Republic of
Creativity
EMBA Practical
Community
Creative Entrepreneurship in Asia
- 6 -
industry in the ROC. In 1973, when ITRI was founded, there was very little high-tech
industry in the country. Today, the ROC is a world-class player in semiconductors,
personal computers, and many other high-tech sectors. ITRI has played a significant role
in this transformation.
Professor K.C. Fan outlined the way in which National Taiwan University (NTU)
created its entrepreneurial incubator center, one of many being developed by universities
and funded by the government. The entrepreneurial incubator center enables professors’
involvement in consultancy, students’ involvement in internships, and the university’s
involvement in setting up laboratories, facility utilization, and entrepreneurial programs.
The additional expected benefits include commercialization of technology developed on
campus, the formation of academic team groups as new start-up teams, and linkages
between the university and industry. However, the center will face challenges, as Professor
Fan noted that other university incubators have not been financially self-sustaining if
financial support from the university or government is cut. Further, their contributions to
universities are still not satisfactory in terms of equity returns. Perhaps the way forward is
to permit universities to attract private investment in the incubators, as is being tried in
China and in Malaysia.
NTU Incubation Center Site Visit
The participants learned more about product innovation through a site visit to the
NTU’s entrepreneurial incubator center. Professors K.C. Fan and Chau-Chen Yang
introduced the NTUIIC to the participants. As an incubator, the NTUIIC created an
environment for “start-ups” and “innovation” with the objectives of lowering the risk of
start-ups, improving the R&D capability of enterprises, assisting traditional enterprises to
seek advances in technology, and to extend R&D conducted at the NTU until the final
stage of commercialization.
The incubator is structured as a company that is the interface between the tenants
and the other stakeholders (internal and external). It has had modest success and has been
able to attract university alumni and notable businesspeople to act as mentors. Since its
formation in 2002, it has “graduated” 28 small and medium enterprises (SMEs)
representing 14 in information technology, 11 in engineering, and three in the field of
biotechnology. It is presently incubating 19 firms.
Two of its tenants, Universal Vision Biotechnology and Genozyme Biotech, were
introduced to the participants. Universal Vision Biotechnology is the first management
consultation company in the field of professional ophthalmic treatment and the first to
specialize in ophthalmic biotechnology in the Taiwan. It is in the incubator because one of
its projects is R&D involving the NTU faculty to improve vision biotechnology techniques
using excimer lasers, the vision treatment commonly associated with high myopia called
LASIK. The other tenant, Genozyme Biotech, focuses on biotechnology applications for
the livestock industry and produces enzymes for feed improvement and tests for the
detection of toxins in feed which ranchers can use to improve livestock yields.
The Interface between Entrepreneurship, Creativity, and Innovation: The Malaysian
Experience
Dato’ Mustafa Mansur drew from the Malaysian experience to demonstrate how
Malaysian entrepreneurs and enterprises have continued to find niches and expand their
markets. He presented two case studies: Royal Selangor International and Air Asia.
Royal Selangor International is a world-renowned producer of pewterware and
high-end gift items, including jewellery. Although it has its share of competitors who have
Integrated Summary
- 7 -
tried to mimic its products, Royal Selangor has employed an innovative marketing strategy
involving creatively displayed showrooms, on-line shopping opportunities since 1996, and
new design collections. It has found innovation to be critical because its products have
short life cycles, and its designs can be easily copied by competitors and are nonessential
luxury items.
AirAsia is Asia’s first low-fare, no-frills airline to introduce ticketless travel. It
operates frequent flights and plies routes not covered by mainline operators, saving costs
through the use of modern technologies to manage its operations like on-line booking and
payment facilities, a multilingual Web site offering real-time holiday packages, mobile
phone short message booking and checking of flight schedules, and a direct “B2B engine”
with agents and virtual credit cards. The interesting element is that the creative team did
not come from the airline industry but from the music industry. They infused techniques
used in the promotion of services and advertisements in the music industry in the new
airline.
Creativity and Entrepreneurship
Dr. M.K. Kim of Soongsil University focused on the theory of creativity and how it
interfaces with entrepreneurship. In particular, he stressed that creativity is a collective
capability that the whole organization can embrace. There are steps that organizations
need to take: they should develop skills and capabilities that make it unique both in the
present and in the future. The uniqueness is collective in nature, founded on the culture of
the organization, in particular the way it operates and communicates as a team, rather than
the creative skills of a few elite employees. The creative capability of the organization is
shaped by the way the entire staff works and feels about the organization. Therefore
creativity often involves organizational development processes rather than recruitment and
career management tasks.
SUMMARY RECOMMENDATIONS
The participants devoted time in syndicate groups to a discussion of creative
entrepreneurship. They agreed that various definitions existed but adopted Professor Tan’s
proposed definition of “any new business activity involving creativity and innovation.”
The definition is important as the type of enterprises and mindsets that the countries,
companies, and individuals seek to establish are identified based on the definition.
Through the discussions, the participants concluded that to encourage creative
entrepreneurship, policy makers need to encourage the various stakeholders in society to
enhance the adoption of technology and encourage innovation within enterprises. These
stakeholders include governments, trade associations, and tertiary educational institutions.
The Role of Governments, Trade Associations, and Other Stakeholders
It is important for governments, trade associations, and other stakeholders to assist
entrepreneurs in sharpening their skills in management and leadership qualities and to
provide the necessary tools to identify opportunities. They often provide the external
impetus and staff experience that lead to productive changes in management processes
facilitating the creation of new products and services. Their suggested main roles are:
Government: foster the environment conducive to creativity and the adoption of
technology.
Creative Entrepreneurship in Asia
- 8 -
Trade/industrial bodies and societies: act as catalysts for business growth,
facilitators of governmental policies, and channels for businesses information.
Institutions of higher learning: provide specialists and researchers, platforms for
technology development, and tools for management and serve as focal points for
economic literacy.
They can provide platforms for entrepreneurs to move forward in the right
environment to create, innovate, and adopt technologies to succeed or to survive. There are
six elements in successful and positive environments for creative entrepreneurship: market
support, intelligence support, financial support, legislative support, technology support,
and infrastructure support. These elements of the environment should be freely accessible
to entrepreneurs. They should work hand-in-hand to promote the efficiency and
productivity of enterprises leading to a synergistic outcome.
Pertinent to creative entrepreneurship is the role of these stakeholders in the
promotion of innovation and technology adoption. The participants recommended the
following:
Networking
Networks should be encouraged as they are means for the exchange of ideas.
Alumni networks, trade associations, industrial bodies, and informal business contacts
could provide a good platform for like-minded and complementary business people to
interact, exchange best practices, and possibly ignite technology transfers among
enterprises. Networks can facilitate the rapid dissemination of knowledge and know-how.
In addition, trade or industrial bodies and societies can be screening agents for promising
business matchmaking opportunities, thus enhancing the ability of businesses to
collaborate.
Government Policies
Governments could assist in providing conducive environments for the creation of
innovation and the adoption of technology. In many countries, governments could provide
technology upgrading incentive schemes and financing schemes to ease cash flows or
increase capital for R&D activities within enterprises. Governments may pass laws or
guidelines to protect SMEs from intellectual property rights abuses. This will encourage
small businesses to innovate and reinvent. The main objective of government policies on
these issues is a substantial net increase in the level of high-quality R&D in enterprises
and to ensure an integrated and unified approach to research-related activities. These
should cover industrial R&D, process development and innovation, and technology
acquisition.
Communication
Organizations should be encouraged to promote open channels of communication
among all levels of management so that no ideas are brushed aside. Stakeholders could
play a significant role in the provision of information and intelligence to enterprises. For
example, industrial associations could provide regular updates on changes in government
policies and new incentive schemes to enterprises. This would make it easier for enterprise
decision makers to utilize government incentive schemes.
Integrated Summary
- 9 -
Incubators and Mentors
Incubators run by universities and research groups could assist businesses,
especially SMEs, to grow in a conducive environment. Researchers, specialists, and
consultants should be available to the enterprises being incubated. The credibility of the
“host” incubator could lend weight to the tenants, thus attracting better funding from the
government or business “angels.” Access to R&D facilities is the main advantage for
promising SMEs to be based in incubators. Mentors can lend their experience to the
incubating enterprises and guide them through the potentially disruptive innovation
process.
Education
Educational institutions could provide the technical know-how and the innovation
process management skills to senior managers in corporations. Studies have also shown
that general education can enhance innovation. The adoption of technologies is more rapid
in countries with higher literacy rates. Thus education and academic institutions can play a
significant role in the adoption of technology and innovation creation in an economy.
Business plan competitions, which incorporate technology adoption and innovation,
are a good opportunity to start young budding entrepreneurs thinking about innovation at
an early age. In some countries, business plan competitions have already been established.
APO Entrepreneur of the Year Award
To encourage innovation and to measure the success of entrepreneurship, the
participants suggested the introduction of the APO Entrepreneur of the Year Award (EYA).
The award could provide a consistent platform to measure successful entrepreneurship.
One main criterion for the APO EYA should be the ways entrepreneurs encourage the use
of technology and the promotion of innovation retain enterprises. This may be the
hallmark of a successful entrepreneur.
CONCLUSION
Overall, the study meeting met its intended objectives. There was lively discussion
of the issues faced by member countries seeking to develop creative entrepreneurship. The
mix of policy makers, entrepreneurs, and representatives from trade and professional
associations facilitated the discussions. The country papers and case studies revealed the
myriad forms that creative entrepreneurship can take in an economy. Positive feedback
was obtained from the participants, and some of the entrepreneurs found common interest
in business ventures and may pursue collaborative alliances.
- 13 -
AN INTERFACE BETWEEN ENTREPRENEURSHIP,
CREATIVITY AND INNOVATION: THE MALAYSIAN
EXPERIENCE
Dato’ Mustafa bin Mansur
Federation of Malaysian Manufacturers
Technological know-how and the ability to manage intellectual assets are critical
considerations in every entrepreneur’s bid to gain competitive edge in today’s highly
globalize environment. The stakes are continually raised, driven by the speed of
technology advancement and comparatively lower cost of manpower in emerging
economies.
Standardization or commonization of parts and components has allowed new
upstarts and seasoned producers in lower cost countries to venture into the production of
state-of-the-art consumer electronics products, ahead of long established market leaders.
For example, China’s Xoceco was mass producing flat screen televisions for their own
Chinese market when electronic giants like Sony were only beginning to roll out in
volume. Xoceco used inexpensive standardized parts from the Republic of Korea and the
US. While it took three years for DVD players to go from US$1,000 to less than US$300,
the same price drop took only two years for DVD recorders. The same domestic price
decrease is happening to computers and cellphones. Established manufacturers could no
longer assume that it would take years before rivals could match their products.
1
The lead-
time to exploit first mover advantage in the market has become shorter.
Being skillful, competent and cost competitive is also no longer sufficient when
emerging powerhouses such as China are jumpstarting their learning curves by enforcing
technology transfer. In addition to securing competitive prices, China is pushing for high-
end designs and technologies to be transferred to her entrepreneurs as conditions for
awarding state contracts worth several billions dollars. For example, General Electric Co.
(GE) and its competitors were required to form joint ventures with state-owned power
companies. They had to transfer to their new partners, technology and advanced
manufacturing guidelines for one of its turbines which cost GE more than US$500 million
to develop. These demands are similar to those made by Japan in the 60s and 70s. Japan
subsequently outpaced US in the electronics and other industries.
2
Long established market leaders respond to the challenging market environment by
developing more complex designs that can not be easily duplicated; keeping their
intellectual creativity as trade secrets instead of applying for patents, or developing market
strategies to sell the entire package of parts and components to rivals to achieve the same
lucrative role as Microsoft or Intel in the PC industry.
Other examples include the following: Philips supplies electronic circuitry for
nearly one third of DVD recorder models sold worldwide; Sony is the world’s biggest
supplier of a key microchip at the heart of most digital cameras; and Motorola sold its
most advanced third-generation cellphone to major rival Siemens AG of Germany. Sharp
Corp. is withholding key information such as the type of equipment used, ordering parts
1
“Upstarts are Crafting Components of Change in Consumer Electronics”, Evan Ramstad and Phred Dvorak, Asian
Wall Street Journal, December 16, 2003.
2
“China Makes Power Play to Score Technology from Foreign Partners”, Kathryn Kranhold, Asian Wall Street
Journal, February 26, 2004.
Creative Entrepreneurship in Asia
- 14 -
from different makers and has even stopped patenting some factory processes because
“Patents can be hints”, said Zempei Tani, Vice President, Sharp.
3
It is clear from the above few examples that other than focusing on costs, product
and process quality, speed and efficiency, businesses must also strive for new sources of
innovation and creativity.
4
Businesses have to develop technology rapidly and to
continuously introduce new and better designs and business strategies to stay ahead of the
competition. As Jodie Ray, CIO of Texas Instruments cited, “It used to be that the
efficiency of transactions was all that mattered. Now, the capability to change quickly is
more precious than money – it’s more important than having the lowest transaction cost.”
Hence, the illiterate of the 21
st
century would not be those who could not read and write.
They would be those who could not learn, unlearn and relearn.
ENTREPENEURSHIP, INNOVATION AND CREATIVITY
According to Peter F. Drucker, “a commitment to the systematic search for
imaginative and useful ideas is what successful entrepreneurs share…entrepreneurship
can occur in a business of any size or age because…it has to do with…innovation, the
disciplined effort to improve a business’ potential…from a conscious, purposeful search
for opportunities – within the company, industry and larger social and intellectual
environment…from pulling together different strands of knowledge, recognizing an
underlying theme in public perception, or extracting new insights from failure. The key is
to know where to look
5
.”
Mr. Drucker went on to identify seven key areas in which entrepreneurs should look
for innovation opportunities namely:
a. Unexpected occurrences, including failure; for example Ford learnt from the
Edsel failure that the automotive market was segmented by lifestyle instead of
income group and promptly produced the Mustang;
b. Incongruities were used to explain Alcon Laboratories’ monopoly for its
enzyme product to dissolve the ligament in cataract removal. The enzyme was
readily accepted by eye surgeons because the product resolved the problem of
having to cut off the ligament, a step that eye surgeons were not comfortable in
performing;
c. Process needs – for example linotype made it easy to produce newspapers
quickly and advertising allowed news to be distributed practically free of charge;
d. Industry and market changes - Drucker attributed the success of brokerage
firm Donaldson, Lufkin & Jenrette to its founders’ recognizing that the market
for institutional investors would predominate in future;
3
“Upstarts are Crafting Components of Change in Consumer Electronics”, Evan Ramstad and Phred Dvorak, Asian
Wall Street Journal, December 16, 2003.
4
“The Future of Competition – Co-Creating Unique Value with Customers”, C. K. Prahalad & Venkatram
Ramaswamy, Harvard Business School Press, 2004.
5
“The Discipline of Innovation”, Peter F. Drucker, Harvard Business Review, 2000.
An Interface between Entrepreneurship, Creativity and Innovation
- 15 -
e. Demographic changes, such as when the Japanese were quick to recognize the
baby bust and education explosion around the 1970s and used the change to
move strongly ahead into robotics;
f. Changes in perception, which could dramatically bring about innovations as
with the Americans’ obsession with health and keeping fit. Their obsession had
launched magazines, health foods and exercise classes;
g. New knowledge that could require long lead times and convergence of other
kinds of technologies, such as an operational digital computer, which did not
materialize until 1946 despite knowledge about it being available by 1918.
It is noted that a combination of these areas could account for the successful and
highly profitable innovations for companies like Sony. Sony had introduced many bold
new products such as the Sony Walkman that encouraged the growth of the MTV and
innovation, development invention of the compact-disc player; the Sony Play Station,
which brought the company early leadership in the new high-end computer game business;
the Sony Everquest, which takes the lead in the on-line computer games sector, selling
low–margin hardware as a platform for high-margin software.
6
We see the interplay of exploiting the incongruities and process needs of personal
stereo, which was once considered bizarre, into a portable music device; industry and
market changes in the high-end video game entertainment industry; and new knowledge in
electronics had allowed Sony to be the only company in the world offering a broad gamut
of consumer electronics. In other words, the interplay of entrepreneurship, creativity and
innovation to allow Sony to not only create new and innovative products but also to set the
standards in dozens of product lines.
MALAYSIAN CASE STUDIES
Based on the seven key areas for innovation opportunities pointed by Drucker, we
are proud to note that Malaysia also has some good examples of companies, which have
demonstrated the same interplay of entrepreneurship, creativity and innovation. For
today’s presentation, we will highlight two cases:
a. Royal Selangor International Sdn. Bhd., “Royal Selangor” the world –
renowned producer of pewterware and high-end giftware, including jewellery;
b. AirAsia Sdn Bhd, Asia’s first low-fare no-frills airline to introduce “ticketless”
traveling.
Royal Selangor International Sdn. Bhd.
Royal Selangor
7
, was founded in 1885. Since then, the company has continuously
introduced new innovations in design and product items in line with industry and market
changes, process needs, and the development of new knowledge. Royal Selangor began
crafting mainly incense burners and candle holders for the Oriental market during the 18
th
century before expanding their selection to tankards, ashtrays and tea services for British
colonials. Since the 1970s, Royal Selangor has diversified into the design, manufacture
6
“Sony Needs Innovation More Than Efficiency”, Skarzynski & Switzer, Asian Wall Street Journal, November 26,
2003.
7
All information obtained from Royal Selangor International Sdn. Bhd.’s website – www.royalselangor.com.
Creative Entrepreneurship in Asia
- 16 -
and marketing of precious jewellery and 925 hallmarked sterling silver lines of business
which are still in operation today.
Creativity and innovation in marketing is another strength of the Royal Selangor,
which had introduced on-line shopping since 1996 – a time when many businesses in
Malaysia were only beginning to learn about the worldwide web and e-mail. As an
indication of the level of entrepreneurship demonstrated by Royal Selangor in its
marketing strategy, only 70 FMM member companies had e-mail facilities in 1997 when
FMM launched its website, FMM Net. These 70 companies represented less than 4% of
FMM’s total membership.
The innovative strength of Royal Selangor lies in the continual introduction of new
designs in anticipation of market demands as demonstrated through the company’s various
collections – from working with the Victoria and Albert Museum of London in 1996 to
create a tableware range inspired by 17
th
and 18
th
century pieces; to the launch of the Lord
of The Rings collection to cater to the demands of fans of the epic movie trilogy.
Creativity and innovation coupled with quality and style are critical to the company
because the products that they are dealing with have very short life cycles and the designs
are easily copied by its competitors, even though the reproductions are not of the same
high quality of craftsmanship or materials. In addition, the products are essentially luxury
items, regarded as decorative than functional in many cases.
The experience and knowledge gained from working with pewter is expanded
through diversification into jewellery and sterling silver items. Royal Selangor’s
acquisition of its silverware branch had included intellectual assets comprising an archive
of over 35,000 drawings, patterns and moulds, and a long-established and prestigious
brandname.
Royal Selangor is clearly a knowledge-driven company, where its entrepreneurial
founder and successors have deeply entrenched innovation and quality craftsmanship in
their operations together with the ability to accurately discern market needs and public
perception. The company, though established in the 18
th
century, has succeeded in
remaining relevant and retaining its standing as a market leader in this particular niche
through constant innovation and lateral expansion of its core competency and adjacent
8
strategies into jewellery making and silverware.
Airasia Sdn Bhd
AirAsia Sdn. Bhd.
9
, “AirAsia” established in 2001, could be considered as one of
the dynamic new upstarts, which could compete with long established operators – even
moving ahead in some areas especially in terms of innovative use of technologies. AirAsia
was purchased for RM1 or US$0.26 together with a US$36 million debt from the original
owners. Today, the airline is reportedly operating at a profit, with margins of 15% on the
US$36 million in revenue, generated within the first five months of 2004.
AirAsia provides a simple “no frills” service at fares that are generally significantly
lower than the traditional full-service airlines. As a comparison, AirAsia charges US$9 for
a flight from Kuala Lumpur to Penang while main line operators’ charge US$45.
Modeled after successful operations of the United States’ Southwest Airlines and
Dublin-based Ryanair, the entrepreneurship of AirAsia lies in its bold venture to take on
an ailing operation in a highly competitive and capital-intensive environment and turning
it around in about two years. AirAsia’s entrepreneurship also demonstrates the capability
8
“Beyond the Core: Expand Your Market Without Abandoning Your Roots”, Chris Zook, Harvard Business Review.
9
Information obtained from AirAsia Sdn. Bhd.’s website – www.airasia.com.
An Interface between Entrepreneurship, Creativity and Innovation
- 17 -
to take the lead [and risks] to introduce “no frills” service to the Asian market and plying
routes that the main airline operators were not covering and/or had perceived as not viable.
AirAsia’s innovative entrepreneurship also extends to its use of modern
technologies to manage operations and to be directly accessible by its customers. AirAsia,
with its on-line booking and payment facilities, is Asia’s first airline to record over RM130
million sales over the Internet alone. It is also the first airline in Malaysia to allow
customers to pay for their telephone bookings using credit cards or cash at the designated
banks. The ticketless service also lets customers bypass the hassle of collecting tickets.
In order to cater to the growing number of destinations covered, AirAsia is the first
Asian airline to have a multilingual website with seven languages and an Internet-based
real-time holiday package program – GO Holiday. In August 2003, AirAsia scored another
first by being the first airline in the world to introduce Short Messaging Service (SMS) to
customers to book seats, check flight schedules or obtain the latest updates on its
promotions through their mobile phones. This innovative facility is clearly driven by the
recognition of the process needs and market changes – centering on the observation that
the ubiquitous handphone is an extension of nearly every individual, even among
schoolchildren.
AirAsia has also extended its innovative information technology practice to its
agents, who have access to an Internet-based real time inventory booking engine.
AirAsia’s agents make payment via a virtual AirAsia credit card. The convenience of
booking and payment is further strengthened by the high frequency and wide coverage of
flight service. The airline has a quick turnaround time of 25 minutes, which is said to be
the fastest in the region. AirAsia is thus able to offer more flights to more areas, especially
to the lesser plied routes.
AirAsia involves local celebrities in its advertising to achieve high impact among its
target segment, the younger set of customers. This strategy could also be attributed to the
firm’s recognition of market and demographic changes in air travel in Asia, where
traveling among the younger generation and budget travels are becoming more popular.
KEY POINTS TO NOTE FROM MALAYSIAN EXPERIENCE
Having noted the above cases of Malaysian companies that have displayed
entrepreneurship, creativity and innovation in their operations, it remains for us to point
out a few pertinent key success factors:
a. These companies are considered pioneers in their respective fields of business.
However, these companies have not been complacent and demonstrate
professional will in leadership. Professional will
10
refer to the will to achieve the
following:
• Creating superb results
• Demonstrating unwavering resolve for the best long term results
• Setting and keeping standards for enduring great companies
• Looking in the mirror to apportion responsibility
10
“Putting People First & Winning the War for Talent”, Manny Lopez, Amrop Hever Taiwan at BusinessWeek – DNM
Strategies Event, 2002.
Creative Entrepreneurship in Asia
- 18 -
b. These companies are also prepared to invest in new technologies and skills,
expand their skill sets and competencies, innovate, and to design better, and
wider choices for their customers;
c. These companies are strong brand owners in direct and close contact with their
customers. The leadership instills the culture and discipline for strategy
execution, including hands-on management
11
; and
d. These entrepreneurs have capitalized on their core competency and prior
network skills and strengths their new ventures. They employ a more dynamic
management approach that constantly reinvents itself.
Taking cognizance of the above, we could conclude that the interplay of
entrepreneurship, creativity and innovation must be supported by leadership having the
following qualities:
a. Having the professional will to succeed;
b. Being prepared to continuously invest in new technologies;
c. Learning, unlearning and relearning skills sets to enhance competency; and
d. Direct contact with the market, transacting business under their own brandname
and through their own showrooms/booking facilities.
CHANGE IN ENTREPRENEURIAL DEVELOPMENT IN MALAYSIA
Supported by constant innovation and creativity these companies have today
become major benchmarks for entrepreneurial development. Royal Selangor’s expertise in
marketing and brand name development is constantly tapped upon through their
participation in various Government committees. Recently, the company was appointed
the chairperson of Malaysia’s Third Industrial Master Plan’s Technical Resource Group on
Marketing and Branding. AirAsia is also participating in the formulation of the same plan
on the logistics front.
More importantly, these companies signify the increasing change in entrepreneurial
development from being original equipment producers for large multinationals to
becoming brand name owners. Spurred on by the “Malaysia Boleh” spirit, which has now
been reinforced by our new Prime Minister’s clarion call to achieve “Excellence, Glory
and Distinction”, there are already several Malaysian companies which are also
developing the same brand of innovative entrepreneurship, particularly in the
manufacturing sector.
The manufacturing sector in Malaysia will develop faster in these areas because the
sector is very open and has been continually exposed to intense competition from new
upstarts in low cost emerging countries and concurrently being pushed by their customers
to carry out R&D. Brand ownership and brand consciousness is also strengthening as we
see more homegrown brands being promoted – such as Supermax in the rubber gloves
industry; Bonia in the leather goods sector; Silverstone, which is already well-established
in the upmarket range of tyres; Globetronics in the electronics sector; and so forth. Clearly,
Malaysia will have many more innovative entrepreneurs to show in the future.
11
“The Strategy Trap: Emphasizing Formulation, Ignoring Execution”, Neoh K. C., CEO – Asia Pacific, Atos Origin
at DNM-Business Week Strategies Event “The 12
th
Asia Leadership Forum”, December 4, 2003.
- 19 -
IMPLEMENTING CREATIVE ENTREPRENEURSHIP
IN CORPORATIONS
Prof. Tan Wee Liang
Singapore Management University
Republic of Singapore
EXECUTIVE SUMMARY
Creative entrepreneurship within organizations requires various factors to be in
place, chief of which is the organizational setting. If there is to be creative
entrepreneurship in corporations with middle managers and others striving to be
innovative and creative, there must be the right organizational culture, communications
and reward systems.
INTRODUCTION
Many market leaders in various industries today have come to the realization that
in the current turbulent environment, success is not only derived through productivity and
efficiency as understood in the traditional sense. In contrast, they require creative
entrepreneurship. Creative entrepreneurship efforts in corporations have been called
organizational entrepreneurship, corporate entrepreneurship and intrapreneurship. We
shall refer to it as intrapreneurship. Intrapreneurship has its biggest impact on long-term
organizational performance, specifically adaptiveness and survival (Gibson et al, 1985).
Miller and Friesen (1982) find that both market turbulence and competitive intensity
cause firms to be more entrepreneurial than their counterparts which face more benign
environments. As market and technological turbulence increase, new market
opportunities accumulate, giving rise to increases in intrapreneurship, at least in those
firms with climate that fosters intrapreneurial activity.
The distinction between entrepreneurial firms (large, medium or small) and firms
that have stagnated in their growth, is the element of creative entrepreneurship. In the
case of small and medium-sized enterprises (SMEs), when owner-managers of firms are
able to build entrepreneurial teams, infuse their organizations with the means and desire
to be entrepreneurial, and put in place systems that facilitate creative entrepreneurship, the
creative entrepreneurship initially embodied in the founder of the firm continues. Large
corporations are keen to continue to be entrepreneurial. Researchers in creative
entrepreneurship within organizations have been intrigued by the elements needed for
intrapreneurship to take place. The basic premise of such elements is simple: many hands
make light work. There are creative individuals in every organization whose energies
have not been harnessed towards adding value in the organization’s inventions,
innovations and processes. Intrapreneurship, if implemented by the entrepreneurial firm,
seeks to empower individuals within the corporation to function like entrepreneurs.
Instead of a firm of employees, the intention is to create a community of entrepreneurs
(Kao, 1997).
One does not need to go far to find examples of creative entrepreneurship in
organizations. The classic example is one multinational corporation known by its
acronym, 3M. Plenty of creativity in an informal working environment helps the “Post-It”
Creative Entrepreneurship in Asia
- 20 -
giant 3M to stand out in rigorous competition. “Anything that sticks or scraps, 3M
makes,” goes the saying. 3M started off making sandpaper and sticky tape, but because
of its relentless innovativeness, it developed Post-it Notes, medical laser imager, Fibrlok
fiber optics splices, Scotch-Brite Never-Rust-Wool soap pads, and even hydrofluoraether.
The company stipulates that 30% of each year’s sales must come from products less than
four years old (3M, 2004a). McKnight’s Principles form the basis for the corporate
culture that encourages employee initiative, innovation and provides secure employment.
He said:
"As our business grows, it becomes increasingly necessary to delegate
responsibility and to encourage men and women to exercise their initiative.
This requires considerable tolerance. Those men and women, to whom we
delegate authority and responsibility, if they are good people, are going to
want to do their jobs in their own way.
"Mistakes will be made. But if a person is essentially right, the mistakes he
or she makes are not as serious in the long run as the mistakes management
will make if it undertakes to tell those in authority exactly how they must do
their jobs.
"Management that is destructively critical when mistakes are made kills
initiative. And it's essential that we have many people with initiative if we
are to continue to grow."
(McKnight Principles enunciated in 1948. Source: 3M (2004b)
One of 3M’s corporate goals is the promotion of entrepreneurship and insistence
upon freedom in the workplace to pursue innovative ideas. Its management believes that
it is essential to provide an organizational structure and work climate which respects the
dignity and worth of individuals, encourages initiative, challenges individual capacity,
provides equal opportunity for development, and equitably rewards effort and
contribution.
WHY INTRAPRENEURSHIP?
There are various reasons why companies adopt intrapreneurship. Firstly, there is a
rapidly growing number of new and sophisticated competitors (Miller and Friesen, 1982).
The specific job of entrepreneurship in the business enterprise is to make today’s business
capable of creating the future, and of re-inventing itself into a different business.
Organizational entrepreneurship will enable today’s already existing – and especially
today’s already successful – businesses to remain in existence and to remain successful in
the future. Firms need to continue to innovate and change in order to avoid stagnation
(Miller and Friesen, 1982). Secondly, it would prevent an exodus of some of the best and
brightest people who are leaving corporations to become entrepreneurs. An
intrapreneurial climate helps to reduce the turnover of innovative-minded employees
disenchanted with bureaucratic organizations (Kanter, 1983; Pinchot, 1985). Lastly, a
conducive environment allows the corporation to tap the innovative talents of its
employees and managers (Kuratko and Hodgetts, 2000).
In addition to the preceding reasons, there are three more immediate benefits from
intrapreneurship. Firstly, relationships with customers will be improved. Since
customers are one of the most important sources of information, more attention is paid to
their needs, concerns and ideas. The outcome of this is more satisfied customers and
Implementing Creative Entrepreneurship In Corporations
- 21 -
repeated patronage. Secondly, the organization will be a better place in which to work. It
will be more fun, more stimulating and more rewarding. This will help improve morale
and the relationships between organizational members. Although the products and
services of the organization are the primary focus of intrapreneurship, employees will also
begin to pay more attention to the process of their work. Thirdly, organizational
entrepreneurship can also help improve the relationship with outsiders, which will lead to
a more socially responsible organization (Cornwall and Perlman, 1990).
At this juncture it must be highlighted that what this paper covers with respect to
organizations could be extended to economies. Like an organization that needs to
encourage and reward entrepreneurship, countries may need to do likewise to engender
mindset changes among their populations. In the same way that corporations have to put
into place available finance for corporate ventures, countries have to provide
infrastructure and encourage a vibrant venture capital industry.
IMPLEMENTING INTRAPRENEURSHIP
At What Level
Assuming that the powers that be, the leaders of the firm are keen to implement
intrapreneurship, there is a need to consider the levels within an organization that will be
empowered to be entrepreneurs. If intrapreneurship is to be seen at all levels of the
corporation, there are implications for approach to intrapreneurship has implications on
the systems that need to be in place for empowering innovation at all levels. Pinchot
(1997b) suggests that organizations must keep their systems open to all levels of
innovation all the time: continual improvement, process breakthroughs, line extensions,
new products and services, new ways of working together, new internal services and new
organizational patterns. These systems are needed because changes in innovation is more
than just ideas; in fact, the bottleneck for innovation is generally in the implementation
(Pinchot, 1997a). The changes in organization systems will create the conditions for
intrapreneurship.
Creating the Conditions for Intrapreneurship
Fuller (1995) identified the typical process of empowered innovation as
encompassing the following steps:
1. Generation of a new idea
2. Discussion with a facilitator
3. Questions asked by the facilitator
4. Submission of an idea proposal to the facilitator
5. Review and comment by a group of consultants
6. Review of consultants’ contributions
7. Development of implementation plan
8. Search for sponsorship
The innovative process can only take place smoothly if it is well supported by
conducive organizational climate that encourages intrapreneurship. Research has shown
that there are five groups of conditions that lead to the internal stakeholders in an
organization - managers and employees – to acting as corporate entrepreneurs. Hornsby,
Kuratko and Zahra (2002) found that such an environment would:
Creative Entrepreneurship in Asia
- 22 -
• Provide management support
• Allow work discretion
• Institutionalize rewards
• Make time available for intrapreneurial pursuits
• Principles to encourage activities outside the organization boundaries and thus
may be risky.
We elaborate on each of these conditions in the subsequent sections.
Management Support
Providing management support may entail the corporation making available
funding resources or hiring the right people and establishing cross-functional teams that
cut across departments in their organizational structures. An instance where
intrapreneurship took place can be seen in the example of Trek 2000 [Vignette 1]. In this
instance Henn Tan knew he needed new skills for an innovation. He hired the key team
members and gave them the required resources. He became the champion and mentor. It
was necessary for resources to be drawn from the various parts of the organization for the
team.
Allowing Work Discretion
This has been lauded by the popular accounts of the practice in companies like 3M
and Hewlett Packard. Not many companies expressly provide for discretionary but the
culture is unwritten within each firm. This corporate culture would have norms that favor
innovation and intrapreneurship, and an understanding that employees have the
opportunity and decision-making on the part of employees.
Rewards
If one is expecting all the employees to do more than their job descriptions, it is
therefore not surprising that there must be reward systems to address their efforts.
Tangible rewards in the form of bonuses, incentives or share options are important but
need to be augmented with intangible motivation. Intangible motivation could be by way
of recognition within the organization. Recognition could project these individuals as role
models for the others and helps to build an internal organization culture that is pro-
enterprise and pro-new ventures. The critical element here is for the organization to be
consistent in their words and actions. A word of caution is needed, the rewards and
recognition must not be perceived as a system to get them to work harder; if not, the
intended objective would thus fail.
Vignette 1: Trek 2000
Henn Tan started his business as a distributor of electronic components and
customized systems, serving the supply chains of large multinational corporations such as
Sanyo, Sony and the like in the South-east Asian region. His customers were the
multinational corporations, their subsidiaries and subcontractors.
Implementing Creative Entrepreneurship In Corporations
- 23 -
The creative entrepreneurship present at the start-up stage was his acquisition of an
existing business as his vehicle so that he could project the image that the firm had been
around for a number of years and was not a new company. He left employment in a
Japanese multinational where he had learnt the ropes about the electronics industry and
their supply chains, and acquired Trek Technology. He also acquired another company,
Shing Components which enabled him to tap into Shing’s network of suppliers and
regular clients. He was successful in building Trek Technology into a trading company
that was acknowledged as a regional distributor of electronic components. Such
impressive track record prompted Sanyo to make an offer to buy a controlling stake in his
company.
Henn Tan would not be an example of continued creative entrepreneurship had he
been content to stop and be satisfied with a successful distribution business. Instead he
built an entrepreneurial engineering department. He did not select individuals based on
professional or academic qualifications alone. He built a team that was as excited as he
about building a technology-based firm. The team he built was highly motivated. In
1999 he recruited a young polytechnic graduate who became the technological father of
the Trek thumb drive - the flash memory portable hard disk.
Although Henn Tan has not called it as intrapreneurship, that is what he has done.
He built and shared his vision of being more than a components supplier with his
engineering team. It has sought to provide complete solutions for the users of their
components. Their early projects included the development of the decoder cards and
subsystems for the video compact disc (VCD) players. The engineering department
sought projects in which they could imbed software or systems onto generic components
to deliver added value for the customers. For this to happen the team members must
believe that Henn had faith in them, know that they would be suitably rewarded, provided
with the necessary resources, and empowered to carry out the necessary to achieve the
goals.
The thumb drive project was driven by Henn’s project manager. He and the team
used the flash memory invented by Masouka at Toshiba with the Intel Universal Service
Bus (USB) together with their custom-designed software to provide Trek Technology
with the product that made its listing on the secondary board SESDAQ exciting. With the
thumb drive, Trek 2000, the listed vehicle that consolidated Trek Technology and Shing
Components, became an original equipment manufacturer. The thumb drive is used by
IBM and labelled as its mobile storage device, Memory Key, and by Sonnet as its range
of portable flash drives-Piccolo.
Prepared by Oscar Hauptman and Tan Wee Liang
Boundary Spanning Activities
The organization must be prepared to extend their scope beyond their core
business. The second vignette “Popular E-Learning” is an example of this. Popular’s core
business was book publication, distribution and retail. The CEO of the company decided
it was time to consider e-learning as an area for business development. Not having any
competences in house, the CEO recruited the expertise required and assembled a team
around the project.
Related to the extension of the business beyond boundaries, is the need for the firm
to continually be on the look-out for new technologies. In order for this extension to
happen, there needs to be technology scanning activity on the part of the firms. The firm
needs to have teams and involve others to be on the look out for technology that is
Creative Entrepreneurship in Asia
- 24 -
relevant to their operations and even technology that is unrelated to their existing
businesses.
Vignette 2: Popular E-Learning
Popular Holdings is a second-generation family business in educational materials.
It began as a chain of book stores spanning Singapore, Malaysia and Hong Kong. In the
late 1990s its current CEO Chou decided to embark upon e-learning as one of the key
pillars of the company's strategy for the 21st century. As the skills and know-how was not
present in his company, he searched for suitable individuals whom he could recruit to
spearhead this new venture.
Chou recruited by Hee, who had worked for an educational software company and
had working experience with the Ministry of Education in Singapore. Hee was familiar
with the e-learning issues and challenges confronting educational institutions. Thus it was
not difficult for him to develop the strategic roadmap for the company and to assemble the
needed team members.
Popular’s e-learning strategy is not built on Hee’s team alone. It is also built upon
the capabilities of the firm in its existing team of educationists and a production team
being able to develop material for the Singapore, Malaysia, Hong Kong and Canadian
markets. It also relied upon the software capability within the firm which that had been
responsible for primary school CD-ROM based material. Hee also built the strategy
around distribution channels that Popular has in its retail chain and logistics arrangements.
Bringing in additional experts, Popular is poised to the leader in e-learning for the
preschool and primary school levels.
This case highlights the importance of attracting and using the right professionals
for creative entrepreneurship in firms. Had Chou been afraid to lose control over his
empire, and have insisted to persist in an area where he did not have the requisite
knowledge or expertise, Popular would not be able to excel. Chou was not afraid to recruit
creative people, to put in place and to allow them to lead. Firms desiring to be creative
must be willing to facilitate the creative process in which one key is to bring in the right
people.
ORGANIZATIONAL ENVIRONMENT & INTRAPRENEURSHIP
In the previous sections, we have outlined some of the research and conditions
suggested. The prescriptive literature advocates that the creation of the organizational
climate is needed to sustain intrapreneurship. It is hypothesized that in so doing, the
individuals in the firms would give their best ideas or efforts to the firm and hence, the
firm would benefit from intrapreneurship. If so, the presence of these factors would have
an impact on the managers’ attitude towards intrapreneurship and would have prompted
action in that regard.
To explore this question, the author conducted a survey-based study conducted on
middle managers in Singapore. The instrument comprised twenty-seven questions
developed from the literature such as Pinchot (1985), and Cornwall and Perlman (1990)
on the organizational climate (culture and practices), measures of the individual’s
attitudes and behaviours, and the characteristics of the organization. In addition to the
statements on organizational climate, the respondents responded to a statement each on
the extent to which innovativeness contributed to the growth and profit of their
organizations, whether they had sufficient knowledge and skill, and whether they would
Implementing Creative Entrepreneurship In Corporations
- 25 -
like to be intrapreneurs. The questions were deliberately kept to the minimum to fit a two-
page survey to encourage the return of completed questionnaires. A seven-point Likert-
like scale measured both the items and the dependent variables.
A sampling frame was developed to select the top 600 companies with the largest
annual sales volume above S$60million from the Singapore 1000 Directory representing
the service, electronics, manufacturing and construction industries. The companies were
classified into four broad categories. The service industry included the financial
institutions and hotels. The oil and chemical sectors were included in the manufacturing
industry. Six hundred companies were telephoned to identify middle managers who
would agree to participate. Middle management in the areas of Engineering, Human
Resource, Marketing, Production, Public Relation, and Research & Development (R&D),
were chosen because of their involvement in both strategic and tactical decisions.
Resulting from the phone calls we sent 434 questionnaires (about 72 percent of the
prospects) by fax. A total of 106 completed questionnaires were received, which
translated to a response rate of 24.4 percent. Four questionnaires were rejected because
they had missing, incomplete or invalid responses. The responses represented the targeted
industries satisfactorily.
It was found that the organizational climate factors appear to have a direct effect
on intention of being intrapreneurs. Organizational culture, organizational flexibility and
innovativeness appear to influence intention. Detailed findings of the regression analysis
are shown in Table 1 below. The finding that we confine ourselves to discussing is
regression 3 [R3].
This study provided empirical evidence that conducive organizational culture and
flexible organizational structure had significant impact on intention of middle managers to
become intrapreneurs. Corporations should thus be encouraged to continue work
developing such environments to encourage greater intrapreneurial efforts. They should
inculcate an intrapreneurial organization culture that allows inventor/innovators and their
teams to continue with the project. Continuity harnesses commitment to the project and
avoids information loss that occurs when large corporations stick to the usual practice of
transferring projects to different teams. Organizations should have upward and horizontal
open communication system which allows feedback on new ideas to occur
quickly. Employees should be empowered without being constrained in the options
available for their needed resources, approvals or intended markets. They should foster a
tolerance for mistakes, encourage “trying” or risk-taking, experimentation without fear of
failure. An intrapreneurial organization culture should not insist on conformity as any
pressure to conform would inhibit the creative process.
Where organizational flexibility is concerned they should allow organizational
flexibility enabling employees to cross the boundaries of existing structure of
organization, avoiding the jealous tendency to turfiness blocks innovation. Companies
should also employees promote innovation and highlight its contribution to growth of the
companies. Employees who perceive that their innovativeness contributes to the growth
and profit of the corporation are more likely to act innovatively. Recognition of the
contribution and publicity about innovation and intrapreneurship would thus be needed.
Together with intangible recognition, companies should also provide for tangible rewards
systems. Clear criteria should be articulated for risk-taking and innovation. This will
promote risk taking and employees will get the assurance that their companies take into
consideration their innovative spirit when assessing them.
Creative Entrepreneurship in Asia
- 26 -
CONCLUSION
There is a growing realization that creative entrepreneurship is needed in corporations. A
growing enterprise needs to sustain its competitiveness. An established business can ill
afford not to continue to find new capabilities, strengths, products and services to build its
competitive advantage. In this paper, we have examined some of the factors in a
corporation’s internal environment that may be needed.
REFERENCES
3M (2004a), McKnight Principles,
<http://www.3m.com/about3M/history/mcknight.jhtml>, (Accessed 16 May 2004)
3M (2004b), A Century of Innovation, < http://www.3m.com/about3m/century>,
(Accessed 14 May 2004).
Cornwall, Jeffery R., and Perlman, Baron (1990), Organizational Entrepreneurship,
Homewood, IL: Boston-Irvin.
Fuller, Brad (1995), A Process for Intrapreneurship,
<www.bradfuller.com/Publications/innovate.html>, (Accessed 16 May 2004).
Gibson, J. L., Ivancevich, J. M., and Donnelly, Jr., J. H. (1985), Organizations (5
th
ed.),
Plano, TX: Business Publications
Kanter, Rosabeth Moss (1983), The Change Masters, London: Routledge.
Kao, Raymond W. Y. (1997), An Entrepreneurial Approach to Corporate Management,
New York: Prentice Hall.
Kuratko, Donald F., and Hodgetts, Richard M. (2000), Entrepreneurship A Contemporary
Approach, Thomson Learning.
Miller, Danny, and Friesen, Peter H. (1982), “Innovation in Conservative and
Entrepreneurial Firms: Two Models of Strategic Momentum”, Strategic
Management Journal, 3.
Pinchot, G. (1985), Intrapreneuring, Harper & Row: New York.
Pinchot III, G. (1997a), Innovation,
<http://www.pinchot.com/pinweb/instruments/climsurv.html>, (Accessed 16 May
2004).
Pinchot III, G. (1997b), What Senior Managers Can Do,
<http://www.pinchot.com/senior.htm>, (Accessed 16 May 2004).
Zahra, S., Hornsby, J., & Kuratko, D., (2002). “Middle Managers' Perceptions of the
Internal Environment for Corporate Entrepreneurship: Assessing a Measurement
Scale.” Journal of Business Venturing, 17(3): 253-273.
I
m
p
l
e
m
e
n
t
i
n
g
C
r
e
a
t
i
v
e
E
n
t
r
e
p
r
e
n
e
u
r
s
h
i
p
I
n
C
o
r
p
o
r
a
t
i
o
n
s
-
2
7
-
R6
Action
**0.363
-0.126
0.138
0.107
0.032
*0.217
0.053
0.137
0.44608
***9.36178
102
R5
Intention
*.228
-0.120
*0.207
*0.240
-0.042
**0.254
**0.227
0.47189
***11.99914
102
R4
Action
***0.452
-0.153
0.181
0.202
0.031
0.36112
***10.85261
102
R3
Intention
*0.302
-0.156
*0.230
***0.354
-0.026
0.33874
***9.83545
102
R2
Feasibility
0.114
-0.177
0.064
**0.363
0.070
0.14737
**3.31864
102
R1
Desirability
0.191
0.018
0.034
0.125
-0.002
0.09106
1.92353
102
Table 1: Multivariate Regression Analysis on Desirability, Feasibility, Intention, and Action
Culture
Practices
Flexibility
Perception
Sponsorship
Desirability
Feasibility
Intention
R-square
F
N
* indicates probability level of 0.05 ** indicates probability level of 0.01 *** indicates probability level of 0.001
- 28 -
PRODUCT INNOVATION AND BUSINESS MODEL:
THE CASE OF OKWAP PHONE
Jackson Chang
Inventec Appliances Corp.
Republic of China
IDEA AND INNOVATION
People sometimes get confused about the difference between ‘idea’ and ‘innovation’
even though a clear definition of ‘innovation’ can be easily found in many management
books. Normally, in our understanding, we would recognize that ‘idea’ is a part of
‘innovation’. Innovation is a process that consists of three major portions - an exciting idea,
the implementation method of the idea, and the approach that brings implementation to the
market. Idea is just the start (or initial step) of innovation. Idea is like the seed of a flower,
which needs to be incubated to become a real innovation. A business cannot be successful
with only great ideas, but without the implementation and marketing steps.
Furthermore, for any specific great idea, the product innovation process (which
implements the idea) and the business model (which brings implementation to the market)
might also be very different. It is important to know that one cannot put all ideas into one
format of innovation process and business model; and hope that all the ideas will always
be successfully implemented and marketed. Therefore, it is rational to say that a “good
idea” needs an “effective product innovation process” to implement and an “effective
business model” to market the implementation result. Product innovation process and
business model which are effective to a specific idea, may not be as effective for other
ideas.
Under the constantly changing environment and competition, the company of today
should try to create value for users and customers through continuous innovation as a way
of survival. In this paper, we describe the manner in which Inventec Appliances
Corporation has sought to apply this in its innovations to ensure a fit between its ideas, the
product innovation process and an effective business model.
INVENTEC APPLIANCES CORPORATION’S (IAC) GLOBAL OPERATIONS
Inventec Appliances Corporation (IAC) has operations in seven cities globally, with
a total of six main facilities in Taipei, Shanghai, Nanjing and Dallas of the U.S. There are
more than 1,200 engineers among its 7,000 employees. Main resources are located in
Greater China (China and Taiwan). IAC, with its headquarters in Taiwan, is one of the
major supplier to Original Equipment Manufacturers (OEMs) and Original Design
Manufacturers (ODMs) of the smart handheld and network appliance product ranges.
IAC is also developing and marketing OKWAP brand cell phone in Greater China, besides
its global OEM and ODM business.
Consolidated Revenue and Target
The consolidated revenue of IAC (including Taipei, Shanghai, Nanjing and Dallas)
was US$960 million in year 2003, more than a 100% growth in revenue over 2002’s
earnings. IAC’s compound average yearly rate is 100% for the period from 2001 to 2004.
Product Innovation and Business Model: The Case of OKWAP Phone
- 29 -
It has set a revenue target US$1,600 million for 2004 (its revenue in 2001 was US$200
million). Based on its revenue in 2003, IAC is ranked number 43rd in the list of the Top
1000 companies in Taiwan manufacturing sector.
1
Dual Business Models
Traditionally, almost all Taiwanese companies in the manufacturing sector started
their business as original equipment manufacturers (OEMs) to build up their production
skill. Between the 1970s and 1990s, they thereafter moved on to using the original design
manufacturers (ODMs) business model with design capability for global or regional
brands. The OEM and ODM business style matched the resource characteristics in Taiwan:
- lower cost of labour, a harder working and more flexible workforce, and a domestic
market constraint by a population of 23 millions people.
Many companies have successfully expanded their business from their original
small operations through connections with major OEM and ODM customers all over the
world. IAC also has the characteristic of Taiwanese companies – where majority of the
business is concentrated on some key ODM customers. IAC has improved the ODM
business model, developing it into an Integrated ODM (IODM) business model by
integrating global of engineering and supply chain together to obtain better performance in
Time-To-Time (TTM) and Time-To-Volume (TTV) production. This IODM business
model has been proven to be very effective in meeting customers’ needs in the preceding
three years (2001, 2002 & 2003). To keep the company growing as well as to raise the
level of technology in IAC’s engineering, IAC operates (in parallel with its IODM
business model) a second business model called “Community Own Brand Marketing”
(COBM) relies on COBM which adopts cell-phone products as its main source of sales
revenue. OKWAP is IAC’s own brand for its COBM cell-phone business.
As of today, almost 80% of IAC’s revenue comes from the IODM business model.
This IODM business model has the following characteristics – it is easier to ramp up
business scale, very sensitive to efficiency and cost, and is highly focused on the
customer’s needs. The COBM business model generates the remaining 20% of IAC’s
revenue. This type of business has potentially higher margins but is coupled with higher
risk as well. However, getting feedback by direct interface with end-users in COBM has
proved to be a very good training experience for all employees and therefore, a very
beneficial activity for the whole organization. In general, employees in the organization,
have become more proactive in finding ways to solve problems having receive more
knowledge directly from the field.
Companies with two business models naturally have more complicated operations
compared to companies with only one business model. Keeping the operations of two
business models in balance inevitably poses some levels of difficulties, especially in the
area of resource allocation and prioritization of strategy. Nevertheless, the experiences and
knowledge learnt from the market through the COBM business model could be a very big
advantage over the other pure ODM competitors in doing business with IODM customers.
Meanwhile, the operational efficiency achieved by IODM customers could be a very good
benefit to COBM business as well.
1
Note: A survey conducted by Common Wealth Magazine 2003.
Creative Entrepreneurship in Asia
- 30 -
Product Ranges and Smart Phone
IAC’s product range cover smart handheld and network appliances. Taking a bird’s
eye view of the electronic industry map, under the technology umbrella of the Internet, the
entire industry can be partitioned into three major blocks namely the computer-related
industry, communication-related industry and networking-related industry.
Computer-related industry and communication-related industry can be seen as being on
either end of the map with the networking-related industry sitting between them. There is
another dimension that we call the ‘consumer’ – which is not physically independent of the
three industries but overlapping them. Since the influence from consumers on electronic
products is more visible than ever before, this consumer can be depicted at the bottom of
the industry map.
Smart handheld and network appliances are converging products emerging from
concept to real application in past years. They are products that are the convergence of the
three domains of computing, communications and networking. They adopt many forms of
technologies from industries. For example, data processing capability comes from the
computer industry, wireless and wired communication capability comes from the
communications industry, and internet or network connection capability comes from the
network industry. One common characteristic of these converging products is that they are
all equipped with a connection capability that allows the exchange information with the
other devices irregardless of computer, communication or network technology. IAC views
this kind of products, including smart handheld and network appliances, as ‘access
terminals’– terminals capable of accessing and exchanging information with other devices.
Smart handheld is smaller in form and consumes less power for its mobility requirement.
IAC has made a reasonable strategic decision to build up the COBM business
relying on the product category of ‘smart phone’ in the first beginning. Selection of this
category is mainly concerned with preventing product and technology conflicts with its
key IODM customers all of whom have very strong positions in either PDA, or music
player, or network products areas. Selection of added value to this category is also a very
natural consequence of IAC’s strengths in software and Chinese cultural-based
applications. The target market of the COBM business model lies in Greater China
where there is increasing consumer demand for smart phones and other handheld devices.
CONFIGURATION OF IDEA, INNOVATION PROCESS AND BUSINESS MODEL
For any organization, the availability of a good innovation process to generate,
collect and filter ideas, and incubate the ideas into a product marketable to users is
critical for business growth. The operational efficiency of the process would play a key
role in determining the performance of a business or an organization. An organization may
adopt different approaches or multiple incentives to stimulate the generation of ideas from
inside or outside the organization. Ideas should also be collected and filtered based on the
purpose and target of the project, before being fed into the innovation process.
Normally, there are several stages in the innovation process. The whole process is
divided into the Strategy and Planning Stage, the Execution Stage and the Deployment
Stage. In the Strategy and Planning Stage, strategic decisions on product direction, product
definition and project planning are the key activities after the collection and filtration of
ideas from inside or outside the organization. In the Execution Stage, commitment and
arrangement of resources to start design and implementation of the product are the main
activities, where internal verification and external validation are needed to ensure the
quality of the executed results. After the Execution Stage, the products have been
Product Innovation and Business Model: The Case of OKWAP Phone
- 31 -
developed. In the Deployment Stage, product release is used as preparation of mass
production in order to launch the product and start sales of the product in the market
thereafter. Sustaining activities are necessary in continuously and effectively enhancing
product popularity and lengthening the product life cycle in the market. In this stage,
services and inventory control need to be executed in parallel with the product life cycle.
A well-defined business model to link all resources and the necessary supports is
crucial to the success of a product promoted to the market. The business model in detail
should include not only the product innovation process, but also other supporting
processes. A business model may be strongly related to the style of the organization in
running a business. However, a suitable business model for a specific, especially
innovative, product may not exist in the organization before the product is developed.
Thus, it is very important for the organization to identify which is the occasion to use an
available business model or to build up another one which is not yet available to meet the
specific requirements of the new product. A traditional business model in the organization
may not guarantee success for all new products. Building and adopting a new business
model would most certainly increase the risk and resource commitment by the
organization, at least, in the beginning.
Considerations of Effective Product Innovation Process and Business Model
In the case of the OKWAP smart phone for IAC, the major strategic decision
outcome is to have a more complete product innovation process and a new business model
(COBM) to cope with the requirements in marketing this product in Greater China; in
contrast to the traditional product innovation process and business model (IODM) which
IAC has applied since 2000.
A well-defined business model should be equipped with details derived from a clear
vision of the environment and the market, plus a clear understanding of customers,
technology, alliances and suppliers. These details would cover management, operation and
integration of different processes inside or outside the company. It is more than the product
innovation process. An effective business model should be tightly, inseparably linked and
integrated with product innovation process, and position the product innovation process as
the core for resources arrangement.
The considerations in implementing an effective product innovation process and
business model for the OKWAP smart phone were raised since 2000. Certainly those
considerations were not completely set up from the beginning, but were gradually formed
and improved as IAC progressed in its development of OKWAP. Table 1 below shows
the considerations that IAC had to resolve in the development of its business model.
Table 1: Considerations in Development of IAC’s Business Model
Strategy Consideration
• Positioning:
What is IAC’s position in the industry?
What does the OKWAP smart phone mean to users?
• Entry segment:
How to enter into market and through which product?
Who are the target users?
• Competing edge:
What is the industry situation?
What is our competence?
Execution Consideration • Resources:
Creative Entrepreneurship in Asia
- 32 -
Where are IAC’s resources from?
What can these resources do?
• Process:
Is the current process sufficient for this product
innovation?
What are the other processes needed to support
product innovation?
• Integration:
How to integrate these resources seamlessly and
operate efficiently?
How to integrate external resources with internal
resources?
Deployment Consideration
• Marketing and promotion:
How to market and promote based on the
characteristics of these products?
• Community:
How to leverage and integrate more external resources
to obtain a positive effect from feedback gathered to
support promotion?
• Service:
Where and how to set up service shops and what are
the services users need?
• Sustaining:
How to enhance the product popularity and life cycle?
How to make a good ending of product in its
end-of-life?
How to manage and control the inventory issues in the
product life cycle and post end-of-life?
We discuss these considerations and how IAC approaches them in the following
sections.
STRATEGY
The Cell Phone is not Limited to the ‘Phone’ Itself
Nowadays, the cell phone has become a personal electronic product that people
carry every day. Sales volume of cell phones has been in excess of 400 million sets in
2000 and over 500 million in 2003. China has been the biggest market of cell phones, with
a yearly consumption of over 50 million sets. Taiwan, with population of mere 23 million,
has been the country with the highest density of cell phone subscribers in the world. The
demand for cell phone is contingent on the following factors – people’s life, industry’s
progress and society’s economy. However, the cell phone business only took off when the
GSM phone system was introduced, giving users the benefit of roaming everywhere and
freedom in choosing handsets which are independent of the SIM cards, through which
carriers would charge their service fees.
With such a huge business opportunity which gives the end users value mainly by
‘talking to each other’, plus other features, such as SMS and WAP, etc. IAC has a vision
that the cell phone should not only be limited to what it is at this moment but will be able
Product Innovation and Business Model: The Case of OKWAP Phone
- 33 -
to serve as a personal platform for the industry to continuously put more features in it. The
‘Smart Handheld’ is the vision IAC has for the cell phone. Thus, IAC has clearly defined
its product roadmap of the cell phone based on the concept of ‘making it smarter for users
to use’ and call the developed product ‘Smart Phone’ from this point of view.
Which Opportunity is More Feasible for Value Innovation?
As the business sales of cell phones is increasing, handset suppliers and carriers are
constantly thinking of potential opportunities to drive the business’s growth. In late 20
th
century and at the beginning of the 21
st
century, majority of the industry’s analysts were
expecting the deployment of 3G wireless technology to take the telecommunication
industry to another peak in the following years. There was huge amounts of investment
bidding for the bandwidth for 3G technology from carriers all over the world.
Unfortunately, that expectation has not been met for many years and the deployment of 3G
technology has been quite slow due to the lack of killer applications and some technical
problems with the handset. It is unattractive for end users to switch service from the
current 2.5G to 3G without convincing reasons.
On the other hand, high demand for cell phone has attracted IT companies and new
start-ups that compete in a market that sees the convergence of telecommunications, IT
and computer technology. The race is on to combine more functions of the cell phone with
computer and consumer products. Over time, rollouts of a bunch of devices with many
different form factors and features combining computing with communications were
available in the market. The common problems for those units were ? too large size, short
standby time, not well integrated features, not user friendly, among other problems. Finally,
debuts of converged devices faced the same problem of slow acceptances in the market
except for a few exceptions.
IAC considered that the added-value to end users under the transit stage of the
whole environment and industry should not be dependent on the technology driven
communication approach (3G) and the computer approach (converged device). There
should be a way to meet end user needs by integrating applications in addition to these
voice functions. These applications would be appreciated and be used very frequently by
end users. With the addition of these applications which have never been integrated in cell
phone, IAC viewed that it was the right way for building up the company’s reputation by
users’ recognition in this smart phone category. This approach is quite different from the
other two approaches mentioned above, which were carried out by many other suppliers.
OKWAP Smart Phone – Practice of Value Innovation
One of the major trends in the current electronic industry is its great reliance on
hardware evolution, from components to system, as main driving force of business growth.
This phenomenon is very obvious when we look at the development history of the
Personal Computer (PC) business which is the kernel of the IT industry. Certainly the
software system and applications of the PC also play critical roles in advancing the whole
industry to a higher level. However, the rollout speed of software is relatively slower as
compared to the newer versions of the Central Processing Unit (CPU). The evolution of
CPU speed, according to Moore’s Law, has been a key feature of all new PCs for many
years.
As time goes by, it is clearer that the clock speed of CPU is not so influential to the
whole PC industry nowadays compared with a few years previously, owing to the lack of
continuous improvement in the user’s perception and appreciation of the feature.
The communication industry has an even more complicated ecosystem which
Creative Entrepreneurship in Asia
- 34 -
includes many different members, for example ? technology enabler, network provider,
handset manufacturer, carrier, content provider and user. Leading players of the ecosystem
are continuously pushing forth new technologies and new standards to the system, but the
speed of users’ reception is always slower than expected by the leading players. The basic
reason is that members of the ecosystem need a longer period of time to synchronize with
one another from an out-of-pace situation. Before the ecosystem has formed a
well-synchronized environment to demonstrate its maturity in managing the
interoperability of the planned new technology or standard among different players, end
users are not easily convinced to pay any extra service charge until the ecosystem delivers
demonstrable value. For this to happen, there is participation by all players in the
communications industry ecosystem as such changes does note come about as quickly. It
is also important to note that there are no dominant players in the communications industry,
who can manage and control targets of technology and dictate the industry standards.
Unlike the IT industry, such that the whole ecosystem in the communications industry
participated by all players would not act so quickly compared with what happened with the
IT industry.
IAC’s strategy for the OKWAP Smart Phone is to provide end users with value in an
alternative way. The local contents and local touch are two major areas where value is
added, in addition to the basic features. These basic features are supported by almost all of
the other handset suppliers in general, derived from hardware improvement on
components and new protocol or services applied in the network. Examples of such
improvements in components are ? color LCD, polyphonic ring-tone and camera.
Examples of the new protocol and services are ? GPRS, WAP, MMS, etc. From the IAC
point of view, those improvements are classified under the ‘hardware and firmware’
category, which is not ‘soft’ enough. In addition to incorporating those improvements in
hardware, protocol or services as basic features of the OKWAP phone, IAC has bundled
local content with the cell phone and sought to build up activities with a local touch to
promote the phone. This approach has been recognized as value innovation of the OKWAP
phone, which differentiates OKWAP products from the others. Local content that the
Chinese can appreciate include - PDA and dictionary functions, very useful cultured
related features (i.e. Solar/Lunar calendar conversion, world time, auto setup of network
connection, Smart Chinese/English input) and free download of ring tones and graphics
from the OKWAP website.
Meanwhile, the OKWAP phone has held numerous promotion and service activities
to guide users to better utilize all features in the OKWAP phone. IAC has also compiled
training information in its website and held training courses in its own OKWAP shop to
teach users to personalize on phones or accessories. Since the target user of OKWAP
phones are mainly young people (around 85% between the age of 15 to 35), the local
contents and local touch have been widely welcomed. In mid 2000, while IAC believed
at the outset that this strategy was a very good way to differentiate products from the
others, they realized there were numerous ambiguous factors and risks. Nevertheless, the
first OKWAP phone i3698 was launched in the Taiwan market in December 2000. The
claimed concept of ‘Five machines in one body – Cell Phone, PDA, Dictionary, Game and
Internet Browser’ actually attracted a lot of attention, even though its weak points of
bigger size and not-so-fancy appearance left some negative impression on the market.
For the past four years, there has been more than ten models announced by IAC in
the Taiwan market. As a result of continuous efforts and improvements in product
development, marketing and services, the concept and implementation of local content
plus local touch for the OKWAP Smart Phone have grown unique in the end users
Product Innovation and Business Model: The Case of OKWAP Phone
- 35 -
perspectives and experiences. Experiences and feedback from end users has been
extremely favorable and the word-of-mouth effect has drastically boost the market share of
the OKWAP phone from zero in the beginning to about 10% in 2004.
OKWAP Smart Phone – Value Expansion
IAC expanded its OKWAP product series from one to three gradually. The A series
is aimed at young people, with fashionable appearance and easy-to-use functions. The I
series is aimed at the technology hobbyist, with many applications from the most advanced
features to evolution any component and system design. The S series is aimed at office
people with software and database integration, planned and designed specifically for users
processing information frequently. The contents and services are also defined and designed
for individual series and models through cooperation with content providers and external
alliances.
Expansion of the product series is very normal business practice and useful in
addressing the users’ needs in different market segments. The effectiveness of value
innovation and value expansion has made OKWAP become a major brand of cell phone in
Taiwan. This is the reason why IAC OKWAP is able to command a premium price for its
units (value share about 30%-40% higher than its unit share in Taiwan market). The unique
appeal of the OKWAP phone with local contents and local touch has become a core
competency of IAC.
EXECUTION
Resources, Process and Integration
The efforts that the other suppliers invest in developing a cell phone might only be
half of the whole efforts that OKWAP normally puts in. The major difference is that the
OKWAP phone has included much more functions and bundled much more contents inside
and outside the phone at the same price level. This is the essential quality and real value of
the OKWAP phones.
There are more than 500 dedicated engineers and supporting people in total in
Taiwan and China responsible for the cell phone’s development. These engineers and
supporting personnel are grouped into different project-based teams and are responsible
for all aspects from product planning to market. Besides these internal resources, there are
external consultants and alliances for specific technical supports. The resources available
include good material management, mass production and a quality management system all
of which are shared by all products of all business units in IAC.
IAC has re-defined a new process package for OKWAP product development and
services to users. The OKWAP process package involves project-based team work with a
high degree of responsibility being reposed on the various teams. Since the resources span
across the Taiwan Strait, project management is very dependent on the efficiency and
stability of the IT infrastructure. To best protect intellectual property (IP) rights on product
innovations, application of IP rights before the completion of product development is
strictly enforced.
Since the level of function and complexity of the OKWAP phone is higher than
regular phones from other manufacturers, it is necessary to develop the product in parallel
with the services needed to support it and community activities based on the characteristics
of the product to shorten the time-to-market (TTM). Integration of product, service and
community activities is a large-scale engineering effort which would involve managing
people in different locations, different departments and different working times. It is
Creative Entrepreneurship in Asia
- 36 -
always a crucial challenge for project-based teams to manage resource integration to
ensure the success of the project. Initial deployment of this process encountered numerous
failures before achieving eventual success. This capability has now grown to become
IAC’s strength.
Value Participation of Internal Resources
The process package for product, service and community is a value innovation
process. Team members from different departments of individual functions inside the
company join this process package. From this sense, it is also suitably acknowledged as a
value participation process for all team members. In general, product development is the
kernel layer of value of all developments. Nevertheless, service activities are another layer
of value added to the kernel, and community activities are, again, another layer of value
added outside of the former two layers.
The process package operates like a spiral with people of different functions linked
to it. Marketing, sales promotion and community activities play an important role for value
creation. Development and quality staff are responsible for value implementation.
Operation staff including program managers and supply chain managers are responsible
for value realization. Service personnel, including after-sales and value-added service, are
the key resources for value extension and fortification. There should be no gaps among all
functions to ensure continuity between processes, in order to achieve the high efficiency of
operation needed for value innovation. Improvement measurements should be taken from
time to time.
Alliance Collaboration with External Resources
IAC seeks to mirror the same process package in their partner’s organizations.
Value innovation where external partners are involved requires the identical process to be
in place to link the internal with the external resources. The external resources which have
characteristics different from that of internal resources should be arranged in a
management system of alliance collaboration. Certainly, the management style of external
alliances could not be the same as that for internal resources. However it could be
conceptually similar in approaching value innovation by managing this process efficiently
with considerations of the business model on sharing benefits created by this process
accepted by all participants.
The external alliances include - network operators (carriers), channels, retailers and
content providers.
DEPLOYMENT
General Situation
The deployment stage starts from the moment the product is released for mass
production. Product, service and community activities are developed in parallel in
execution stage prior to this stage. Product release for mass production is a key milestone
for operation in companies such as IAC, which still relies on manufacturing as its main
activity.
Marketing and sales personnel should have prepared a series of promotion activities
for the new product launch, which is a consequence of the product release for mass
production. The promotion activities are specifically designed for any model based on
targeting specific user segment(s), price band and sales channels. The initial promotion
activities are arranged for sales channels and retailers to access to product information and
Product Innovation and Business Model: The Case of OKWAP Phone
- 37 -
to understand the product’s specialty. Thereafter, the promotion activities are expanded
into the user groups through all kinds of media ? TV, newspapers, radio, bus
advertisements, magazines and Internet websites etc.
IAC’s many experiments in adopting new methods to promote the OKWAP phone
have shown good results with lower expenses. The key concept is to find out which media
the target users normally access and put a reasonable promotion budget on it, instead of
pouring all the promotional budget, without focus, on all kinds of media.
Service, including after-sales service and value-added service, is a critical factor for
own-brand products. IAC has set up seven OKWAP stores in Taiwan besides the service
network linked to sales channels and retailers. The OKWAP stores are places where end
users utilize OKWAP services, participate in the OKWAP community groups and content
download service without any charge. The OKWAP stores are very helpful for IAC to
understand users’ needs directly in addition to the other feedback methods, such as:
telephone call to call center, e-mail, and user groups in websites.
There are many website contents and web activities prepared for OKWAP users.
Users do not need to pay for most of the contents which IAC has licensed. The web
activities are held quite often (about once every one or two weeks) with wide varieties for
users’ preferences and choices.
IAC has developed sustaining models – in addition to the core models of OKWAP
phones – planned and launched for specific groups of users and hobbyists. The sustaining
models are marketed to effectively lengthen the life cycle of core models. A good
understanding of the target segment is necessary before deciding on the process of
sustaining the models. Topics of sustaining models might be - color and outlook variations,
famous icons in fashion, or even some special meanings of seasons or festivals.
Daily tracking and checking of goods sold in the market is the most important
information that IAC would like to know, in order to get the first hand knowledge of
market which determines the flexibility of goods supply. An IT infrastructure which can
collect all information from individual sales points of retailers on daily basis is the key to
success in managing inventory.
OKWAP Community
To further promote OKWAP phones, IAC has sought to build a community of users.
The OKWAP community is conceptually formed by several portions. The constituting
portions are - OKWAP.com, OKWAP users club, OKWAP dealers club, OKWAP service
system and OKWAP Internet alliances. IAC’s vision for the OKWAP community is to
build up a community with high quality of virtual images and physical experiences to
strengthen relationships with OKWAP users.
Some valuable situations and results of the OKWAP community are as follows:
OKWAP.com
• Over 11 million downloads have been made from OKWAP website by end users
• Around 300K page views and 30K downloads per day through WAP, SMS, MMS
and PC to the OKWAP phone
• On-line shopping for download-services and accessories for the OKWAP phone
OKWAP Users Club
• Over 1.2 million OKWAP phones have been sold in Taiwan
• Over 500K members of OKWAP users club
• OKWAP college to train users about operations and Do-it-Yourself features
Creative Entrepreneurship in Asia
- 38 -
• Frequent road shows and activities on a wide variety of topics
OKWAP Dealers Club
• Market information and operation management support to dealers
• OKWAP value added program (to users)
• OKWAP incentive program (to dealers)
OKWAP Service System
• OKWAP-owned stores, for after-sales service and value-added service
• Quick service and repair system
OKWAP Internet Alliance
• Alliances with major content providers
• Alliances with major cell phone websites
• OKWAP phones are often rank at the top of the hottest phone list
Successful execution and deployment depends not only on internal resources and
processes but also on the process of external alliance collaboration. It is crucial to know
that success on synchronization of these two processes. Thus, managers should be able to
detect problems occurring from the internal and external resources of the company, and
possess the capability to manage these resources to solve problems.
Market Information
From the results of a survey conducted by GfK marketing Services in Taiwan,
several results concerning OKWAP are as follow:
• Market share of OKWAP phone (by all networks based on units) has grown from
2% in September 2002 to around 10% in February 2004; while Nokia has
dropped from 34% to 14% and Motorola has dropped from 32% to 20% over the
same period.
• Market share of OKWAP phone based on units is 9.6% in February 2004.
Nevertheless, the value share is 12.7% which is about 32% higher than its unit
share. According to the survey, the value share of OKWAP is ranked second after
Motorola (16.4%) and ahead of Nokia (12.0%).
SUMMARY
Product innovation is a complex, dynamic and systematic resources integration and
utilization process. However, carrying out the process effectively is not easy. Very often
organizations fail to build up the business models needed for product innovation for many
reasons. Resources in an organization which lacks a new business model are largely
arranged for the core business and key customers, and are not in favor of new product
innovation. However, in many cases, business model innovation is very necessary for
product innovations to secure much needed resources.
IAC has considered the OKWAP smart phone as a product category that has
uniqueness in the market. Thus, IAC chose to build up a new process package to manage
and integrate the internal and external resources, and synchronize the operations of these
resources. Hence, the OKWAP practice is a good example of the product innovation
process and a business model which effectively transforms ideas into products and
Product Innovation and Business Model: The Case of OKWAP Phone
- 39 -
successfully promotes the products in the marketplace.
Creating value through innovation is as important as cutting cost through enhancing
efficiency for any company. Certainly, it is better to have competence in both innovation
for value creation and efficiency for cost reduction instead of just having competence in
one.
- 40 -
THE STRATEGY TO CREATE AN ENTREPRENEURIAL
INCUBATOR—THE NTU CASE
Prof. Kuang-Chao Fan
National Taiwan University
Helen Y.C. Hsiao
University of South Australia
and
Lee H.S. Luong
University of South Australia
INTRODUCTION
Business incubation is a dynamic process of business development of SMEs during
its startup period, placed under the management of an incubator. The business incubator is
a body providing space, services, and hands-on management assistance in order to nurture
young firms, helping them to survive and grow during the start-up period when they are
most vulnerable (NBIA, 2003). It provides a facility in which a number of new or young
businesses are located; and in which these businesses have access to shared staff and
services, and receive a pro-active incubation program of advice, training, introductions,
and access to resources that may not otherwise be available to them (Harley, 2001). Ever
since its first development at Batavia town in New York State in 1959, the number of
incubators in the world has gradually increased. Up to 2003 the number is around 4,000
worldwide, as shown in Table 1 (Finer, 2004).
Table 1: Incubator statistics up to 2003
Type In US Outside US
Government based non-profit 700 2,700
For-profit private 300 300
Total 1,000 3,000
The traditional government-based non-profit incubators have the common mission
of creating a new economy in society. They are developed by: (1) state or city
governments, (2) universities (3) special purpose government agencies. In addition to the
annual budget which is sponsored by the government they may take extra fees, royalties,
or a 1-5% equity stake from tenant companies. After 1990, with the interest of
corporations and VC firms, for-profit private incubators grew rapidly. Their aim is to take
their technologies to the market quickly (rapid technology commercialization) thereby
growing the companies with the view of maximizing their investment through stock
market listings or sale. These are the so-called “accelerators” or “catalyst groups” with the
internet business model of “without the wall”. They normally take a 10-30% (for
corporation type) or a 20%-60% ownership stake in their clients’ business (for VC type) by
direct investment at the early stage.
Current university incubators are mostly positioned as non-profit organizations. In
addition to the general missions of government developed incubators, university
incubators have the following special features:
The Strategy To Create An Entrepreneurial Incubator—The NTU Case
- 41 -
1. Development by universities and funding by government.
2. Professorial involvement in consultancy, student involvement in internships,
university involvement in lab and facility utilization, and entrepreneurship
programs.
3. commercializing campus technology and corporatizing the academic team as a
new start-up.
4. Channel the linkage between university and industry.
Although its contribution to society is significant, most of the university incubators
are not financially viable if the financial support from the university or government is cut.
In addition, their contributions to the universities are unsatisfactory in terms of equity
return. Since the last decade, some countries have launched a new policy to permit the
corporatization of the public universities and for-profit university incubators have been
inaugurated in those countries, such as China (Tsuo, 2000; Harwit, 2002), Malaysia
(USAINS, 2004) and Australia (ITEK, 2003). Although the business model is more
multi-directional and flexible, the history of for-profit university incubators is, however,
still young. So far, there is no significant statistics demonstrating the success of such
incubators in terms of financial sustainability. Nevertheless, it is correct for such
incubators to seek their own long-term viability.
INCUBATION MODELS
Traditional Model
During the early stage of the period from 1960 to 1990, the main reason for the
establishment of incubators in most places is to recover from economic recession by
means of job creation, regional economic revitalization, and fostering of new types of local
business. The profile of incubation model thus developed can be seen in Figure 1
(Smilor, 1987).
Figure 1: Incubation system before 1990 (Smilor, 1987)
P
r
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U
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p
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Incubator Affiliation
Entrepreneur
New Business
Incubator
Economic Development
Technology Diversification
Job Creation
Profits
Viable Companies
Successful Product
T
e
n
a
n
t
C
o
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a
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Support Systems
Secretarial
Business Expertise
Administrative
Facilities
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Incubator Affiliation
Entrepreneur
New Business
Incubator
Economic Development
Technology Diversification
Job Creation
Profits
Viable Companies
Successful Product
T
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t
C
o
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Economic Development
Technology Diversification
Job Creation
Profits
Viable Companies
Successful Product
T
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C
o
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p
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Support Systems
Secretarial
Business Expertise
Administrative
Facilities
Support Systems
Secretarial
Business Expertise
Administrative
Facilities
Creative Entrepreneurship in Asia
- 42 -
Modern Model
After 1990, venture capitalists (VCs) started to influence the market ecology.
Holding immense funds VCs seek potential companies to invest in, rather than establish a
brand new company. This business also began to look for potential SMEs. Since then the
incubation system also included the joint venture of investment services. A modified
incubation model is shown in Figure 2 (Hsiao, 2001).
Development
?Governments
?Non-profit organizations
?Private Companies
?Universities
Investment
?Venture Capitals
?Angels
?Private Sectors
Mentor System
?Technology
?Management
?Marketing
?Laws
Incubator
?Physical Facilities
?Administration
?Personnel share
?Knowledge & Information
?Events
Tenants
?Technology Innovation
?Product Development
?Job Creation
?Company Profits
?Sustainable growth
Figure 2: The modern incubation system after 1990
Integrative Model
A new incubation model, that integrates venture funds into the incubation system so
that incubator can invest in some potential startups, as shown in Figure 3 (Grimaldi, 2003),
is being carried out at North Carolina Technology Development Authority in USA
(NCTDA). The NCTDA accomplishes this mission through three primary business sectors:
entrepreneurial support, including the development of business incubators; capital
formation for emerging companies through direct investments; and research
commercialization that moves research from university laboratories into companies
(Brotherton, 2000).
Figure 3: Emerging merits of business incubation model (BIC) and private
incubation model (CPI & IPI) into university business incubation (UBI)
BICs
UBIs CPIs IPIs
The Strategy To Create An Entrepreneurial Incubator—The NTU Case
- 43 -
For-profit Private Incubator Model
As indicated earlier, most for-profit private incubators are developed by
corporations or VC firms. They select potential start-ups and own a significant stake in
ownership through investment, before starting to incubate these hi-tech companies
“without the wall” (Acorn, 2003). In Taiwan, some VCs have started to establish private
incubator corporations to look for long-term investment. It is a new industry encouraged
by the government. Towards the end of 2002, there are only six for-profit private
incubators (Chang, 2003). The incubation model is shown in Figure 4.
Investors
Incubator
T1
T2
Tn
Figure 4: Private incubator model, Ti means the ith tenant.
University Incubator Model
Figure 5 illustrates the relationship of a normal university-based incubator in which
the university, incubator, and tenants are independent entities. The degree of relationship is
pretty low. The incubator would not deem the tenants as its own asset. Rather, the tenants
are treated as clients only. Whenever any tenant fails, the influence to the incubator and
the university is not significant. Due to the low operational cost of tenant companies at
their start-up stage, the success rate is 80% – compared to other independent start-ups in
the range average of 50% – is certainly high. How many can eventually grow to enter the
stock market? Although there is no published information on the success rate, the author’s
experience indicates that it is extremely low not withstanding that seven years have
elapsed since the introduction of incubators in Taiwan. It has been noted that the
university’s incubator only holds 1% to 5% (normally 1%) of the tenant’s stake. It can be
realized that the incubator would not obtain significant profit at the end. The feasibility of
sustainability is suspectable.
THREAT AND SUSTAINABLE FACTORS TO INCUBATORS
From previous research (Fan, 2000) it was pointed out that possible weaknesses of
current university incubators, especially for the project type, in Taiwan, could be
summarized as below:
• Incubator directors do not have adequate entrepreneurship experience,
• Project type incubators do not have funding sources to last through difficult
Creative Entrepreneurship in Asia
- 44 -
periods,
• Incubators cannot be treated simply as a university/industry cooperation program,
• The University’s mentor system does not work closely enough with the tenant
companies due to lack of incentive,
• The incubator itself does not have a well planned strategy for sustainable
management,
• Incubator’s profit returns to the sponsoring university is insufficient.
University
Incubator
T1
T2
Tn
Figure 5: University incubator model in Taiwan
In addition, recent reports have depicted some failure and success factors for a
sustainable incubator (Harley, 2001; Finer, 2004; Lalkaka, 2001; Chinsomboon, 2000). In
summary, any incubator should possess the following characteristics for sustainability:
1. Sustainable revenue generating businesses.
2. Deliver quality expertise.
3. Conduct adequate due diligence of their stake-owned SMEs.
4. Sufficient VC/professional/university linkage.
5. Adequate government policies, initial funding and support.
6. Recognized brand name in their industry
7. A large meaningful database of contacts.
INTEGRATIVE INCUBATION MODEL OF NATIONAL TAIWAN UNIVERSITY
In order to gain a breakthrough despite the above cited barriers, a feasible solution
is to form a closer tie among the development body, the incubator and the tenant
companies. What does “a closer tie” mean? This paper proposes that the incubator should
become a partner of each potential tenant company so that the incubator team could get
involved in the company’s business, rather than just nurturing the company. On the other
hand, the funding body should also become a share owner of the incubator. In other words,
the incubator must form an integrative framework to get involved and to share the duty
The Strategy To Create An Entrepreneurial Incubator—The NTU Case
- 45 -
with each potential tenant company and the funding body. We name this model as the
“mutual life body.” The conceptual model of this kind is illustrated in Figure 6, in which
T
1
and T
2
mean tenants only under pure incubation and T
m
to T
n
are those invested
potential tenants.
Figure 6: Closely linked incubation system
A feasible new university incubator could be in the form of an Incubator Company,
which operates not only in the field of business incubation but also in business investment
so as to attract investors, including venture capitalists, angels, private corporations, alumni
and staff, to invest in this incubator company. It has been mentioned in previous sections
that many public universities are not allowed to take investments from academic funds and
the university has already contributed intangible assets to the incubator. These intangible
assets could be counted as part of the capital in the name of “technology share” or “equity”
of the incubator company. In other words, the investors should donate part of their shares
to the university. By this way, the bottleneck of investment regulation restricted to many
public universities can be broken through.
NTUIIC (NTU Innovation & Incubation Company) is the only incubation company
founded by the National Taiwan University, in 2002 with capital which is from all
investors (NTUIIC, 2003). The company is authorized to run the university’s incubation
business and to invest in potential tenants. In return, the NTU takes 20% share from the
company as donation. The organization chart of this company is shown in Figure 7. The
integrative framework of the incubation system is shown in Figure 8. The internal flow of
NTUIIC system among the university, NTUIIC and tenant companies is shown in Figure 9.
It is clearly seen that the sponsoring university provides only the intangible assets, rather
than the funding capital. It must be emphasized that alumni and mentors are major partners
and investors in the ventures due to their closer relationship with the university.
Those start-ups established through technology transfer from the university, also
called the spin-off companies or TLO start-ups (Gregorio, 2003), pay additional licensing
fees to the incubator company under negotiation. Collecting rental charges (including
services) in cash as well as equity and licensing charges in stock, the incubator company
returns the university normal rental fees plus a significant percentage share of its annual
profit. A close linkage can be seen; that if the tenants succeed, the incubator company gets
Incubator
Investors
University
T1
T2
Tm
T
n
Incubator
Investors
University
T1
T2
Tm
T
n
Creative Entrepreneurship in Asia
- 46 -
the profit. Consequently the sponsoring university shares profit from the Incubator
Company. This is the essence of “mutual life body” as emphasized in this study. This
system is also named the “entrepreneurial incubator” in this study.
Figure 7: Organization chart of NTUIIC
Figure 8: NTUIIC integrative framework.
I
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INCUBATOR
National Taiwan University
R & D Commission Office
Incubation
C
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Investors Board University
CEO
Incubation Investment
Investors Board University
CEO
Incubation Investment
The Strategy To Create An Entrepreneurial Incubator—The NTU Case
- 47 -
Space
Facility
Technology
Facility
Students
Investors
Board of
Trustee
Incubator
Team
Investment
Team
Experts
Campus
Spin-off
Companies
Regional
Start-up
Companies
Equity
Rent
Equity
Rent
Incubation
Investment
Resource
University Tenants
Royalty Licensing
Incubator Company
Figure 9: Internal flow of NTUIIC
CONCLUSION
An integrative framework of the new university incubator is proposed in this paper.
This system integrates the merits of government-based university incubator and for-profit
private incubator. Owing to the constraints on public universities for direct investment this
study also proposes the feasible approach of technology sharing from the incubation
corporation, which cooperates closely with the original university incubator. Such a
system has been implemented in National Taiwan University since 2002. It is still in the
experimental stage. Potential profit would be gained from the investment return after
several years. Transforming the non-profit system to the for-profit system is the first step
toward the entrepreneurship of university incubator.
REFERENCES
Acorn campus, http://www.acorncampus.com/, Internet access, Dec. 2003.
Brotherton, P., “TDA Announces Service Provider Partnerships To Benefit Incubator
Tenants”, NCTDA News Release, Aug. 7, 2000.
Chang, C.H., “Study on the Development Model of Private Incubators in Taiwan”, Master
Thesis, National Cheng-Chih University, July 2003.
Chinsomboon, M., “Incubators in New Economy”, Master Thesis, MIT, 2000.
Fan, K. C., “A Study of Collaborative Model of University Incubator and Industrial
Development”, Proc. of the Workshop on Cross-Strait Education Innovation Toward
the21st Century, Wuhan, China, pp. 53-58, October 2000.
Finer, B. and Holberton, P., “Incubators: There and Back”, MIT Enterprise Forum of
Cambridge, http://www.mitforumcambridge.org/index.html, Internet access, April
2004.
Creative Entrepreneurship in Asia
- 48 -
Gregorio, D.D. and Shane, S., “Why do Some Universities generate More Start-ups than
Others”, Research Policy, Vol. 32, pp. 209-227, 2003.
Grimaldi, R. and Grandi, A., “Business incubators and new venture creation: an
assessment of incubating models”, Technovation, 2003, in-press.
Harley, B., “Business Incubators: Good Models vs. Exciting New Models”,
http://www.apctt.org/presentations/itbi_barbara.ppt, Internet access, 2001.
Harwit, E., “High technology incubators: Fuel for China’s new entrepreneurship”, China
Business Review, Volume 29, Number 4, July-August 2002.
Hsiao, Y.C., “A Study of Incubation Scheme”, Master Thesis, University of South
Australia, 2001
ITEK Pty Ltd, Introducing ITEK- Staff Profile and Service Guide, University of South
Australia, July 2003.
Lalkaka, R., “Technology Business Incubators: Characteristics, Benefits, Performance”,
APTCC-GOI International Workshop on TBIs, Bangalore, India, January 2001.
NBIA, “Seven Strategies for Reaching Financial Self-Sustainability”, Internet Access,
http://www.nbia.org, June 2003.
NTUIIC, Internet access: http://www.ntuiic.com, 2003.
Smilor, R.W., “Managing the Incubator System: Critical Success factors to Accelerate
New Company Development”, IEEE Transactions on Engineering Management,
Aug. 1987, pp. 146-155.
Tsuo, T.C., “Comments on the University Incubator in China”, Chairman’s comment on
the Workshop on Cross-Strait Education Innovation Toward the21st Century,
Wuhan, China, October, 2000.
USAINS Group, http://www.usains.usm.my/usainsMain, Internet access, January 2004.
- 51 -
INDONESIA
Susanto Joseph
Employers Association of Indonesia (APINDO)
The development of a country has been recently shown to be strongly dependent on
the growth and advancement of its economic and industrial sectors. It is also made very
clear that this increase and advancement can be achieved if the country has a significant
number of tough and independent entrepreneurs who are sensitive, respond to change and
also able to adapt, so as to contribute to the country. True entrepreneurs are also patriots as
they create job opportunities and handle unemployment which if left unchecked could lead
to a reduction in poverty.
The 1997 Asian economic crisis, followed by manifold crises in Indonesia have
shaken the country’s macro economy. Many companies became bankrupt and there was
large scale capital outflow. All this happened amidst the political changes taking place in
Indonesia. These changes were triggered by the decline in power of Soeharto regime,
beginning in 1998.
Economic growth has since been relatively low with the country’s GDP registering
between 3-4% per year. Unemployment has increased, resulting in 40 million unemployed
people. Yet, Indonesia survives because of the contribution from the informal sector and
the Small Medium Enterprises (SMEs) which in many countries are considered to be led
by tough, pioneering entrepreneurs. Their contributions to regional development within a
country, role in supporting larger industries and capacity for innovations have been widely
acknowledged.
In Indonesia, there are approximately 67% workers in the informal sector and with
the rest in the formal sector. According to a survey carried out in 37 countries (2002) on
the relationship between unemployment and entrepreneurship
1
, it was found that when
unemployment is high, total entrepreneurial activity will also be high because the
alternatives available beyond the labor market diminish. However, a country cannot
develop and advance if it is only holding on to the informal sector, doing so will lead to
serious poverty.
In general, it is known that the informal sector is identified with low productivity,
low income, limited access to market, low finance; consequently putting the country in a
less competitive position. The informal sector is mostly dominated by small household
industries with a workforce size of between 1 to 4 people. If these micro-enterprises are
effectively empowered, these small industries could develop into SMEs. What a country
should do is to direct and transform this micro economic and informal sector into a formal
SME sector?
John Naisbitt, futurologist and well-known writer said at the Global Entrepreneur
Forum held in Singapore in 1995 that SMEs will be the main players on the world’s
economic chessboard in the future. It is easier for these SMEs to excel, be competitive
and seek new economics opportunities because they are able to make decisions and take
faster steps than others. They are not constrained by hierarchy and bureaucracy as with
large companies. This organizational flexibility enables them to exploit market
1
Marc Cowling & William D. Bygrave, Relationships between unemployment and entrepreneurship in 37 nations
participating in the Global Entrepreneurship Monitor 2002, Summary report can be downloaded at
www.gemconsortium.org.
Creative Entrepreneurship in Asia
- 52 -
opportunities, implement innovation, create new products and adapt to fast changing
consumers’ needs and tastes
2
. For example, many Japanese companies that have won a
major share of niche markets are SMEs. But of course, SMEs which are making earnest
efforts to change should be assisted by their parent companies, receive financial support
from the private sector and the government.
Thus, the informal sector must be viewed as providing a space for transition and
opportunities for learning, as well as a medium within which creative and tough
entrepreneurs are selected and emerge. This transformation process reflects the growth of
strong SMEs as the embryos of big and modern companies. However, this process needs
to involve many parties, especially the government whereby its regulatory policies should
provide economic assistance, easy access to banking institutions, low interest loans and a
proper assistance team. Community figures, especially successful entrepreneurs, can be
looked upon as role models that reflect the knowledge and skill of entrepreneurship.
These role models will accelerate the process of economic recovery of a nation and lead
the country to achieve maximal growth.
MICRO-ENTERPRISES AND SMES IN INDONESIA
It is interesting that the number of micro-enterprises and SMEs grow during and
after crises escalate in growth. In 2001, there were 90 clusters of such businesses. In 2002,
there were 332 clusters and in 2003, there were 375 clusters. The fields of such clusters
were common agribusiness of livestock, farming, fishing and agriculture. There were also
mining and electricity businesses.
According to a study conducted in 2003 by the Indonesian Central Statistic Bureau
(BPS), there were more than 42.4 million SMEs. The activities of these SMEs show their
potential for contributing to the nation’s economic growth. However, this increase does
not necessarily improve economic growth (which is relatively stagnant at approximately 3-
4%), such growth is dependent on the consumer sector. Similarly, other sources
contributing towards economic growth such as export, investment and development
expenditures did not increase. Figure 1 shows the national supply of goods and services
by source, with small and medium sized enterprises providing 43.8% of the total supply.
Although economic recovery has not been achieved for the time being, the micro-
enterprises and SMEs are valued as economic saviours for their role as motivators in
speeding up economic growth and as job creators. In 2003, the total proportion of workers
in micro-enterprises and SMEs increased by 12.2%, compared to the year 2000, in which
workers only increased from 70.4 to 79.0 million. Compared to large companies, the
micro-enterprises and SMEs show greater immunity to these crises. They are not reliant on
imported materials and are able to reach the domestic market with their products and
services. Thus, the development of the micro-enterprises and SMEs must be included
under government strategy for these enterprises provide work opportunities and reduce the
level of poverty.
The government itself through the Ministry of SME and Cooperation has
highlighted these policy directions to aid the development of SMEs:
1. Create a conducive business climate
2. Increase access to productive resources
3. Develop excellent and competitive entrepreneurs and SMEs
2
Idem, "Small businesses make an important contribution to the success of a country's economy. They are major
creators of jobs, they innovate, and they spot and exploit new opportunities.
Indonesia
- 53 -
This paper does not intend to discuss the SME problem in great depth. However, the
Indonesia SME sector still remains the supportive backbone of its national economy,
especially during economic crises. Yet when the focus is on entrepreneurship, this issue of
SME needs to be addressed. In fact, there are several successful, creative and innovative
entrepreneurs born and formed as a result of the involvement participation in the SME
business sector.
Small
Entreprises
30.0%
Medium
Entreprises
13.8%
Import
14.1%
Big
Entreprises
42.1%
Figure 1: Supply structure of goods and services nationally
Since 2002, the Indonesian government (through the Governor of Indonesian
Central Bank (BI) and Poverty Reduction Team) led by the Coordinating Minister of
People’s Welfare has established a Memorandum of Understanding (MoU) on poverty
reduction through the empowerment and development of SMEs. In 2003, a task force of
SME financial consultants and facilitators was formed as one of the alternative strategies
to increase banking access to SMEs. This strategy will succeed if the main SME players
are entrepreneurial cadres supported by a conducive business environment and receive
holistic development in many aspects, such as management, technical knowledge,
marketing, business development, as well as wide support from related parties such as
bankers, NGOs, universities, business community, and donors such as Asian Development
Bank (ADB) and World Bank.
In this paper, the discussion will be focused on the entrepreneurial aspect, such as
efforts on how to increase entrepreneurship among SMEs and the relevant constraints such
as internal factors which come from the SME’s personnel and external factors which
hinder entrepreneurs from maximizing their development. Several examples will be quoted
as possible learning models.
SUCCESS STORIES
There are many success stories of entrepreneurs around the world that have been
written and published. These success stories serve as a form of inspiration for beginners
who decide to be an entrepreneur. This is the decision undertaken by some entrepreneurs
in Indonesia who chose to start their business from ground zero. Some were financed with
their inheritance and some conspired with government officers through certain projects.
However, this issue will not be discussed as present factors have made it easier, such as
certain facilities which are not based on individual efforts.
Creative Entrepreneurship in Asia
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The following are some of the criteria used in selecting the entrepreneurs that are
portrayed below:
1. Portraying self-reliance by starting their businesses from the bottom, thereafter
growing into large organizations without depending on support from the
government or any other group.
2. These entrepreneurs become ‘idols’ for new entrepreneurs and have shared their
experiences through numerous seminars and discussions on entrepreneurship
and SMEs.
3. Their success stories have been widely published and have inspired others to
become entrepreneurs. They must be recognized as pillars of their nation’s
economy.
Table 1 sums the entrepreneurial attributes of the three entrepreneurs.
Bob Sadino (71 years old) is one of the legendary entrepreneurial figures in
Indonesia. His name is identical to simplicity. His daily attire differs from other
entrepreneurs. The boxes motif T-shirt and short jeans characterize his attire. His speech is
uninhibited and he is an easygoing person. Bob owns one of the biggest retail business that
focuses on serving expatriates’ needs. As the founder of KemChicks Group (which as of
2004 has been around for more than 30 years), his career began as an eggs seller at South
Jakarta, a place where there were a lot of expatriates. Over time, his business grew to
include a supermarket, a sausage factory, vegetable farm, agribusiness, a travel bureau, a
snacks factory, a restaurant and a magazine company. He even became a movie star.
How did Bob start his business? His business capital was sheer optimism and
courage. “Just do it”, he said. Wasn’t he afraid to fail? He answered lightly that failing is
normal – if we haven’t failed, we do not deserve life.
According to his staff whom he considers as family, his relaxed and open attitude
puts them at ease to discuss or argue about his company activities. The implementation of
this father-and-son type of relationship is the main success factor of KemChicks Group.
The core of this kind relationship is based on being a trust 20 years ago. Then, Bob
declared that he had left his position as a decision maker and he had no difficulty choosing
professional cadre to run his business.
One of the factors justifying his selection was the company’s culture, which
recognizes employee leadership. As he says, it means choosing a leader at the operational
level and the selection is done by ‘the kids’ themselves who choose their colleague as their
leader. Bob himself plays the person who steers the company strategy through ‘signs’.
Company activities are also based on teamwork where responsibility is divided equally
among workers. Besides this, everyone has direct control over each other. Thus, Bob has
actually implemented a learning organization where as the founder; he has bravely given
opportunities to his next generation to learn from their mistakes.
According to a management expert, Bob’s leadership has succeeded in
implementing decentralization; empowering and enabling modern companies to survive in
today’s competitive world. Further information can be browsed at
Http://www.expat.or.id/sponsors/kemchicks.html.
Purdi E. Chandra (45 years old), founder of Entrepreneur University is one of
several entrepreneurs who started his business from ground zero. He started his informal
business when he was in junior high school, breeding chickens and ducks and selling them
to a traditional market. When he was 23 years old, he established an education advisory
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institution called “Primagama” with his friends; dedicated to serving those who wish to
continue their studies at the university. Then, he was a university student of four faculties
from two universities in Yogyakarta. As he felt that he had gained nothing from the
education, he left the universities and started his own business. In the beginning, he only
had one outlet with two students. Now, he has hundreds of outlets with more than 100,000
students per year. “Primagama” has been declared by Indonesian Guinness Book as the
biggest education adviser institution in Indonesia.
Table 1: Entrepreneur's Spirit, Behavior and Style in Practical Experience based on
their Success Stories
Bob Sadino Purdi F. Chandra Sukyatno Nugroho Other Entrepreneurs
- Dare to look different - Imaginative - Willing to take risks - Never give up, persevering
- Learn from mistake - Like to experiment - Adaptable - Diligent, hard worker
- Employee
Empowerment
- Courage to explore - Never give up - Brave to act against the flow
- Decentralization - Brave to fail - Strong will - Keep learning
- Enabling - Strong will to succeed - Persevering - Creative
- Recognition - Creative - Team work - Flexible
- Depends on the team
work
- Skills management - Innovative - Willing to take risk
- Open management - Interpersonal skills - Ready to change - Strong will to improve
- Friendly - Leadership skills - Creative - Able to compete
- Father-son relationship - Intuitive - Possess initiative - Discipline
- Family atmosphere - To survive - Diligent - Leadership skills
- Strong leadership - Optimistic - Willing to learn - Business efficiency
- Pioneering spirit - Possibility and success
thinking
- Self-reliant - Open minded
- Failure is normal - Ambitious - To make breakthrough - High spirit
- Modest
- Puts in best efforts
- Quick in responding to
market opportunity
- Sharp in reading customer
needs
- Uses of new technology
- Self-reliant
- To make breakthrough
Purdi said that he learned how to run a business from his parents, especially his
mother. Supported by his wife, he opened Primagama branches in every big city in
Indonesia. Primagama became a holding company which controls approximately 20 of the
biggest companies all around Indonesia in every field, such as formal and informal
education, telecommunication, travel bureau, restaurant, supermarket, insurance, furniture,
golf field and more. The establishment of the Entrepreneur University was a combination
of his business obsession and social obsession to create new entrepreneurs. The University
led to creation of a new work field for the unemployed in Indonesia.
His writings are widely published in the media. Purdi’s writings are influential
although his ideas are sometimes seen as irrational – however, his success refutes this
Creative Entrepreneurship in Asia
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criticism. Purdi seems convinced about sharing his experiences with readers on his
strategy to develop his business which started from ground zero and grew to a worth of a
billion rupiah in assets. In his book “Being Success Entrepreneurs” (2003) which has been
reprinted four times, he says that an entrepreneur must have the courage to dream, to try,
to explore, and to fail, and success is the first step of being a true entrepreneur.
Four main characteristics of entrepreneurs are creativity, management, interpersonal skills
and leadership. The next main factors to starting a business is to be brave, followed by
skills. Purdi said that entrepreneurs must have characteristics such as willingness to make
something big from something small, intuition, and the determination to survive even after
incurring numerous debts. An entrepreneur has to learn to adapt to and deal with debts
which exist in every business. The last characteristic is optimism. An entrepreneur is
always expected to be creative at all times. Creativity brings new ideas to goods, services
or innovations which enable them to meet the constantly changing needs of the market.
Daring to be different for others is an expression of creativity and possessing and
entrepreneurial spirit. Positive thinking is not enough. According to Purdi, we need
‘successibility thinking’. “Successibility thinking” will lead people to be introspective and
reflect on themselves. “Successibility thinking” examines the possibility of success.
Moreover, it encourages them to be forward thinking. To engage in successibility
thinking, one must marry “possibilities” with thinking about “what is likely to succeed”
In his entrepreneur university, the education syllabus is based largely on
developing emotional intelligence and cultivating a business intuition. Materials given not
only include knowledge but also entrepreneurial values such as no retreat, strong spirit,
ongoing creativity and innovation, deep intuition, acting bravely in facing high risks, and
exploiting business opportunities without test, remarks, and title. These are the qualities
that one will need (upon graduation) to succeed as an entrepreneur. This is the story of
Purdi E. Chandra, a true entrepreneur. More information can be obtained from
www.primagama.co.id.
Sukyatno Nugroho (56 years old), known as a seller of mixed fruit drinks (or ES
TELER), has many branches around Indonesia. Sukyatno, the owner and also founder of
ES TELER 77 Juara Indonesia is very popular and well-known by society. His mixed fruit
drinks business was established in 1982. The business started from a small canteen and
has now grown to become a large chain of franchised fast food restaurants spread all over
Indonesia, Malaysia, Singapore and Australia. His restaurant outlets not only sell mix fruit
drinks but also packaged food and various great tasting Indonesian traditional foods. He
has 5000 workers in his company.
His business is unique because it begins with his mother’s participation and
eventual win in the mixed-fruit drink making competition. Es Teler is a mixed fruit drink
made from avocado, coconut pulp, jackfruit, milk, sugar palm fruit and shaved ice. After a
family discussion, they eventually opened a small canteen in a shopping centre called ES
TELER 77, 77 was chosen because it is considered a lucky number. Quite often, the small
canteen had to be closed due to floods caused by bad weather. His business was threatened
many times as it was considered a disturbance. Finally, the Sukyatno family decided to
open a restaurant near a shopping centre at Gajah Mada Plaza. A few years later, they
decided to establish a small company which turned out to be the pioneer of their business
empire. Some branches were also opened in Jakarta.
As a small company, they faced constraints very often from the owner of the land
and the shopping centre manager. However, they did not give it up. Once their canteen
was unfairly shut down. They strongly willed to open five new branches at another
location. This idea resulted in the emergence of the franchising concept of ES TELER 77.
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The first franchise was opened at Solo in 1987. Many people were interested to take up the
franchise. The year 1987 to 1990 was a period of hard work and learning with more than
100 branches opening during that period.
The family team led by Sukyatno as the oldest son adapted very quickly and
became an expert in this franchising business, leading to rapid business growth and the
opening of their first central kitchen and warehouse in 1997. Thereafter, the company
started to explore the international market to continue with business development.
In 1998, Sukyatno, the President Director of the company, was bestowed the title of
Doctor Honoris Causa by the American World University, IOWA, USA, with a thesis
titled “Look Globally but Think and Act Locally.” Further information can be browsed at
www.esteler77.com.
Beside the three examples above, there are other successful entrepreneurs who have
succeeded in leading their businesses and contributing to the development of the country’s
economy. It is noted by SWA Magazine, a national magazine which rates the best
entrepreneurs, that there are a lot of business figures and professionals who have
succeeded in their own field. Needless to say, it will take much time to get information
about their key success factors. Furthermore, books that published their experiences, their
successes and failure in the business world, are rarely found. They possess the spirit that
“Never give up, strong will, hard work, going against the flow, continuous learning,
creativity, readiness to change” are watch words that mark their entrepreneurial careers.
These stories of successful entrepreneurs are periodically published in various
business magazines and newspapers. One of them is KOMPAS, a well known national
newspaper in Indonesia, which regularly presents the efforts of these entrepreneurs, such
as:
Johnny Andrean (39 years old), known as a creative and innovative hair stylist and
dresser, started his unisex beauty salon business in 1978. The business grew year after
year, selling JA products such as hair foam and cream, conditioners and shampoos as the
trademark of the business. Presently, his business is expanding to the Johnny Andrean
Beauty Centre and Salon and has more than 163 branches throughout the country
including 37 training centres for hair cutting skills.
As Johnny is always on a lookout for new opportunities in line with the
development of his business, he also expanded his business network into bridal couture
and wedding services, bakery, and franchising. Many young hair stylists have since
followed his steps.
Alim Markus (54 years old), known as the king of household appliances, joined the
business world when he left junior high school at the age of fifteen. As the number one
person of Maspion Group, his business expanded into electricity, banking, real estate and
herbs. He started his career from the bottom as a salesman, a cashier and an administrator
before becoming a president director. Realizing his lack of education, he expanded his
knowledge by taking up classes such as accountancy, English, Japanese, even Korean and
Dutch. He is completely involved in all the company’s activities having followed it from
its small beginnings to its present state as a big company. He believes that people are not
professionals without knowledge. Being professional is not enough. It has to be followed
by strong will, discipline and diligence. One thing that is very important is his leadership.
It is not surprising that at the age of 30, he replaced his father’s position as the President
Director of the company in 1980.
Maspion is known as the prime producer of household tools made from plastic and
aluminium, with tens of companies are under the flag of Maspion employing thousands of
workers. He is very selective in developing his business, always choosing the best partner
Creative Entrepreneurship in Asia
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such as Du Pont (USA) who has an developed an advanced teflon technology which lets
him take the lead in the agrochemical business. Cooperating with Samsung (from South
Korea) has also led him into the electrical and electronic home appliances industry.
Markus is also very efficient in managing time, work and appearance. His workroom is not
too big and always open.
There are unique entrepreneurs such as Sofwan Aliwarga (68 years old), the owner
of printed batik, who serves his consumer wearing worn-out shirt and shorts. “I never
think of my appearance, but I think of spirit and hard work. That’s my main unique
feature”, he said: Sofwan was rewarded by the government under the producer exporter
category in 1993. PT. Windu Eka, his printed batik company, started out as a family
business. In 1970, the company started as a handwriting business. In 1972, he improved
his machine into a printing rotation machine and upgraded one year later to a
computerized machine. In 1990, his company specialized in exporting textiles to fulfill
demand from Europe, USA and several Asian countries.
According to Sofwan, to succeed as an entrepreneur, one must work to achieve
excellent results and not disappoint the consumers. By its motto, which is hard work and
delivering the best product, the company is trusted by several garment industries in Hong
Kong, USA, Netherlands, Japan and Malaysia.
EFFORTS TO IMPROVE ENTREPRENEURSHIP
A well-planned program will succeed if the players have the knowledge, skill and
attitude needed to achieve the goal of the program. This time, formal entrepreneurship
development has been implemented by the Government through providers of Business
Development Services comprising approximately 400 professional and commercial
companies all around Indonesia, accessible by all existing and also individual
entrepreneurs.
Entrepreneurship development has also been implemented by existing government
departments. For example, the Department of Agriculture provides help through
consultation and advisory services such as the Agriculture Guidance & Counselling Team.
The Department of Manpower and Transmigration also plays a part through the
enlargement of a productive work field project (1997), which also published an
entrepreneur module dedicated to young educated workers who chose the path of
entrepreneurship to earn their living. This effort also creates young professional
entrepreneurs. As we all know, youths who are unemployed typically lack education and
skills. Thus their job search is largely futile. The few ways for them to find work is by
starting their own business. Otherwise, they may remain unemployed
3
. On the other hand,
they also do not possess adequate entrepreneurship skills that are pre-requisites for starting
their own businesses. This is why informal training in entrepreneurship is much needed.
Several entrepreneurship modules are as follows:
• Information of business opportunities
3
It's not surprising if in ILO Recommendation Nr.189/1998 on the General condition to stimulate the creation of work
field for SMEs stated that "….SMEs are getting more responsible for the creation of majority work field in the whole
world". Beside that, SMEs give positive support in motivating the achievement of national development goal, which are
: improve sustainable economy growth and ability to react to changes by through flexibility, stimulation innovation,
entrepreneurship, technology development and research, increase the participation of the less fortunate economic
group, the marginalized group in society, among other groups.
Indonesia
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• Starting the business
• Promoting the new business
• Drawing up a balance sheet
• Choosing quality materials
• Encouraging business achievement
• Fixing prices
• Calculating the break-even point
• Managing emotion when facing consumers
• Result-oriented efforts
• Finding and exploiting opportunities
• Finding and exploiting markets
• Creativity in exploiting situations
Meanwhile, the government’s efforts for the empowerment and development of
SMEs began with the formation of the Business Development Services in 2003 with the
core services of business facilitation and consultation. It is expected to be available to
provide services in areas, including training in conducting feasibility studies, drawing up a
credit proposal, a business plan and a financial report. Before the services can be provided,
the consultants or facilitators will be selected, trained and certified after they have met all
the feasibility criteria (fit and proper test).
Generally, the consultants or facilitators giving assistance to the entrepreneurs of
SMEs are required to have an understanding and mastery of all the following:
• Knowledge of banking and credit
• Criteria of feasibility and banking ability of SMEs required by the bank, so as to
arrange the business plan, feasibility study and credit proposal
• Characteristics of SMEs and obstacles faced in bank relations
• Other aspects needed for a business feasibility study are legalities, marketing,
production, capitalization, financing, etc
• Management and business financial analysis
• Capability to find the opportunities’ potency and business risk
• Environmental matters in the relation with the business
• Knowledge and entrepreneur spirit from medium to high level
• Guiding the implementation of case studies, arrangement of credit proposal,
feasibility study and evaluating the entrepreneurs that have been trained.
• Be computer literate, at least with training in MS Word and Excel programs
Aside from the foregoing, there are several private institutions that provide
entrepreneurship courses, but most of them are more focused on salesmanship and
marketing skills. There are also writers who spread their knowledge and entrepreneurial
skills through their articles in many forms of mass media or books on entrepreneurship
road. One of them is Andrias Harefa, through his book “Starting Entrepreneur from Zero’
(2000), who put forward the following success factors of an entrepreneur:
• motivated by an idea and a dream
• largely dependent on creativity
• exhibit courage
• disbelief in luck but real effort
• view a problem as an opportunity
Creative Entrepreneurship in Asia
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• choose business according to hobby and interest
• start with existing capital
• love to try new things
• be able to rise from failure
• not depending on academic titles
CONSTRAINTS OF SMEs IN PRACTICES
In general, SMEs are still marginal in the domestic environment. Many of them
operate outside the formal legal system; contributing to widespread informality and low
productivity. They lack competence and access to financing. Thus, to discuss constraints
faced by SMEs, we also need to discuss the constraints faced by entrepreneurs in their
businesses. The constraints can be divided into two groups: internal and external
entrepreneur factors:
Internal Entrepreneur Factors:
• Financial difficulty; e.g. trapped by money lender
• Limited capital and property for investment
• Limited knowledge. It may be related to low and improper education. Being
educated does not necessarily mean receiving formal education
• No access to training and counseling
• Limited technical skill or competency in a related field
• No information or networking to get support
• Limited spirit and entrepreneurial attitude
External Entrepreneur Factors:
• Difficulty in getting raw materials
• Traditional business management
• Limited access to funding resources or other financial institutions
• Inability to fulfill the terms of credit and administration required by related
financial or government institutions
• Business costs/burdens; e.g. high interest rate, doubling tax collection
• No coordination among government institutions related to the entrepreneur and
SMEs, so an overlap in responsibilities occur. Almost every department in
Indonesia has their work unit related to SMEs
• Unsupportive business climate and environment
• Lack of strong entrepreneur association in the SME sector that can fight for their
aspirations and interests when faced with domestic issues or threats from global
competition.
CONCLUSION AND RECOMMENDATIONS
It is undeniable that given the difficult economic situation, entrepreneurs and SME
are an important contribution to the recovery of a nation’s economy. Entrepreneurs who
lead many SMEs become ‘patriots of development’ as they are job creators and
innovators. They spot and exploit new opportunities and also help the government to
handle social and economic problems caused by emerging economic crises. Unfortunately,
the entrepreneur development solution in Indonesia is not directed at the external factors.
It is admitted that access to capital, access to information, access to markets, technology
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and managerial skills are important, but the most important aspect is the entrepreneurs’
mindset. In the end, it is this mindset that will be the basis of attitude or behavior.
Several actions are suggested to speed-up the nurture of tough entrepreneurs:
• Entrepreneurs gathered in SMEs associations need to form strategic alliances
with big and successful enterprises with these enterprises playing “godfather” to
the smaller enterprises. Such a pattern can achieve a high level of cooperation,
such as business learning and training in the processes from pre-production to
post-production.
• Entrepreneurs’ development need to be managed, centralized, integrated and
comprehensively implemented in one department, not across many departments
and this involves successful entrepreneur practitioners.
• As young job seekers are the biggest group in the unemployed, entrepreneur
development needs to be focused on this group through various entrepreneur
programs conducted at education institutions and informally conducted at a
school of hard knocks or business world. Education institutions such as the
Entrepreneur University established by Purdi F. Chandra can be held up as a
model which require their students to create their own business and they
graduate only if their businesses succeeded. In addition, students are not
awarded any academic title.
To develop entrepreneurs to become renewers of the national economy, the
following suggestions are recommended:
• The government forms a National Body to integrate and comprehensively,
formulate, develop, motivate, evaluate and monitor entrepreneurial activity;
including the arrangement of in-depth research on success and failure factors of
entrepreneur and entrepreneurial best practices
4
.
• Encourage the business world including employers’ association and educational
institutions to take part in the growth and motivating the regeneration of new
entrepreneurs through various business activities, for example annual
competitions, promotion week, product marketing, etc.
• Stir civil society organizations such as farmers, fishermen and workers’ union to
be an organize community-based activity to identify potential entrepreneurs
from society. Beside that, NGOs can also participate as in identifying
entrepreneurial candidates in the business world.
• Plan cooperation with international organizations, such as UNDP, ADB, World
Bank, ILO and donor countries, bilaterally and multilaterally, through pilot
4
Great news (Kompas, 27 May 2004) reported that government through the poverty reduction committee lead by the
Coordinating Minister of Public Welfare has provided non-guarantee loan for the SME program. As the first step, the
government bank will provide loans to SMEs directly or through the SME agency/intermediary. Other banks will be
brought in as partners. This program is similar to one launched by Bank Artha Graha, a private sector bank. Its
entrepreneur credit program provides credit to the informal sector SMEs without requiring loan guarantees. The Bank
play as foster father after considering the business suitable for the loan and trust each other while not ignoring
prudent principles of bank management.
Creative Entrepreneurship in Asia
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projects or technical cooperation in entrepreneurial and SME development. For
example SEED (Small Enterprise Development) training tools include ?
Entrepreneurship of ILO which offer various programs like Start Your Business,
Improve Your Business, Expand Your Business, Know Your Business, etc.
• Pay attention to entrepreneur empowerment which not only includes knowledge
and skill, but also changes of attitude and emotional maturity that is demanded
in the entrepreneur profession. Success stories of entrepreneurs from various
levels can also be showcased as role models and examples of the influence of
entrepreneurial culture.
REFERENCES
Andrias Harefa, Starting Entrepreneur from Zero, Gramedia Group, Jakarta, 2002.
Bambang Ismawan, The Role of Civil Society Organization in Expanding Work and
Business Opportunity, Yayasan Bina Swadaya, Jakarta, 2004.
Bank Indonesia, Empowerment of Financial Consultant/Micro and SME Facilitator of
Banks Partner, Jakarta, 2003.
Bisnis Indonesia, Daily newspaper, Jakarta, 16 July 2004
Didin Abidin Masud, The Struggle of 26 Managers To Success, Gramedia Group, Jakarta,
1997.
Fransiscus Welirang, Motivate the Growth of Healthy and Competitive SME, presentation
paper for SME workshop held by APINDO, Jakarta, 2003
ILO, Decent Employment through Small Enterprises, Jakarta, 2003.
ILO, In-Focus Programme on Boosting Employment through Small Enterprise
Development: Job Creation in SME, Jakarta, 2003
ILO, Working Out of Poverty, ILO Support to the Poverty Reduction Strategy Paper for
Indonesia, Jakarta, 2004.
Japan Federation of Employers’ Association – Nikkeiren Position Paper, Promoting
Structure Reform to Overcome the Crises, 2002.
Kompas, Daily Newspaper, Jakarta, 22 October 1993.
Kompas, Daily Newspaper, Jakarta, 19 January 1995.
Kompas, Daily Newspaper, Jakarta, 10-17-21-24-27, May 2004.
Marc Cowling and William D. Bygrave, Entrepreneurship and Unemployment:
Relationships between Unemployment and Entrepreneurship in the Global
Entrepreneurship Monitor, 2002.
Ministry of SME and Cooperative of the Republic of Indonesia, Official Statistic News
Nr.21/VII/24 March 2004, www.bps.go.id.
Ministry of SME and Cooperative of the Republic of Indonesia, Presentation Paper, 2003.
United Nations Development Program, Unleashing Entrepreneurship, Making Business
Work for the Poor, Report to the Secretary-General of the United Nation, 2004.
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Annex1
The Employers’ Association of Indonesia established on January 31, 1952, was called the
All Indonesian Consultative Body for Businessmen’s Social and Economic Affairs
(PUSPI). Since its 2
nd
National Consultative Conference, the association in 1985 was
renamed as The Employers’ Association of Indonesia or Asosiasi Pengusaha Indonesia
(APINDO). APINDO is the only representative of Indonesian Employers, recognized by
Decree of the Manpower Minister and also mandated by the Indonesia Chamber of
Commerce & Industry – KADIN INDONESIA to handle industrial relations and
manpower matters.
At national level, APINDO is a part of the National Tripartite Cooperation
Council. This body consists of representatives of the government, the employers and the
workers union.
The vision of APINDO is to create business climate for the businesses through its
primary mission to encourage harmonious industrial relations especially at the plant level,
to represent Indonesia business in various manpower institutions, to protect, advocate, and
to empower all business players especially their members.
The activities performed by APINDO cover eight core areas:
1. Organization, regional development and public relations
2. Foreign relations and international cooperation
3. Industrial relations and advocacy
4. Wage and social security
5. Training and education
6. Productivity, OSHE and environmental protection
7. Small and Medium Enterprise
8. Women entrepreneurship, women workers, gender and social affairs
At this moment, there are about 6.000 companies throughout the country that are
registered as regular members. At international level, APINDO also develops networking
and is a member of ASEAN Confederation of Employers (ACE), Confederation Asia
Pacific of Employers (CAFÉ) and International Organization of Employers (IOE). Every
year, APINDO represents Indonesian employers at the International Labor Conference in
Geneva. APINDO also cooperates with International Confederation of Free Trade Union,
Nippon Keidanren International Cooperation Center, Korean Employers’ Federation, and
more.
The APINDO Leadership Council consists of 3 levels; namely The National
Board, The Provincial Board in 30 provinces and the District/City Board in 175 districts.
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MALAYSIA
Zainal Abidin bin Othaman
MARA Negeri Sembilan
INTRODUCTION
Entrepreneurs can be individuals who act independently or are part of an
organization. They create a new venture or developed an innovation and take the risk of
bring them to the marketplace. Identifying opportunities in a dynamic and uncertain
environment requires an entrepreneurial mindset that can take on the passionate pursuit of
opportunities. After identifying the opportunities, entrepreneurs take actions to exploit
them and establish a competitive advantage. The process of identifying and pursuing
opportunities is entrepreneurial, but this activity alone is rarely enough to create maximum
wealth or even survive over time. The action taken must be valuable, rare, difficult to
imitate and non-substitutable to create and sustain a competitive advantage.
Innovation refers to a change in technology that departs from previous ways of
doing things. The outcome of innovation is to find a better product, process or procedure
in accomplishing the task. There are two fundamental types of innovation, namely product
innovation and process innovation. Process innovations are changes that affect the
production method. Product innovations are changes in the actual outputs (products and
services) itself. Innovation teams refer to a group of persons finding solutions to come up
with a better product, process or procedure.
The above circumstances should lead the entrepreneurs to organize and create an
entrepreneurial innovative organization. The increasing rate of globalization and
increasing challenges from competitors warrant that entrepreneurs spend time to think of
new avenues for change in their existing endeavors. In order to fulfill this need it is
important for the organization to have a vision, culture and process for innovation.
This paper will present selected Malaysian entrepreneurs who have infused their
corporations with entrepreneurship and developed innovation teams. They have been
drawn from the 24,510 Bumiputra entrepreneurs registered under the MARA Information
System.
ENTREPRENEURSHIP AND INNOVATION TEAMS
In order for an entrepreneur to create an entrepreneurial innovative organization, it
is important for the entrepreneur to instill in their organization elements that can inspire
and take the organization to new heights of success. At the same time, entrepreneurs
should bear in mind that external forces also play a significant role in enhancing the
success of their undertakings.
Paint an Inspiring Vision
The entrepreneur needs to incorporate in their company a vision that is highly
desirable, challenging and believable. There are manifold benefits to be gained from this
move. First, when people share a common goal and on a journey or adventure together,
they will be more willing to accept the changes, challenges and difficulties that the journey
might entail. Secondly, more responsibility can be delegated. Staff can be empowered and
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given greater control over their work. This is because they know the goal and direction in
which they are headed and can be trusted to steer their own raft and to figure out the best
way of getting there. Thirdly, people will be more creative and contribute more ideas if
they know that there are unsolved challenges that lie ahead. They have bought into (that is,
decided to be participants) the adventure so they are more ready to find routes over and
around the obstacles on the way.
Yaakob bin Husin established YBH Food Products Sdn Bhd at No. 115, J alan
Perdana 5, Taman Perindustrian Perdana Lukut, 71010, Lukut, Port Dickson in 2001. At
that time his business was producing five types of drinks and employed 12 assistants. In
running the business, he had weekly meetings with all his assistants. He instilled “we can“
a motto in his assistants. He told them all problems can be solved with creative thinking,
action and collaboration not only among themselves but also with other people such as
suppliers, customers and government officials. He laid out his vision for the company to
export its products to the Middle East of Asia and to become the leading producer of non
flavored drinks in Malaysia. These messages were constantly reinforced in weekly
meetings.
Build a Receptive, Open and “Without Fear” Culture
People are anxious about change. Change is uncomfortable. Change implies there
will be winners and losers. It is natural that people will prefer to stay within their comfort
zones rather than risk embarrassing or costly failures. Entrepreneurs should spend time
with people encouraging them to undertake risks and reassuring them that those risks are
necessary and worth taking. Fear of failure often inhibits people from pushing themselves
to new limits. However, doing nothing has its risks too; staying in the corporate comfort
zone is a dangerous option. Entrepreneurs should reassure their employees that they will
not be punished for taking risks on worthwhile or bold initiatives that do not succeed. Of
course taking risks means taking calculated risks and not wild risks. Every employee, who
is undertaking a risky initiative, needs freedom and also mentoring and guidance. Again
communication is the key. Informed people do not fear change.
Ghazirah Hashim opened a cake house in Ampangan, Seremban in 1995. She
employs 15 workers in the business. She mixes freely with all her workers and calls them
by name. She frequently encourages her assistants to tell her any mistakes that she has
made so that she can understand and correct herself. This is a departure from the existing
Malay cultural norm to not pinpoint the boss’s or supervisor’s mistakes. She also
encouraged her workers to try new cake recipes in the market and not to be afraid to make
mistakes. She constantly tells her workers it is not wrong to make a first mistake, but it is
wrong to repeat the same mistake made without benefiting or learning from prior mistakes.
Empowering the Employee
Change cannot be delivered by one person. It should be done by the people in the
whole organization – the creativity needed for innovation is in the team within the
organization. In order to transform them into individuals possessing the entrepreneurial
spirit that searches for new opportunities, it is important to empower them. The purpose of
empowering people is to enable them to achieve the change through their own efforts.
They need clear objectives so that they know what is expected of them. They need to
develop the skills for the task. They need to work in cross-departmental teams so that they
can create and implement solutions that will work across the organization. They need
freedom to succeed. They also need to be given the freedom to fail. People want to
understand and agree with what is expected of them. The scope of their freedom and their
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responsibility must be agreed upon. They need training, reinforcement and encouragement.
They need support in acquiring creative problem-solving skills and encouragement to be
brave enough to come up with radical innovations. Above all, empowerment means
trusting people. It is by giving them trust, support and belief that people are empowered to
achieve great things.
In running the business Yaakob bin Hussin (YBH Food Sdn Bhd) faces lots of
problems especially in obtaining cash sales. He already sells his products to the
hypermarkets and supermarkets in Malaysia as well as other small retail outlets. In the
hypermarkets and supermarkets, he faces problems because when he put the products on
display, he receives payment only two months after they are sold. On top of that he has to
pay a certain amount of fees prior to receiving payment for goods sold and this creates
cashflow problems. In order to overcome this problem he empowered his employees to
discuss marketing opportunities with the Ministry of Education and respective schools in
Melaka, Negeri Sembilan and Selangor. Owing to this empowerment policy, YBH was
able to get an endorsement from the Ministry of Education allowing it to sell its products
to every school and giving a certain portion of its sales to the respective schools
concerned. In doing this, YBH was able to generate cash sales and minimize problems
incurred by cash sales.
Goal Setting and Deadlines
Goal setting is a formal process of deciding what the enterprise wants to achieve. It
provides long-term vision, short-term motivation, and helps to focus on the acquisition of
knowledge and organize the resources. By setting clearly defined goals, employees can
take pride and raise their confidence through the achievement of these.
Haji Manggar, principal owner of Heritage Drinks Industrious Sdn. Bhd. (HDI) is
projected to have sales of RM 30 million in 2004. In 2002, its sale was RM 12.3 million.
In 2004 it produced 840,000 tins of Heritage drinks per month. This is 10% of the
production capacity.
In order to increase the production, HDI must weigh numerous factors. HDI is
producing three types of drinks, Tongkat Ali Herbal Drink, Kacip Fatimah Herbal Drink
and Tongkat Ali Diet Herbal Drink. Tongkat Ali or Eurocoma Longifolio J ack is derived
from plants and is very popular due to its aphrodisiacs functions. It is often called the
Malaysian Tonic. Kacip Fatimah or Labisia Pumila Benth is also from plants and
popularly used as a traditional medicine given to women after childbirth. At the moment
HDI is selling RM 2.90 per tin.
HDI has formed a committee to find solutions to increase its productions and sales.
HDI conducted a SWOT (Strength, Weaknesses, Threat and Opportunity) analysis of its
business. HDI has a big advantage because it has received International Awards namely,
the “New Millenium Award Paris 2000 France” and the “International Quality Summit
Award New York 2001”. The awards present HDI as an internationally recognized quality
product. At the time of writing, HDI is sold to 12,000 retailers in Malaysia out of 120,000
retailers. It has since realized the untapped opportunities in the market. However, HDI
experiences a lot of competition. The niche market that HDI is in the “energy and health
drinks” market segment. In Malaysia this market amounts to RM 100 million a year.
Competition comes not only from the local entrepreneurs but also from the international
companies.
In addressing these findings, HDI is developing additional products. It is now
adding canned drinks with flavors such as strawberry and orange. It now concentrates its
efforts in exporting these drinks to the Middle East. In its promotion program it replaced
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the older actor with a younger one to attract the younger age group of 18 to 30 years.
Furthermore it intends to reduce the price of each drink to RM 2.50 to boost sales.
Use Creative Techniques to Generate a Large Number of Ideas
Every one of us can be creative if we are encouraged and shown how to do it. We
were all imaginative as children but gradually most people have their creative instincts
restrained by the routine of work. With proper training, people can develop skills in asking
questioning and selecting ideas. They can be the innovative engine that the organization
needs.
The process of finding creative solutions is something that can be built into the
culture of an organization. This is done by techniques, methods, workshops and a
pervading attitude of encouraging crazy ideas.
The goal is to change the organization: to achieve a metamorphosis from a routine
group of people doing a job to a highly energized team of entrepreneurs, who are
constantly searching for new and better ways of transforming vision to reality. The aim is
use creative techniques to develop innovative solutions to achieve the goal. But merely
encouraging innovation is not enough. There is a need to initiate programs that show
people how they can use creative techniques. People need training in order to learn the
skills and to develop the confidence to try new methods.
Musa bin J eb has operated the Sembilan Resource Management Sdn. Bhd. since
1998. He rented a former resort for RM 50,000 a month and changed it into a training
center. His average expenses per month is around RM 130,000. It is very trying for him to
sustain in the business because he cannot depend on walk-in customers. He has to get the
multinational companies and the government agencies to conduct their staff training and
entrepreneurial development program at his center. He makes sure his employees address
all his customers “Sir/Madam”. He or his staff personally buys supper for all the
organizers of the programs. He encouraged his staff to attend seminars, workshops and
courses in order to broaden their knowledge. In doing so he feels his employees will be
better equip to develop skills in questioning, brainstorming, adapting, combining,
analyzing and coaxing customers. From the feedback given by his staff, he is now able to
diversify and operate a garment shop.
Involve Customers in Business Improvement
Customers play an important role in formulating and strengthening a business
organization. The goal is to identify ideas, problems and solutions for new products,
services, and processes. The customers are the users of the end-products. Their needs and
wants should be addressed. It is important to involve customers in generating ideas as well
as focusing on their needs.
Anifa Entreprise Sdn. Bhd. (Anifa) is a family business, established in 1996 and
located in J alan Bongek Tengah, 71,300, Chengkau, Rembau. It was started by Anifa and
had 6 employees in the beginning. Currently, it manufactures 5 types of bottled sauce.
ASB used to receive a large number of returned sauce bottles from its vendors. ASB
sought to understand why those sauce bottles were being returned by the customers. It
conducted a survey and found that customer tastes differed by region. Those staying in the
eastern part of Peninsular Malaysia such as Trengganu and Kelantan preferred a sweeter
sauce taste. Customers in the southern part of Peninsular Malaysia such as J ohore, Melaka
and Negeri Sembilan, preferred a hotter sauce taste. On discovering these taste preferences
as the cause of the returned bottles, Anifa changed its supply of sauce in accordance to the
preferences of each region.
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Cooperate with Suppliers
Suppliers can be key partners in the idea-creation process, but many organizations
are reluctant to share information with suppliers fearing they might be partners with their
competitors. Other obstacles to cooperation include cultural differences, lack of
cooperation, lack of resources, and lack of vision – leading to an inability to conceptualize
new opportunities.
Abu Motors Sdn. Bhd. began operations in 1996. By 2004 the company opened a
new branch at Taman Markosa, Seremban, Negeri Sembilan. It sells and repairs motor
cycles. Apart from Malay, Abu can speak fluent Chinese. In executing the business, he
receives considerable cooperation from suppliers even though they are of a different race.
These suppliers are friendly to him because he is able to relate to them in Chinese which
he acquired during his primary school education in a Chinese school. They have been
helpful in giving him many advantages such as payment through consignment,
rescheduling late payments etc. His suppliers are also ever ready to supply vehicles to him
compared to his other competitors who frequently face stock outages and irregular
delivery.
Networking through Business Associations
Entrepreneurs need information. They need to build good relations with relevant
authorities so that they can make better decisions in their business undertakings.
Yaakob bin Hussin of YBH Food Sdn. Bhd. is the Vice President of the Malay
Chamber of Commerce Association, Negeri Sembilan. In that appointment he has access
to other members of the association. Since becoming Vice President, he has attended
courses and mingled with the Malaysian Minister of Entrepreneurial Development, other
VIPs and entrepreneurs. Through the interactions at networking sessions he learnt of
another source for raw materials from India which is cheaper and of better quality than
local sources.
Support of Government
The government of Malaysia has created a government ministry specializing in
promoting and developing entrepreneurs. Funds are made available to entrepreneurs.
MARA, for example, has the objective to encourage, advise, train and help the Bumiputra
to participate actively in the activities of small and medium scale industry and commerce.
MARA implemented the Entrepreneurial Program, the Business Financing Program
and the Development of Business Infrastructure Program to help Bumiputra entrepreneurs.
The Entrepreneurial Programs implemented in 2003 are as shown in Table 1 below:
Table 1: Entrepreneurial Programs Conducted in 2003
Program No. Entrepreneurs Amount (RM)
Entrepreneurial Training 7,317 2,798,022
Consultancy Services 813 652,377
Apprentice Training 2,427 1,190,571
Marketing Promotions 131 100,390
Technical Entrepreneur 1,707 1,367,202
Furniture Technology & Resource Centre 349 252,164
Total 12,744 6,360,726
The Business Financing Program provides financing facilities to assist Bumiputra
entrepreneurs who wish to start a business venture, improve their businesses or upgrade
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their entrepreneurship level in commerce as well as in the small and medium scale
industry sector. The number of entrepreneurs who received this business financing
facilities and the amount approved is shown in Table 2 below:
Table 2: Business Financing Program in 2003
Sector No. Entrepreneurs Amount (RM)
Wholesale 1,854 103,167,700
Trading 1,581 27,734,000
Services 1,162 23,252,000
Manufacturing 208 4,705,000
Transportation 69 2,995,000
Total 4,874 161,854,538
The Development of Business Infrastructure Program aims to provide business
premises and industrial lots for lease to Bumiputra entrepreneurs in order for them to be
able to run their businesses at strategic locations. At the end of 2003, the number of
projects available for lease by Bumiputra is shown in Table 3 below:
Table 3: Facilities Provided under the Business Infrastructure Program
Types Of Projects Total Project Total Units
Arcade 80 2,050
Bazar 83 1,030
Business complex 24 997
Shophouses 76 833
Workshop 19 193
Industrial lot 14 294
Total 333 5,308
Bumiputra entrepreneurs are invited to adopt MARA as their business partner.
Commercialization of Research and Development Products
The government of Malaysia is allocating 0.4% of its GDP to Research and
Development (R&D). Under the Sixth Malaysia Plan, it is allocating RM 629 million with
the amount increasing to RM 935 million in the seventh Malaysia Plan. The Malaysia Plan
is a 5 year Plan. The Seventh Malaysia Plan is from 1996 to 2000. These R&D funds are
distributed to various Universities, Higher Public Learning Institutions and public research
institutions. The government has set a priority on R&D that can be commercialized. At
the National University of Malaysia, R & D projects with potential to be commercialized
are put on display.
Abdul Rahman from Reger Tools Sdn Bhd had approached the Research
Development Centre, National University of Malaysia and Nik Abdullah Nik Mohamed, a
researcher who had founded the product, Fire Locking System. This system is useful
usually during fires. In the panic during a fire, an occupant would have problems
remembering where the house keys are. In addition, it might take an unnecessarily long
time to unlock in the house doors which could fail with the metal components of the lock
expanding due to the increased ambient temperature. As a solution to this problem, a door
lock activated by a smart material sensor is recommended to unlock the doors when a high
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temperature is detected. Reger Tools has entered a memorandum of understanding with the
university. The company has successfully applied for a grant from the Ministry of Science,
Technology and Innovations for a sum of RM 2 million to upgrade and commercialize the
Fire Locking System.
CONCLUSION
The entrepreneurs in Malaysia include their employees, customers, suppliers, the
government and retailers as members of their innovation teams.
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PHILIPPINES
Dr. Justino R. Arboleda
Coco Technologies Corporation
The implementation of the GATT has always been regarded by many businessmen
in the Philippines with apprehension. It is a common belief that small rural based
enterprises would not survive competition from countries with more efficient and lower
production costs, and support from their governments. With good business ideas,
innovative marketing, investment in education employee, training, and constant product
development, even small rural based companies can compete in a global market.
Editorial Note:
This country paper is a first person account of creative entrepreneurship in the rural
sector. The first person voice of the author has been retained because unlike the other
papers in this volume the author is the entrepreneur.
INTRODUCTION
You are perhaps wondering why a CEO of a small company would need a doctorate
degree in anything. The truth is, I am only an accidental entrepreneur. I was in the
academe and was the Dean of the College of Agriculture and concurrently the Vice-
President for Planning, of Bicol University, a government university in the South of
Manila for ten years.
My university is located in the poorest region in the country. In spite of its
proximity to Manila, the national capital and the largest market for all goods and services
in the country, the area has remained poor. Being in the academe, I was the head of a
poverty study commissioned by the government and Asian Development Bank in 1989-
1991. Our study’s showed that ignorance on resource development, lack of farming and
entrepreneurial skills are the main causes of poverty of farmers in the region. Our
university, therefore, with me as its head, has started to develop technologies and skills
that will help the farmers develop their resources.
The paper I am presenting is a topic that I am very familiar with because it is based
on my experience: a story on how an academic who knew nothing about business, became
an entrepreneur.
RURAL DEVELOPMENT AND PRODUCTIVITY CHALLENGES IN
THE PHILIPPINES
The region I lived in is almost 70% taken up by coconutcrops. The good thing about
coconuts as a crop is that it thrives very well in our area where there is abundant rainfall
every year. No other crops would do as well in such an environment. Unfortunately, the
income from coconut is only about P1,000 (One Thousand Pesos) per hectare per month.
With almost 2.4% per annum population growth in the Philippines, the average land area
held by a farmer is down to two hectares per family. This situation leaves almost 70% of
the farming population in my area with an average monthly income, derived from
farmings of US$40. To survive, the farmer will have to take on odd jobs in town, send his
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children to be maids in Taiwan and other countries, or to take up any work they can find to
contribute to their family’s survival.
This is the main reason why the economic indicators of our region are very low.
The very low productivity of these farmers drags the indicators down. More than 30 years
ago, Philippines was ahead of many countries in terms of economic development. Yet it is
one of the least economically developed countries in the region today. As the population
grew and farms become smaller, the corresponding incomes of farmers decreased without
the development of new rural enterprises.
The challenge in developing the farmers in the countryside is they lack the basic
skills, and lack of access to opportunities and new ideas to develop their resources:
1. Lack of Formal Education
The Filipino farmers only have an average of five years of formal education.
They are literate but have no opportunity to further their education.
2. Lack of Available Technologies to Develop Their Farm
Most of the developed technologies are for rice and corn. There are none or very
little village level production technologies applicable to the coconut farming
system.
3. Lack of Land Resources and Capital
Most of the farmers do not have land or cannot avail themselves of the loans
from formal lending institutions. The requirements are not simple to comply
with, even in government banks. Most commercial banks only exist in the
countryside to collect deposits to fund lending in the industries in the cities. This
further decreases the flow of money in the rural areas.
4. Lack of Organizational, Technical and Entrepreneurial Skills
There are very few farmer cooperatives that have succeeded in the Philippines.
Many do not have the entrepreneurial and organizational skills necessary to start
a manufacturing operation or any business except farming.
Rightly or wrongly, my grandparents, and uncles who were revolutionists and
nationalists, blamed the lack of entrepreneurship and lack of organizational skills on our
colonial educational system. They said that in the installation of our educational system,
the Spanish and the Americans simply wanted literate but obedient and controlled subjects.
They never wanted to educate future business competitors.
DIFFICULTIES OF STARTING A PIONEERING RURAL ENTERPRISE
To aid the development of the coconut farming system, it has been the focus of our
university, under my leadership, to develop rural based enterprises. One such project
involved developing technologies to process waste coconut husks into coconut fiber
erosion control materials and coir dust as a soil conditioning agent. Coconut husk is one of
the biggest item of farm waste in the Philippines. About 12 billion coconut husks or about
6 billion kilograms are burned in the farm each year. Until now, I keep on wondering why
we have not done this sooner.
With the funding support of IDRC (International Development Research Center of
Canada), I was able to start a small project developing rural-based manufacturing
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technologies to produce cocofiber products for erosion control. Unfortunately, like many
other technologies developed in the university, there were no adopters of the technology. I
was very frustrated and people were even distrustful of technologies coming from the
universities. They said that members of the academe would not even invest a single penny
of their own money in the technologies they have developed. I understood the situation,
but it made me so frustrated that I decided to quit the university and engage in the business
myself just to prove it is viable. I did not want the results of the research activity to gather
dust in our library shelves. Many other technologies developed in the university suffer this
fate for the following reasons:
1. Fear of Venturing into New Enterprises (Lack of Entrepreneurial Spirit)
Perhaps because of the lack of capital resources, people are afraid to risk their
lifesavings in an uncertain venture. The lack of tolerance for failure, which
usually devastate family resources, makes venturing into a new business,
however seemingly attractive, difficult.
2. Lack of Venture Capital or Government Assistance for New Businesses
It is difficult to start a business through borrowing without real estate collateral,
which academics like me do not have. Business is so difficult now that banks do
not even lend money on chattel mortgage of unusual machineries. Venture
capital does not exist in the Philippines and it is futile to seek financial
assistance from the government.
3. High Cost of Informal Sources of Financing
Therefore new rural entrepreneurs like me had to rely on the high cost of
borrowing from informal sources of financing, friends and relatives. Some of
the money I borrowed had interest rates of 25% per year or even higher.
I therefore had to use my wife’s life savings, which was then only about
US$2,000. But of course the cost to me is to be good and obedient to my wife
for many years. Borrowings from my brothers and sisters, also have many social
costs for me. They eventually became stockholders in our company and I have
to deal with listening to all their ideas and suggestions on how the company
should grow.
4. Lower Social Status of Small Entrepreneurs
Of course my wife was worried about our future when I left the university. On
top of that I had to borrow all her savings to venture into a business she did not
understand. What she probably found hardest to cope with was the drop in my
social status: from being the dean and vice president of a major government
university in the country, to a small businessman, just like the small shop-keeper
near our house, selling many small items.
In a country where success is equivalent to being employed in a top American
corporation or being a high level official in the government, being self employed
is only for the non-achievers who could not be employed elsewhere and have no
alternative things to do in life.
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People came to talk to my wife to dissuade me from leaving a very promising
academic career for an uncertain future in gathering farm waste. Everybody I
knew thought I hade gone crazy.
For quite a while, I really thought that I made very hasty decision quitting the
university. I had no choice but to burn my bridges so that I could really face up
to the challenge of managing a new enterprise, which proved to be exciting but
very difficult and totally different from the world I was used to.
MARKETING CHALLENGES
One of the disappointing realizations of academics or a technical person like me
who goes into business is that 90% of my time has to be devoted to a job we hate most:
selling and dealing directly with customers.
1. Seasonality of Export Market
We initially sold our fibers to small local furniture manufacturers, but the
volume was not big so we decided to look for export destinations. In one of my
trips to Europe as a consultant to GTZ, I requested the Philippine Embassy to
look for a possible user of coconut fiber in Germany. I found a small company
using jute and other plant materials for erosion control but was willing to
develop products from coconut fiber. The product development was successful
and it became easy to market the products to J apan and the United States as
well. All we had to say to the J apanese was that the Germans are using it and to
the Americans, that the Germans and the J apanese are using our products.
The difficulty with exporting our products is that they are linked to the planting
and landscaping season, usually during autumn and spring. We have limits to
our inventory, and after one export season, our factories have to slow down
production in anticipation of the next export season.
We are trying to even our inventory imbalance by exporting to Australia and
New Zealand, which has opposite seasons and by developing the local market.
2. Need for Local Market Development
Initial difficulties were encountered in the Philippines because engineers in the
country are not familiar with the method using plants to stabilize the soil.
Strategies were developed for the Philippine market. Through these strategies,
our company has grown from initial export sales of 15% in 1996 to 17% in
2003.
a. Bias Against Locally Made Products
It is harder to sell in the Philippines locally made products than exporting to
other countries. Filipino customers generally are biased against locally
made products because of quality concerns. We have overcome this by
informing customers that our products are being used in developed
countries and produced brochures showing the foreign use and applications
of our products.
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b. Collection Difficulties
The problem with selling to local customers in the Philippines is the delay
in payments. Customers usually delay their payments until they can collect
from their construction projects. Although we can compensate this by
increasing our prices to cover our financing costs, this remains to be our
biggest problem with the local sales. Our capital is tied up with a large
collectible account from the customers.
3. Providing Quality Service
The local construction industry in the Philippines is limited to a few of
companies. Although they compete with each other, each company tries to learn
from the experience of other companies. We see to it that we provide very good
service to our customers and that it is to their satisfaction. Gradually, even
without advertising, we are becoming known in the construction industry as the
company to consult for erosion problems. In 2004, most of our jobs are repeat
orders from old customers for their new projects.
4. Creating a Marketing “Story”
In order for potential companies to remember us, we highlight the fact that we
are employing thousands of poor families who earn their living making erosion
control nets. We also add the fact that the waste coconut husks are used instead
of being burned and contributing to the pollution of the environment.
Many of our customers are big land developers who also have programs to help
the poor and reduce poverty. Using this story to touch the sensitivities of our
customers gives us an edge. All things being equal, we usually get more erosion
control projects over other construction methods on the basis of the customers’
desire to help the poor.
5. Lobbying for Government Support
As the company grew, it became confident in handling larger projects. When it
comes to construction projects, the government is the biggest customer in the
country. Convincing the government to use our materials as a means to reduce
poverty in the coconut areas took us two years. Finally in September 2003, the
government issued a Memorandum Circular to all government agencies
including the Department of Public Works and Highways to use coconut fiber
products as erosion control material in the country.
6. Personal Touch of the Chief Executive
In whatever marketing efforts, it is still the chief executive of the company who
is the top salesman. Constant contact with the customer by the chief executive
makes the customer feel important and the relationship continues with the
customer even overlooking certain mistakes made by our company because we
keep in touch. This customer relationship maintenance however, takes so much
of my time that my wife already regrets that she ever lent me the money to start
the company.
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INCREASING PRODUCTIVITY IN A RURAL SETTING
My company was established as a poverty alleviation project. As such, there was a
focus on the employment of farmers. This posed no problem at the start of the company
because I was always around to manage things. The situation has however changed when
we set up office in the capital city and I had to spend most of my time in managing the
sales and services work of the company.
Initial attempts to hire new supervisors and lower level managers from outside did
not succeed. Their knowledge of the company is limited and there was resistance from the
old employees. A lot of work had to be done to introduce management skills to existing
workers who have very low skills level. The educational profile of the workers is as
follows in Table 1 below:
Table 1: Formal Educational Attainment of Juboken Enterprises Workers
Category No. of years Factory Household
subcontract worker
Elementary Six years or less 11% 68%
High school Ten years or less 86% 30%
Collegiate Fourteen years or less 3% 2%
As can be seen on the table, the company employs the poorer sector of the society
with low formal education and low level of work skills. It is therefore a challenge to
increase their production output without close supervision.
Our company however faced two situations, which necessitated improvements in
the production of the company:
1. Higher demand for more production and lower prices;
2. More time for the management to focus on marketing; and
3. Need to develop management skills among present workers
Our company took the following steps:
1. Invest in Employee Productivity Training Programs Conducted by
Government Agencies
These training programs are usually free of charge and are good eye openers for
the employees. Not only do they get a new perspective of their work, workers,
who have undergone training, usually have higher self-confidence and self-
respect.
2. Conduct of Field Trips to Other Companies
Field trips permit the employees relax and also provide an opportunity to
compare the advantages and disadvantages of the company.
3. Provision of Skills Training to Enable the Employees to do Multiple Tasks
This provides employees with other skills e.g. electrician, welder ettc. Their
salaries increase if they are multi-skilled, and the company benefits by saving on
the costs of hiring another worker.
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4. Improved the Production Recording System to Identify Group Outputs
This system identifies the output of each group and comparative analysis can be
done on the performance of each group.
5. Set Production Targets
As demand for our products increases, delivery deadlines and production targets
have to be met. Increased production is achieved as much as possible without
increase in number of employees or resources. The management and workers
both agree on this target.
6. Established Incentive Systems for Production
If production targets are met, group incentives such as additional one-month
salary are provided for. Last year, our workers received additional two months
salary for meeting their production targets.
7. Conduct Weekend Meetings to Check Performance, Discuss and Solve
Problems
These meetings have become very important in monitoring the performance of
the workers, and jointly solving problems and issues arising from the efforts to
meet production targets.
To free ourselves from spending too much time in production activities and to
concentrate on marketing, we had to do the following:
1. Give our employees our full trust and confidence
2. Give our employees authority to make production decisions
3. Give our employees high tolerance to mistakes and praises for a job well done
4. Give our employees the necessary moral support and the budget they need
As a result of what we have done, we have almost doubled our production and sales
in the past three years without a corresponding increase in labor and production costs.
We have also experienced the following benefits:
1. Less direct supervision and more senior management time to sales activities
2. Less conflicts in the production floor
3. Higher compensation to employees
4. Larger employee contribution to the company activities
KEEPING AHEAD
Although a pioneer in the coco fiber erosion control business in the Philippines, we
still have to keep ahead of our competitors by doing the following:
1. Providing Specialized Services for Customers
Using coconut fiber erosion control materials in combination with plants to
protect construction areas from soil erosion is a technology new to many
companies and government agencies. Our company assists customers in the
design and installation of these products. Other companies are not capable of
Creative Entrepreneurship in Asia
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providing these services. We therefore have a very great edge and dominate the
erosion control market in the Philippines.
2. Forming the Best Sales and Services Team
If in the factory we have to contend with employees who had low skills level,
our sales and engineering services office in Manila have to have the best people
we can afford. With the economic crisis in the country, it was not very difficult
to hire top graduates.
3. Investment in Product Development
Constantly studying the customer’s needs through consultation is necessary to
develop new products.
4. Quality Assurance and Guarantees to Customers
Our company assures the customers the best quality goods and services. To
prove this, we provide one-year warranty for our work. No other company in the
Philippines does this. Through this move, we gained and enjoy the trust of the
clients.
CONCLUSION
With the implementation of the GATT, many in the Philippines fear that small
enterprises in our country would be wiped out of the competition due to the lower labor
and production costs in other countries.
Our experience in our company shows that with a good business idea, investment in
product development, innovative marketing, and investment in training of employees, even
rural-based companies in the Philippines can compete in a global market.
- 79 -
SINGAPORE (1)
Dr. Aloysius Tay Ban Hock
Formerly Association of Small and Medium Enterprises
“The creation of something new is not accomplished by the intellect but by the play
instinct acting from inner necessity. The creative mind plays with the objects it loves.“
On this note, I thank you for being a wonderful audience and hope you will be able
to take away with you some key insights on creative entrepreneurship.
INTRODUCTION
The rapid spread of general-purpose technology, particularly information and
communication technology (ICT), is changing work organization practices, production
processes and the relationships between consumers and producers.
Singapore was ranked the sixth most technologically sophisticated country in the
world and ranked fifth in the world for “firm-level technology absorption” by the Growth
Competitiveness Report (World Economic Forum, 2004). This indicates that Singapore
firms are aggressively absorbing new technologies to enhance business growth and
competitiveness, and are employing increasingly sophisticated technologies in the
industries. Singapore also showed significant increase in its ranking on the Technology
Index of the Growth Competitiveness report between 2002 and 2003.
By adopting new technologies or changing current technologies and processes, it is
a strategic and deliberate attempt by businesses to propel themselves to new levels on the
economic playing field. To rise above the competition, companies in Singapore will not
only need to compete within the country but also with regional and international players.
In this paper, four local companies are highlighted for their adoption of technology
to stay above the competition. It should be noted that three cases discussed here are
companies who have adopted process innovation and not product innovation. All firms are
significant players in their respective fields in the Singapore SME sector. The case
examples are followed by a section or the Singapore government’s initiatives to support
enterprise innovation.
Table 1: Global Competitiveness Report 2003-2004:
Singapore’s Performance on Technology Index
(Source: http://www.spring.gov.sg/portal/stats/productivity/ssect1_112.html)
Top Country
& Score
Singapore
(Ranking) & Score
Indices
2003 2003
2002
(original)
TECHNOLOGY INDEX
Measures the elements of innovation linked
to economic growth, diffusion of
technology, and information and
communications technology (ICT).
United States
6.3
(12)
5.09
(17)
4.89
Creative Entrepreneurship in Asia
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Table 1 (Cont’d)
Innovation sub-index
United States
6.44
(15)
4.04
(20)
3.76
Technological sophistication
Country’s position in technology among
those of the world leaders
Finland
6.6
(6)
5.8
(9)
5.6
Firm-level technology absorption
Companies in one's country are aggressive
in absorbing new technology
Finland
6.4
(5)
6.1
-
Company spending on research &
development
Companies in one's country spend heavily
on R&D relative to international peers
United States
5.9
(10)
4.8
(16)
4.6
University/industry research
collaboration
Business collaboration with local
universities in its R&D activity is intensive
and ongoing
Finland
5.9
(3)
5.3
(9)
5.0
Utility patents
US patents for invention granted per million
population, 2002
United States
301.48
(10)
97.62
(14)
72.12
Information and communication
technology (ICT) sub-index
Iceland
6.32
(6)
6.14
(5)
6.02
SCIENCE ARTS CO. PTE LTD -TRADITIONAL CHINESE MEDICINE
Science Arts Co. Pte. Ltd. (“Science Arts”), a traditional Chinese medicine
company stepped out of its comfort zone to embrace technology in order to stay ahead of
its competition. The small, but fast-growing company has successfully merged a
traditional business with an untraditional way of doing business.
This importer and processor of Chinese traditional herbal medicines in Singapore
and Southeast Asia has a widespread network of retailers. The operation is no small
undertaking. Science Arts carries a catalogue of more than 2,000 different products, and
annual sales of more than US$6 million.
The Science Arts sales force had been facing dissatisfied clients when it came to
taking orders. It would normally require 48 hours from time of order to delivery.
Occasionally, a wrong order may turn up due to misinterpretation of the sales order
because of the sales representative bad handwriting. Hence, with the feedback from the
sales force and clients, the management and staff of Science Arts brainstormed to resolve
the problem. With the assistance of a IT solutions provider, Silk Technology, Science Arts
decided to equip all of its Singapore sales representatives with the HP Jornada 568s, a
pocket PC, which allows the company to track customers and record product orders.
Linked to mobile phones, the device taps into a backend system that features an HP LC
2000 server networked to five HP Vectra model desktop computers for processing
transactions and two other HP PCs used to ring retail sales record .
Singapore
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The Pocket PCs have proven to be a boon to their business where the sales
representatives can transmit orders back to the home office anytime, anywhere, greatly
shortening the sales cycle. This allows them to spend more time selling new products to
their customers. The pocket PC is equipped with smart features which has the ability to
predict and understand the customer’s preference. As a result, Science Arts enhances
customer loyalty by providing the right products in the right place, at the right time to the
right customers. Science Arts earns itself a favorable reputation amongst its customers for
efficient and punctual inventory replenishment.
Science Arts’ Managing Director, Mr. Tan Lee Huak estimated that he has achieved
a 30% increase in new businesses. The sales representatives can now call on 13 customers
instead of 10 each day as they are more efficient now. Mr. Tan noted the integration of
external sales to back-end accounting and distribution operations eliminates human error,
especially in data entry. The new mobile sales force solution also reduces the inevitable
conflicts between the field staff and the back-office logistics staff.
As a result of harnessing technology, the company has been able to trim overheads
by reducing paperwork, human capital and unnecessary trips to client’s retail outlets
arising from wrong orders. The results have been satisfactory to the company such that it
now plans to expand its business by examining the possibility of pursuing new overseas
markets.
Five years ago, the company was anxious to reduce costs and increase productivity
after fighting against a severe slowdown in the regional economy. Managers struggled to
keep inventory in line with declining sales – a difficult task to accomplish without
computerization and management’s swift adoption of creativity and innovation.
COLOURS BY THE BAY TRENDS ? FOOD & BEVERAGE
Food & beverage (F&B) operators are rapidly integrating new technologies into
their businesses and reaping the resultant benefits of higher productivity. Nooch, a “noodle
bar”, is one of the first restaurants in Singapore to embrace information technology. The
management and staff deliberated on a solution that will improve the overall customer dining
experience. The central objective was to capture customer loyalty and increase market share
through overall customer satisfaction. Hence, the Personal Digital Assistant (PDA) was
employed to do the job. The waiter keys in the order into the PDA and this information
automatically registers on a computer located in the kitchen. This system allows staff to devote
more attention to serving diners. Food usually arrives 10 minutes after the order is taken.
Billing is made more efficient too. Any changes made to the order is reflected instantly at the
cashier, hence eliminating billing errors. Furthermore, with the assistance of intelligent
backend material management systems restaurant owners will have better control over stock
reordering. On top of that, greater financial security is guaranteed, as unreported sales will be a
thing of the past.
“Colours By The Bay”, a restaurant group comprising seven different outlets, is one
F&B operator who has taken the concept to a higher level. By adopting a cluster approach,
seven F&B operators are banded and set up their outlets at a common location; offering
different dining concepts in a common location, sharing resources such as advertising and
promotions, and leveraging on a common technology infrastructure - Wireless Point-Of-
Sale – to minimize cost and improve productivity and efficiency.
This initiative has also proved to be a success - increasing workers' efficiencies and
boosting sales They provided an excellent example of how SMEs can work together to
enjoy economies of scale. “Colours By The Bay” introduced a wireless cross-ordering
Creative Entrepreneurship in Asia
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system. For the first time, diners have the choice of ordering from any of seven eateries,
regardless of where they are seated. The orders will be sent directly to the respective
restaurants' F&B counters, kitchens and point-of-sale systems. This cross ordering is made
possible through the use of wireless networking and handheld PDA technologies that span
floor area of 2,415 square metres.
On top of this, the system can cross-bill the restaurants and a customer can ask for
his bill to show which outlet he has ordered from. “Colours of the Bay” has taken an
innovative approach of combining interesting F&B concepts with wireless technologies, to
enhance customer service and operational efficiency.
THE CRESCENDAS GROUP ? CRESCENDAS MEDICAL PTE LTD
MEDICAL SECTOR
The Crescendas Group is a dynamic and diversified group of businesses with
operations and facilities in Singapore, Malaysia, China, Myanmar and Laos. With a track
record of more than 20 years and staff strength of more than 1,000 employees, the
Crescendas Group's business portfolio can be grouped into the following business
divisions:
• Property;
• Building;
• Leisure;
• Electronics;
• Distribution;
• Medical.
The group started their business in 1982 in the transport and distribution business.
Today, Mr. Lawrence Leow, Executive Chairman of the Group, has not only established
the abovementioned businesses, he was also added a medical portfolio. Crescendas
Medical will soon launch their first dialysis machine on the market. This will be the first
of such machines that are manufactured by a company in Southeast Asian region. Mr.
Leow explained that he has assembled a good R&D team and by learning from the
Germans, his team managed to adopt the German’s technology and assemble a locally-
made dialysis machine.
With the willingness to adopt technologies and the commitment of the teams at The
Crescendas Group, the company is able to stay ahead of the competition. As this product
has not been launched, specific details cannot be provided.
NATURAL COOL AIR-CONDITIONING AND ENGINEERING PTE LTD –
RETAIL IN AIR-CONDITIONING, MOBILE AIR-CONDITIONERS
SHOWROOM
Buying an air-conditioner is now more convenient than ever. Natural Cool - one of
Singapore’s leading company in air-conditioners retail sales and servicing, introduced its
unique Cool Mobile showroom, that brings its air-conditioners right to work/renovation
sites and residential properties. This innovative idea has made the purchase of air-
conditioners more convenient as potential buyers can view different models of the product
and receive professional advice about it at their doorstep. A wide range of well-known
Singapore
- 83 -
brands which buyers can choose from are available on-site. Customers simply call a
hotline and Natural Cool will send its mobile air-conditioner showroom to any place in
Singapore.
This idea was conceptualized in the boardroom when the company responded to
salesmen’s feedback on customers’ complaints about the opening hours of its retail outlets
– the customers said that the stores were opening late and for too short a period. The board
then decided to bring the showroom to the customers at a time as requested by them
instead. The company acted to meet the needs of people of who often complain of their
lack of time.
The investment made to implement this creative sales idea is minimal. The only
new requirement was a van that was modified to showcase the various models of air-
conditioners. A licence was obtained from the Land Transport Authority of Singapore
(LTA) to convert ordinary vans into the required mobile showrooms. Training was
conducted for sales personnel who were stationed at the retail stores. Thus these sales
personnel are equipped to perform a cross-section of duties, such as being the driver, the
salesperson, as well as the site surveyor. The same person would recommend,
demonstrate, sell, conduct site viewing and take the necessary measurements.
In conducting a cost and benefit analysis of this innovative idea, the incremental
cost is minimal, but the result is an overwhelmingly high rate of sales closure – 90%.
Savings are accrued from the reductions in overheads associated with a showroom set-up.
Natural Cool obviously benefited from the exposure that this creative idea brought
them. In this instance, the company did not harness new technology to increase
productivity, but embraced old technology instead ? by using an automobile to improve
business.
WHAT THE SINGAPORE GOVERNMENT HAS DONE
It is well recognized that technological innovation lies at the heart of a nation’s
ability to sustain high rate of economic growth and productivity and to maintain
competitiveness in the increasingly knowledge-based global economy.
Government agencies like Standards, Productivity and Innovation Board
(SPRING), InfoComm Development Authority (IDA), Economic Development Board
(EDB) and International Enterprise Singapore (IES) are working hand in hand with the
industry to help SMEs to innovate and adopt technology to remain competitive. It should
also be noted that there are numerous other schemes that Multi-national Corporations can
tap on. The focus here is on the SME sector where government assistance is greatly
needed.
SME21
Small and medium-sized enterprises play a critical role in Singapore’s economic
development. SPRING is the lead agency for upgrading SMEs and transforming the
domestic sector for higher productivity. A major initiative in the SME21 strategic plan is
to provide assistance to accelerate the development of growing companies. The target is to
have 6,000 SMEs achieve annual sales of $10 million by 2008. This means that one in 15
SMEs would have the potential to become a large company. To date, 3,630 SMEs have
successfully grown to this level.
GET-UP Scheme
Creative Entrepreneurship in Asia
- 84 -
To boost the global competitiveness of technology-intensive enterprises, the
Growing Enterprises with Technology Upgrading (GET-UP) program was launched in
February 2003. A multi-agency initiative of the Economic Development Board, SPRING,
IE Singapore and A*STAR, GET-UP facilitated the placement of research scientists and
engineers from A*STAR’s research institutes in local enterprises.
PATH Scheme
Administered by IDA, Pilot and Trial Hotspots or PATH, first introduced in May
2001, is an industry development initiative that accelerates the development of innovative
infocomm infrastructure, applications and products. It does this by supporting the trial and
pilot of emerging infocomm technologies and best-of-breed services. To be entitled to
PATH, the company must be able to display the following:
• Involve the innovative use of wireless technologies in one or more of these
areas: mobile commerce, location-based services, wireless multimedia and
messaging, wireless enterprise and machine-to-machine communications;
• Be conducted in Singapore, unless otherwise justified; and
• Demonstrate significant levels of contribution to new capabilities within the
company and/or industry.
LEFS and LETAS Schemes
SPRING administers two government schemes to help SMEs upgrade, modernize
and expand their operations. They are the Local Enterprise Finance Scheme (LEFS) and
Local Enterprise Technical Assistance Scheme (LETAS).
LEFS offers fixed interest rate loans through 18 financial institutions. This
arrangement allows the government to tap the participating financial institutions' (PFIs)
specialized banking and credit evaluation expertise in assessing loans, ensuring that LEFS
loans undergo similar rigours of credit evaluation. At the same time, with the government
sharing the risk, these PFIs are more prepared to lend to SMEs.
Under LETAS, assistance is given to enable SMEs to defray the cost of engaging
external expertise for operational upgrading and strengthening in-house capabilities to
improve productivity. The number of applications and value of assistance approved in
FY2002 totalled 4,889 and amounted to $83 million respectively. This was a 24% increase
in the number of applications and a 15% rise in the value, compared with FY2001.
The government extended the enhancements to LEFS and LETAS to 30 June 2003.
The enhancements were first announced as part of a package of off-budget measures in
July and October 2001 to help local enterprises cope with the difficult economic
conditions. Larger local enterprises, with a fixed asset investment not exceeding $50
million and with employment size not exceeding 300 employees. If they are in the service
sectors, continued to have access to short-term working capital financing.
In January 2003, LEFS and LETAS support was extended to publicly-listed SMEs,
which are at least 30% locally-owned, with group fixed asset investment of not more than
$15 million and group employment size of not more than 200 workers for service
companies. The government recognized that these companies may still need help as they
often lack the expertise to boost their capabilities in order to be better positioned to expand
and venture into foreign markets.
The Singapore Government has done all they can to encourage local enterprises to
adopt technology to enhance their businesses and to remain competitive. It has introduced
numerous financial and R&D assistance to enable many companies to benefit from these
Singapore
- 85 -
schemes. However, one major factor that can still be improved is the ease and accessibility
of such schemes by smaller players in the market. These companies still do not know
about such schemes that are available for their growth. This can be attributed to lack of
knowledge or lack of know-how to tap on these resources. Thus, a more aggressive drive
should be launched to reach out and educate the uninitiated.
CONCLUSION
From the above case-studies, we can see that although these organizations differ in
business types, they have the following characteristics in common:
• Strong and clearly expressed shared values
• The companies adopt innovative processes by managing its people, capabilities
and product portfolio.
• An appreciation of/for the whole individual and everything s/he can bring to the
organization
• Cultures that encourage openness and playfulness
• Celebrate successes, constantly
• A strong, clearly communicated sense of history
• Intense customer focus
• Clear focus on trends
• Cross-functional teams
The role of government support for innovation has been considerable.
To conclude, Singapore’s adoption rate for new technology is high and is on the
rise. In some case, the adoption of older technology can assist and propel business growth.
Hence, it may not necessarily be the adoption of new technology that can enhance growth,
but the utilization of the right technology and the creativity of all players in the team, with
the openness of management to adopt new and creative ideas that will be the key to
business success and thus be on the surf of competition. The ability to tap on government’s
assistance will greatly enhance the adoption of new and costlier technologies to enhance
business growth.
- 86 -
SINGAPORE (2)
Adrian Lim Meng Yan
The Young Entrepreneur Mastery Limited
INTRODUCTION
The word “entrepreneur”, derived from 17th-century French “entreprendre”, refers
to individuals who were “undertakers”, meaning those who “undertook” the risk of new
enterprise for profit or loss. The entrepreneur seeks, in Joseph Schumpeter’s (an Austrian
economist) word, to reform or revolutionize the pattern of production by exploiting an
invention or, more generally, an untried technological possibility to produce a new
commodity or produce an old one in a new way, by opening up a new source of supply of
materials or a new outlet for products. Entrepreneurship, as defined, essentially consists of
doing things that are not generally done in the ordinary course of business routine.
The concept of entrepreneurship can be regarded as a path of creation. An ongoing
process with ideas, actions, creations and interactions which culminate as outcomes, e.g.
an enterprise, a product, or a piece of art. Entrepreneurs pursue ideas through a creative
process whereby imaginative people germinate ideas, nurture them, and develop them
successfully.
To put it simply, creative entrepreneurship is therefore a process where the
entrepreneur undertakes the risk of a new venture by pursuing new ideas to bring
something new into existence, to set up an enterprise or to find a better way to develop a
project.
Internationalization, as the term denotes, is to develop and expand the local
enterprise beyond its domestic shores. With the explosion of the technology and
information that is readily available through the Internet, the international market is an
inevitable progress that a creative enterprise must undertake, particularly in the context of
Singapore which is constrained by a small domestic market.
Singapore’s then-Prime Minister Goh Chok Tong recognized the need for
Singapore business to venture abroad as up to now Singapore’s growth has primarily been
investment driven. There are a host of reasons for internationalization given Singapore’s
limited size and resources, which have led to an increasingly high cost structure and a
small domestic market. At the same time, expanding abroad would mean an opportunity to
tap into much larger markets, the promise of finding new markets for existing products
and generating new demand that was previously unavailable. For manufacturers, it might
also be an opportunity to find new sources of supply and labor that will enhance their
competitiveness.
In line with the government’s call for Singapore businesses to extend their fields
beyond the domestic shore, many businesses have taken the initiative to venture abroad.
Examples of such business ventures include Osim, BreadTalk and Qian Hu. A brief
synopsis of the successes of these companies is provided under Part III of this paper.
ROLE OF PUBLIC POLICY IN INTERNATIONALISATION
Government Initiatives to Build a World-Class Company
The Singapore government recognizes that world-class multi-national corporations
will continue to be key driver of Singapore’s economic growth and the necessity of
Singapore
- 87 -
building our own world-class economies to complement our economic growth. Local
enterprises should pool resources to achieve synergy and economies of scale, leverage on
external expertise to raise professional standards, develop their own brands and products
through innovation and technology, and re-engineer their business processes. This is done
through the implementation of plans such as Trade 21, Industry 21, Franchise 21 and SME
21. (refer to Annex 1).
Incentives and Assistance Schemes
In Singapore, the government agencies are providing incentives and assistance
schemes to local enterprises that have the potential to venture abroad into new markets.
Below is a summary of the main government agencies that promote such an endeavor.
LETAS (Local Enterprise Technical Assistance Scheme) from SPRING Singapore
assists Singapore Enterprises in improving their productivity. This is a generic scheme
under which SMEs can obtain relevant technical assistance offered by management
consultants. The SMEs may be reimbursed for up to 50 percent of their costs for engaging
management or technical consultants on projects approved by relevant government
agencies. SMEs which have projects that meet SPRING’s criteria may obtain
reimbursement for up to 50 percent for assistance received.
The Economic Development Board (EDB) has an Innovation Development Scheme
to encourage and assist Singapore Enterprises in the innovation of products, processes and
applications. This will equip the local SMEs and or Large Local Corporations (LLCs) with
good support for the innovation of products, processes and applications (refer to Annex 2).
International Enterprise (IE) Singapore's primary focus is to help growth enterprises
secure overseas markets, create greater demand for their products and services. IE
Singapore has a good number of assistance programs such as International Partners
Program, Double Tax Deduction (DTD) for Market Development Scheme, Overseas
Manpower Program, Growing Enterprises with Technology Upgrade (GET-Up) and other
assistance for enterprises venturing overseas (refer to Annex 3).
To help Singapore infocomm companies tap opportunities in foreign markets, the
Infocomm Development Authority of Singapore (IDA) and Singapore infocomm
Technology Federation (SiTF) have jointly set up the Singapore Solutions Centre (SSC) in
Shanghai. The SSC will serve as a one-stop centre for China companies and agencies that
wish to find out more about the technologies, products and services which Singapore
infocomm companies can offer. It will also help to identify partnership opportunities for
the companies of both countries to work together in deploying innovative IT solutions to
meet the growing needs of the China market.
IDA has a few assistance programs such as the Overseas Development Program
(ODP), which is a key platform in forging win-win partnerships between Singapore-based
infocomm Local Enterprises (iLEs) and leading Singapore Companies/Infocomm Multi-
National Corporations (MNCs) (refer to Annex 4).
A*STAR (Agency for Science, Technology and Research), through the T-Up
Program, will share talent and help transfer technology to the industry.
Each agency offers assistance to address specific industry needs within the agency's
charter. The result is an integrated and coordinated approach to harness all the capabilities
of the various schemes and incentives which will help Singapore enterprises grow to be
global enterprises by overcoming their financial, human resource and technology
constraints.
With the above mentioned agencies, there is a common thread - no agency works
independently. The agencies work to synergize their strengths and overcome Singapore’s
Creative Entrepreneurship in Asia
- 88 -
economic constraints. For instance, the GET-Up (Growing Enterprises with Technology
Upgrade) Team comprising of senior staff from A*STAR, EDB, IE Singapore and
SPRING Singapore was formed to pro-actively aim to visit 500 selected Singapore
Enterprises with growth potential. The GET-Up Team will help to identify and ascertain
these Enterprises’ difficulties in finance, human resource as well as technology, and utilize
various tools from the different agencies to resolve these problems.
The last agency to be mentioned is the Ministry of Trade and Industry (MTI). Its
vision is to transform Singapore into a globalized, entrepreneurial and diversified
economy, a leading global city for talent, enterprise and innovation. It envisions to achieve
by 2018:
• a globalized economy where Singapore is the key node in the global network,
linked to all the major economies;
• a creative and entrepreneurial nation willing to take risks to create fresh
businesses and blaze new paths to success; and
• a diversified economy powered by the twin engines of manufacturing and
services, where vibrant Singapore companies complement MNCs, and new
startups co-exist with traditional businesses to exploit new and innovative
ideas.
Singapore is a highly trade-dependent economy, with the highest trade to GDP ratio
in the world. Not only is the economy heavily reliant on imports as its only source of food,
energy and industrial raw materials, its small domestic market also means that its
industries must rely on overseas export markets to absorb its outputs. Furthermore, trade
activities have historically been and continue to be an important source of economic
wealth for the country.
Singapore is therefore a free trader, implementing practically no barriers to the free
flow of goods in and out of the country, and a vocal champion of global free trade. The
primary objective of its trade policy is to guard its trading interests by ensuring a free and
open international trading environment.
This is why Singapore places the highest priority on the multilateral trading system
embodied by the World Trade Organization (WTO). Singapore has initiated FTA
discussions with a number of our strategic trading partners. The progress of Singapore’s
FTA efforts as at May 2003 is summarized below.
Concluded
New Zealand Japan
European Free Trade Association Australia
United States
Ongoing
ASEAN & the People's Republic of China Bahrain
Canada Egypt
Hashemite Kingdom of Jordan India
Republic of Korea Mexico
Pacific Three (New Zealand, Chile, Singapore) Panama
Sri Lanka
Singapore
- 89 -
BRIEF SYNOPSIS OF INTERNATIONALISED SINGAPORE ENTERPRISES
OSIM International Ltd.
OSIM was established in 1980 and has grown to become a global leader in healthy
lifestyle products.
Over the years, Mr. Ron Sim, founder and CEO of OSIM, has learnt to be more
creative and innovative in his company’s approach to product enhancements, designs,
intellectual property (IP), technologies and concepts. For example, their massage chair has
grown from using roller mechanisms to pneumatic ones to the present iSymphonic AV.
This new OSIM chair synchronizes audio and visuals with massage.
From its humble beginning in Singapore, OSIM today has over 500 OSIM outlets
in 79 cities in 21 countries. OSIM’s success-conscious mindset is due to its relentless
pursuit to be creative and innovative, and a forerunner in the healthy lifestyle segment.
They have identified their core business in 4 main areas:
Table 1: Global network of OSIM outlets
31 March 2004 31 March 2003
Hong Kong 72 67
Taiwan 60 45
China 136 93
Singapore 72 79
Malaysia 71 58
Global franchise markets 99 61
Total 510 403
Source: From www.listedcompany .com
Table 2: Turnover by geographical operations
March 2004 March 2003 Countries
S$m % S$m %
%
Change
Hong Kong 23.3 34% 19.7 37% +18%
Taiwan 15.0 22% 9.9 19% +52%
China 10.6 15% 6.3 12% +68%
Singapore 8.7 13% 8.2 16% +6%
Malaysia 6.3 9% 5.9 11% +7%
Global franchise markets 4.8 7% 2.5 5% +92%
Total $68.7m 100% $52.5m 100% +31%
Source: From www.listedcompany .com
• Health Focus - managing your healthy lifestyle
• Hygiene Focus - clean environment for your home and office
• Nutrition Focus - supplementing your daily nutritional needs for a balanced diet
• Fitness Focus - bringing the convenience of fitness to the comfort of your home
OSIM is constantly developing new products to drive sales and also has a strong
focus on global expansion. The company aims to add 100 outlets and 2 to 3 new countries
to the OSIM empire by end 2004.
Creative Entrepreneurship in Asia
- 90 -
Qian Hu Corporation Ltd.
Qian Hu Corporation Ltd. is a leading exporter of ornamental fish. The Singapore
homegrown company has played a significant role in helping the country achieve the
prestigious status as the world's leading exporter of ornamental fish in the past decade and
recognition as the ornamental fish capital of the world. Today, Singapore supplies more
than 30% of the world's aquarium fish.
Once a humble pig farming business, Qian Hu has undergone massive
transformation to become one of the most diversified local companies – dealing in the
business of import and export, farming, breeding, quarantine, wholesale, and distribution
of ornamental fish. Qian Hu is uniquely positioned as an integrated ornamental fish
service provider, providing a one-stop service point for domestic and international
wholesalers, retailers and consumers.
Qian Hu is not just a breeder, distributor or manufacturer. Their business model
hinges on 4 core activities:
• Ornamental Fish
• Aquarium & pet accessories
• Export
• Domestic distribution
Qian Hu’s successful business model is exportable, expandable and scalable. These
are the essential qualities that differentiate them from the rest of the competition in terms
of its integrated services, brand, distribution network, manufacturing capabilities, and
most importantly, its quality, innovation and service culture throughout the Group.
In his recent company announcement, Mr. Kenny Yap, Managing Director of Qian
Hu mentioned that “There is reason to celebrate. Despite the double whammy impact of
the "perfect storm", our Group turnover grew 8.0% to $67.7 million, while net profit
attributable to shareholders rose 7.2% to $7.0 million.”
Over the years, the "never say die" and "can-do" attitude has seen Qian Hu grown
by leaps and bounds and has become one of our key business strengths. “Creativity sparks
the way we run our often-perceived-as-a-traditional, low-technology business - after all,
much can still be done to ensure that we safely deliver our ornamental fish all over the
world and in the fastest possible way,” Kenny Yap, the CEO noted.
Since 2002, Qian Hu has initiated a long-term strategy to build a technology-driven
organization that maximizes its business efficiencies across the board, aptly code-named
FISH which is an acronym for:
Fish - Fast response in an ever-changing business environment
Intelligent - An innovative, smart organization
Strong - Unity amongst key stakeholders
Harmonious - Deriving synergies
Qian Hu recognizes that knowledge is at the core of enterprise value-creation. In the
formation of a knowledge company, they have identified the organizational, cultural and
technological strands of its knowledge-based business processes and embarked on
collaborative practical research that aims to improve enterprise decision-making and
maximize value creation. Such collaborative efforts span across and beyond corporate
boundaries, and open new avenues for innovation.
Singapore
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In 2004, Qian Hu will pursue an aggressive expansion of a new chain store concept,
“Qian Hu ? The Pet Family”, in Jakarta, Bangkok, Shanghai, Tianjin, Beijing, Penang and
Johor Bahru. It plans to expand to more than 100 stores within the next 5 years.
BreadTalk Group Ltd.
BreadTalk was established in 2000 in Singapore and has become one of the top
brands in the food and beverage industry. The success of BreadTalk is in the way it
radically changed the mindset of people to bring joy and fun in eating bread.
The founder and Group Managing Director, Mr. George Quek has brilliantly
revolutionized the culture of bread consumption with its visually appealing, aromatic and
unique-tasting products. Furthermore, all its bread have an identity and creative names
such as, Crouching Tiger, Hidden Bacon inspired by the Hollywood blockbuster; Mount
Fuji inspired by its Japanese master chef; and HotChic, its spicy, sambal-flavoured
Chicken Floss bun.
In BreadTalk’s website, it mentioned that its international expansion plans are:
China
It currently owns and operates two BreadTalk outlets in Shanghai which are well-
received by consumers there. They are targeting to open six more outlets in Shanghai this
year, and their first outlet in Beijing by third quarter of 2004.
Indonesia
Sales from the three Jakarta outlets opened in 2003, as well as the fourth outlet
opened recently in January 2004, have been strong. The franchisee plans to open 10 more
outlets in fiscal year FY2004, including one outlet in Surabaya
Gulf Cooperation Council
The company’s franchisee in the GCC, Al-Mejhem Global Group, W.L.L., plans to
open its first outlet in Kuwait in the first half of this year. The target is to eventually open
up to 30 outlets in the GCC.
Philippines
Their Philippines franchisee plans to open the first BreadTalk outlet in Manila by
April 2004, with nine more outlets in the country within the first three years.
Malaysia
ML Breadworks Sdn. Bhd., their franchisee in Malaysia, is also targeting to open
10 outlets in three years, starting in the Klang Valley area, mainly Kuala Lumpur and
Selangor areas, followed by the rest of West Malaysia. The first outlet will open in the
first half of 2004.
For FY2004, the Group aims to open 10 to 15 outlets in the Philippines, Malaysia,
and the GCC. They are also targeting to seal new franchise agreements for three to four
more countries, such as Hong Kong SAR, Taiwan, Thailand and Australia.
CONCLUSION
In Singapore, the government plays an active role in supporting and encouraging
SMEs and LLCs to venture beyond their comfort zone. The various government agencies
are synergies which effectively ensure that the potential of a growing company or
Creative Entrepreneurship in Asia
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organization to venture abroad is given a chance through the myriad of assistance
programs.
As for the SMEs and LLCs, their desire to further expand their business horizon
gives them an added challenge. Their innate entrepreneurial trait does not permit them to
be satisfied with their present status. Their constant and insatiable desire to move from
glory to glory will not only motivate them, but to many others who are modeling their
success.
Hence, the government and entrepreneurs in Singapore are constantly challenged to
be an alchemist, bringing about a major transformation and ensuring sustainable success
for the future.
Singapore
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Annex 1
ASSISTANCE PROGRAMS
The following information is found on
http://www.mti.gov.sg/public/ECD/frm_ECD_Default.asp?sid=25&cid=93
Trade 21
The vision of Trade21 is to make Singapore the Global City of International Trade.
It is a masterplan that sets out the challenges, objectives and strategies for Singapore's
trade development in the next five years. It presents the key strategies and targets of
International Enterprise (IE) Singapore to:
• Internationalize Singapore Enterprises
• Make Singapore the Centre for Global Trade Hub Services
• Secure Global Market Access for Singapore and
• Develop a World Class Trade Facilitation System
Industry 21
The Economic Development Board’s Industry 21(I21) blueprint was launched in
June 1998. Comprising a set of 6 programs, I21 was designed to promote Singapore's
economic growth into the next millennium. It aims to develop Singapore into a leading
competence centre for knowledge-driven activities and a hub for the headquarters and
product charters of multi-national corporations. The I21 programs include:
(a) Cluster Development
Promote greater diversification among and within the key industry clusters,
and also promote knowledge-driven activities across the value-chain of these
industries
(b) Promising Local Enterprises/World-Class Companies
Build up local world-class companies, and root foreign world-class companies
in Singapore
(c) Innovation
Promote innovation within companies and encourage them to develop new
knowledge-driven capabilities and activities
(d) International Business
Tap into global and regional hubs for capital, new technology, ideas, resources
and markets
(e) Headquarters
Attract foreign companies to set up their global headquarters in Singapore
(f) Resource Development
Develop a local workforce and attract foreign talent with critical skills
necessary to support industry needs into the next millennium
It is envisioned that in the next 10 years, knowledge-driven industries under I21
would contribute 40% of Singapore's annual GDP, and generate employment of 20,000 to
25,000 annually. Two out of three jobs in manufacturing would be for skilled and
Creative Entrepreneurship in Asia
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knowledge workers, while in the services sector, three jobs out of four would be for skilled
and knowledge workers.
Franchise 21
Franchise 21 aims to position Singapore as an International Franchise Capital and
promote franchising and economic groupings as strategic tools to help domestic businesses
become regional and global players in the new economy. 3 broad strategies and 17
programs will be implemented to expedite the formation of franchises and alliances:
• Branding Singapore as a franchise capital by developing a franchise mark to
accredit local franchisors and master franchisees and as a hub for franchises to
network and interact
• Developing strong franchisors and master franchisees through appropriate
programs and incentives
• Increasing the number of franchisees and alliance members in the SME sectors
through facilitation, development of training programs and provision of
incentives
SME 21
SME21 is a 10 year strategic plan spearheaded by SPRING Singapore to create
vibrant and resilient small and medium enterprises (SMEs) that enhance Singapore's
competitiveness and economic growth. It has 3 strategic goals:
• groom innovative high-growth SMEs to ensure a steady stream of SMEs to
reach world-class status
• develop productive SME sectors to enhance productivity by restructuring,
revitalizing and upgrading the sectors
• creating a knowledge-based, pro-enterprise environment to inculcate the
appropriate mindset for business and entrepreneurship
Singapore
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Annex 2
ECONOMIC DEVELOPMENT BOARD’S (EDB) – ASSISTANCE PROGRAMS
The following assistance program from EDB can be found at
http://www.sedb.com/edbcorp/sg/en_uk/index/investors/assistance_schemes/for_equipme
nt_infrastructure_dvpt.html.
Approved Foreign Loan Incentive (AFL)
Suitable
for
What the
scheme does
Eligibility Benefits Type of
assistance
Investors Tax incentive:
grants full or
partial exemption
on withholding
tax on interest
payments to non-
residents
Interest payments
must be made on
loans taken to
purchase
productive
equipment only
Minimum loan
amount is
S$200,000
Improves the
company’s ability to
access offshore
financing for
investments in
productive equipment
as non-resident
recipient would not be
paying higher taxes in
the home country
Equipment
investment
Development & Expansion Incentive (DEI)
Investors Tax incentive:
provides
preferential
corporate tax rates
on all qualifying
profits above a
pre-determined
base, for a set
period
Project must
generate
significant
economic spin offs
for Singapore
Reduces tax liability.
Assists the company to
move into higher
value-added business
activities
Business
development
Expansion Incentive for Partnerships (EIP)
Investors Tax incentive:
Provides tax
exemption on
50% of the
qualifying
overseas income
above a pre-
determined base
Open to
audit/accounting
and law firms
legally constituted
as partnerships
At least 50% of
the equity stake of
the applicant firm
must be held by
Singapore tax
residents
Activities must
lead to the
establishment of a
regional centre of
competence
Reduces tax liability.
Assists the firm to
establish centres of
competence and
conduct substantial
level of regional
activities
Business
development/
regionalization
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Integrated Industrial Capital allowance (IICA)
Suitable
for
What the
scheme does
Eligibility Benefits Type of
assistance
Investors Tax incentive:
allows companies
to claim capital
allowances for
approved
expenditure on
plant and
equipment used in
an overseas
subsidiary
Plant or equipment
must be owned
from Singapore
Reduces tax liability Regionalization
Regionalization Finance Scheme (Indonesia) (RFS-I)
Investors Loan: provides
fixed rate loans
for investment in
Indonesia
manufacturing
operations
Assists local
companies to set
up and/or expand
their operations in
Indonesia
Open to all
Singapore
companies
Investment must
lead to active
operation or
increase in
production
capacity in the
Indonesian
company
Loans may be
extended for
factory, or
machinery and
equipment
investment
Provides an alternative
source of financing
Loans are at fixed
interest rate
Expansion/
regionalization
The Singapore-Riau Advantage
The Riau Islands of Bintan and Batam are just a stone's throw from Singapore.
Located to the south of the city-state, Bintan is 45 km or an hour away by ferry, while
Batam is 20 km or a 45-minute ferry ride. Together, these two islands offer abundant labor
and facilities.
The competitive business environment of Bintan and Batam has entrenched global
players from industries as diverse as precision engineering, plastic moulding, chemicals
and garment fabrication.
Companies benefiting from the Singapore-Riau Combination include Philips,
Thomson, Siemens, Seagate, Nidec and Venture, to name a few. They also include
business giants from the US, Japan and Germany, amongst others.
Investment Guarantee Agreements
Singapore has signed investment guarantee agreements with 31 countries and
regional groupings, with a further 10 in the pipeline.
Singapore
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These pacts help to protect foreign investments made by Singapore-based
companies. The governments of the host countries are obliged to:
• Accord fair and high-level treatment to investments by Singapore-based
companies
• Allow repatriation of income and capital earned in the country
• Ensure compensation in the event of expropriation or nationalization
• Provide an objective dispute settlement mechanism
The 31 agreements are with:
ASEAN Mongolia
Bahrain Netherlands
Belgo-Luxembourg Economic Union Pakistan
Belarus Poland
Bulgaria Peru
Cambodia Republic of Mauritius
Canada Riau Archipelago
China Slovenia
Czech Republic Sri Lanka
Egypt Switzerland
France United Kingdom
Germany United States of America
Hungary Uzbekistan
Laos Vietnam
Latvia Zimbabwe
Creative Entrepreneurship in Asia
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Annex 3
IE SINGAPORE ASSISTANCE PROGRAMS
International Partners Program
International Partners Program (iPartners) is an IE Singapore initiative that aims to
increase Overseas Sales and Access of Singapore based companies through synergistic
partnerships with industry leaders that could provide additional marketing channels.
Brief Description of an International Partners Program Project
An iPartners Project consists of one Anchor Company and several Alliance
Partners. The companies have come together with the specific purpose of
internationalization, spearheaded by an Anchor Company through an iPartners Business
Development Manager. Below is a graphical representation of an iPartners Project:
Role of Anchor Company
The Anchor Company, which is an industry or market leader, will spearhead the
project by providing one or more of the following value-add to the Alliance Partners:
a. Greater access to the overseas market or a different segment of the overseas
market through its value proposition including brand recognition, track record,
etc;
b. Adapt new or existing products or services for overseas markets; and
c. Develop capabilities to penetrate the overseas market including the upgrading of
existing technology/technological capabilities.
Role of Alliance Partner
The Alliance Partner must be able to complement the Anchor Company in this
project and provide value proposition to the project. The Alliance Partner must sell its
products or services in the overseas market(s) targeted by this project.
Increase in Overseas Sales
Increased Direct Overseas Access all in the Alliance
Improve Capabilities
Aggregate Existing Products and Services
Introduce New Products and Services
Increase
Overseas
Access
Spin-
offs
Role of
Anchor
Company
in helping
Alliance
Content
#1
Content
#0
Technology
#1
Technology
#0
Role of
Alliance
Partners
Singapore
- 99 -
Role of iPartners Business Development Manager
iPartners Business Development Manager's responsibilities include:
a. To co-ordinate the project so as to ensure that its targets and objectives are met;
b. To identify resources to pursue overseas business opportunities for the project;
and
c. To report the progress of the project.
Double Tax Deduction Online System
What is Double Tax Deduction for Market Development Scheme?
The Double Tax Deduction Scheme for Market Development aims to encourage
Singapore companies to expand their overseas markets. It allows for approved companies
to deduct the eligible expenses incurred for approved projects twice against their taxable
income.
Who can apply for this scheme?
To qualify for support, the company must meet the following criteria:
1. Be a resident company or have a permanent establishment in Singapore, and
2. Be an active operating/trading company with the primary purpose of promoting
the trading of goods or provision of services.
DTD support is not be available for companies that are already enjoying other
forms of tax incentives/concessions from the government (e.g. incentives under the
Economic Expansion Incentive Act and the Income Tax Act).
What activities are supported?
The following projects are supported under Section 14B of Income Tax Act:
• Participation in approved trade fairs
• Participation in overseas trade missions/ market development trips
• Setting up of overseas marketing offices
• Master licensing and franchising
• Advertising in approved local trade publications
• Printing of corporate brochures/catalogues for distribution in overseas markets
• Engaging in other overseas market development activities, e.g. market surveys,
feasibility studies, advertising and promotional campaigns in overseas markets,
design packaging, product / service certification for export
What can I do with DTD online System?
• Through DTD online, you can
• Find out more about the DTD scheme
• Submit applications online
• Track the status of all your company's DTD applications
• Submit evaluations forms online
Creative Entrepreneurship in Asia
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Annex 4
IDA AND SiTF SET UP SINGAPORE SOLUTIONS CENTRE IN SHANGHAI
To help Singapore infocomm companies tap opportunities in the China market, the
Infocomm Development Authority of Singapore (IDA) and Singapore infocomm
Technology Federation (SiTF) have jointly set up the Singapore Solutions Centre (SSC) in
Shanghai. The SSC will serve as a one-stop centre for China companies and agencies that
wish to find out more about the technologies, products and services that Singapore
Infocomm companies can offer. It will also help to identify partnership opportunities for
the companies of both countries to work together to deploy innovative IT solutions to meet
the growing needs of the China market.
As part of IDA's clustering strategy for helping Infocomm companies overseas, the
SSC would showcase companies who are behind successful IT projects in sectors such as
Transport, Logistics, Financial Services and Healthcare. These are also the four key
growth sectors in China today. The SSC will feature a cluster of companies in each sector
that can offer a complete suite of vertical solutions for potential customers. Each cluster
will be led by a company with an established track record of doing business in China and
this cluster leader will help its members to work in the China market. For a start, 19
companies have signed up as members of SSC, and the cluster leaders include Singapore
Computer Systems, NCS Yu Bo, IPACS and Stratech Systems (See Annex A for list of
SSC members.)
The SSC is off to a good start with the Healthcare cluster leader, Singapore
Computer Systems, and its cluster member, EGIS Healthcare Technologies, clinching a
contract worth more than S$2 million with Beijing Tongren Hospital. Singapore Computer
Systems will help Tongren deploy a fully integrated hospital information and management
system for its new hospital wing. Over the next three years, SSC also hopes to achieve
S$37 million export revenue.
To allow China companies and agencies to experience Singapore technologies and
solutions first hand, the SSC will house a permanent "Solutions Showcase". This is an
interactive showcase of IT solutions in the four clusters as well as other innovative
Singapore's technologies. Among the first to be featured are technologies from Creative
Technology, AXS Infocomm and ST LogiTrack.
"The Singapore Solutions Centre represents a major milestone in SiTF's efforts to
help our home-grown infocomm companies regionalize," said SiTF Chairman Saw Ken
Wye. "In addition to SITF's efforts in bringing business missions to China and the rest of
the region, the SSC forms a strategic beachhead through which SiTF member companies
can more effectively source opportunities and establish a local presence in China. The
SSC also plays a strategic role in building the 'Made-in-Singapore' branding of our local
infocomm solutions in the international market," he added.
The SSC will be managed by a full-time director in Shanghai and its operations co-
funded by IDA and SiTF. Each cluster of companies within the SSC will also have a full
time Business Development Manager to help the companies in identifying business
opportunities within these four specific sectors.
In addition to the SSC, companies can also tap on IDA China office
1
for assistance
within the China market. Established since 2002, the IDA China office has been helping to
facilitate infocomm collaborations between Singaporean and Chinese companies, and
establishing the role of a government-to-government interface in the Infocomm arena.
Through its Overseas Development Programme
2
and funding schemes such as Market
Singapore
- 101 -
Development
3
, IDA will also provide assistance to the SSC cluster members to support
their activities in China. Besides this, IE Singapore is supportive of this initiative and is
funding two of the clusters through the iPartners Program. SSC cluster members can also
tap on the IE Singapore's network of overseas offices in China.
Singapore Solutions Centre Clusters
Financial Services
1) NCB Yu Bo (Leader)
2) Automatic Identification Technology Pte Ltd
3) FairEx International Financial Systems
4) FOCUs5.NET Pte Ltd
5) NextVIEW Pte Ltd
6) System Access Pte Ltd
Healthcare
1) Singapore Computer Systems Limited (Leader)
2) EGIS Healthcare Technologies Pte Ltd
3) Medimedia Asia Pte Ltd
4) Sentient Health Pte Ltd
5) SQL View Pte Ltd
Logistic
1) IPACS e-Solutions (S) Pte Ltd (Leader)
2) Boon Software Consulting Pte Ltd
3) Logipolis Pte Ltd
4) Silk Technologies Pte Ltd
Transport
1) Stratech Systems Limited (Leader)
2) Ademco (Far East) Pte Ltd
3) Ufinity Pte Ltd
4) Vislog Technology Pte Ltd
OVERSEAS DEVELOPMENT PROGRAM (ODP)
Objectives
The Overseas Development Program (ODP) is a key platform to forge win-win
partnerships between Singapore-based Infocomm Local Enterprises (iLEs) and leading
Singapore Companies/Infocomm Multi-National Corporations (MNCs), at the
Headquarters level, to:
• Prepare iLEs to be globally competitive, and to compete globally
• Boost iLEs' capabilities to increase their presence in growing markets outside
Singapore
• Further enhance iLEs' overseas market position through direct access to leading
MNCs/Singapore Companies' R&D resources, and global business opportunities
and networks in their own countries
Creative Entrepreneurship in Asia
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Why Overseas Development Program?
New impetus to leapfrog local partners' "go-to-market" capabilities. Many
Infocomm Local Enterprises have matured over the years and have successfully developed
software products and services for the market within and beyond Singapore. The ODP will
be the impetus to "rapidly push" the iLEs towards globalization.
Capability Enhancement. Emphasizing on building capabilities, the ODP is a
partnership-driven program that will leverage on the strengths, business connections and
technology edge of MNCs/Singapore Companies' HQ to help iLEs gain a head start in new
markets overseas.
ODP Partnership Models
Technology Partnership. Focus on product development, commercialization, and
overseas market access.
Services Partnership. Focus on overseas solutions deployment, and overseas market
access.
REFERENCES
The above information is an extraction and compilation from the following
websites of:
Economic Development Board (http://www.sedb.com/edbcorp/sg/en_uk/index.html).
Spring Singapore (http://www.spring.gov.sg/portal/main.html).
International Enterprise Singapore (http://www.iesingapore.gov.sg).
Ministry of Trade and Industry,
(http://www.mti.gov.sg/public/Home/frm_MTI_default.asp).
Infocomm Development Authority of Singapore,
(http://www.ida.gov.sg/idaweb/marketing/index.jsp).
The Listed Company.com (http://www.listedcompany.com/).
- 103 -
SRI LANKA
Samantha Sathischandra Wanniarachchi Kumarasinghe
Multichemi Group of Companies
CREATIVE ENTREPRENEURSHIP IN THE FACE OF UNCERTAINTY
Prior to 1977, Sri Lanka had a closed economy and was mainly exporting its
agricultural produce - tea, rubber and coconut without adding any value. After the open
economy policy was introduced in 1977, the private sector got active and a new breed of
creative entrepreneurs emerged. The companies that rode on the open economy wave at
the very beginning enjoyed the best advantages over the late entrants.
In 1983, terrorist activities in the North and the East of the country started and the
local market available for Sri Lankan entrepreneurs slowly began to shrink. Therefore,
they had to be more innovative to survive in a fiercely competitive market that was
shrinking in size due to the North-East war.
In this chapter, a few examples of Sri Lankan entrepreneurs who have been very
successful due to their creativity and innovativeness are mentioned. Interviews were
conducted with the entrepreneurs where possible or otherwise relied on a secondary
source.
CREATIVE ENTREPRENEURSHIP IN THE TRADING INDUSTRY
Harry Stassen J ayawardhane (“Harry J ayawardhane”), a former tea taster, founded
Stassen Exports Limited in 1977, as a bulk tea exporting company. At the very outset,
their mission was to fight the bulk tea-exporting giants which were mainly British-owned
companies. The dynamic and dedicated Harry J ayawardhane successfully fulfilled his
mission by becoming the fifth largest bulk tea exporter in the country by the year 1982. In
1987, Stassen Exports became the proud owner of world’s first certified organic tea garden
and also expanded his bulk tea exports to become the leading tea exporter in the country
by 1988. He also went into exports of desiccated coconut and spices. He has won
presidential export awards for five consecutive years. By this time, he had amassed great
wealth, as all his export profits were tax-free since 1977.
The government offered capital gains tax concessions for trading profits in the share
market in late eighties. Harry J ayawardhane moved into the share market and started
buying shares of publicly quoted companies.
Since then he has taken maximum advantage of the open economy and the
privatization of government corporations. His main strategy has been acquisition of
publicly listed companies and developing them successfully. His vision in business
acquisitions and restructuring has made him the largest businessman in Sri Lanka today.
At present, he is into many manufacturing industries but bulk tea continues to be his
number one export.
His current investments with controlling shares include the following:
• Largest alcohol distribution network with numerous distilleries
Creative Entrepreneurship in Asia
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• Second largest private bank in the country
• Largest milk powder packing plant in the country
• Largest insurance company in the country
• Processed food distribution company with the best brands in the world
• Largest hotel and hotel management company with hotels in Maldives as well
• One of the largest and oldest engineering companies in the country
• Large tea plantations
• Unknown number of foreign investments
He has a new vision of becoming one of the leading businessmen in Asia by the
year 2010.
He is known as a man with strict and strong administration coupled with hands-on
type management. Creative and capable employees are well looked after by him. His
companies are known for paying the highest annual bonuses. Currently, he is also the
advisor to the President of Sri Lanka on Foreign Trade and Investments. He will continue
to be entrepreneurial to achieve his vision of being a leading businessman in Asia.
CREATIVE ENTREPRENEURSHIP IN THE FINANCIAL INDUSTRY
Lalith Kothalawala’s father, J ustin Kothalawala, hailed from a rich family. When
J ustin Kothalawala formed Ceylon Insurance Company in 1938, it was the first Ceylonese
owned company in Ceylon (now Sri Lanka). When Lalith Kothalawala completed his
education in England and returned to Ceylon in 1964, his father’s business comprised of
three companies - Ceylon Insurance Company, Middleway Printers and the Finance
Company. His father also owned the tallest building in the country at that time, called
Ceylinco House. Lalith Kothalawala joined his father’s business at the age of 23 as a
trainee.
After the death of his father in 1973 he became the chairman of the companies at
the age of 32. Since then, Lalith had added more colour and variety to his father’s business
and formed Ceylinco Group diversifying into every conceivable field. They too have
enjoyed the benefits of the open economy after 1977. His vision was to enter into joint
venture investments with the regional giants of the many fields of business, mainly from
India. He has a clear strategy of training and empowering employees and invests in
information technology. He has also established e-commerce businesses in regional
countries such as Malaysia.
Today Ceylinco Group has over 100 private and public companies and over 22,000
employees. Lalith Kothalawala has 15 deputy chairmen under him managing the group’s
business, dividing it into 15 main segments. He allows his companies to be run by these
chairmen and the directors of respective units without much intervention. He has not gone
into major acquisitions unlike some other entrepreneurs.
His major investments are in the following areas.
• Finance companies
• Banks
• Insurance companies
• Credit card business
• E-commerce
Sri Lanka
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• Land and property development with innovative concepts
• Condominium projects
• Large scale housing projects with about 1,000 houses per project
• Diamond cutting projects
• Rural banking operations
• Health care and fitness projects
• Insurance companies in foreign countries such as Nepal and Bangladesh
His senior directors and managers respect him very much as an honest and kind
entrepreneur. His success is in his vision and the way he has harnessed the talents and
creativity of his senior staff. A man with no children, he has set up a trust to manage his
businesses after him. The senior directors too will have some ownership in the respective
groups.
His insurance company, Ceylinco Insurance recently won an international award for
creativity on its “On the Spot Cash” motor insurance policy.
In 2004, he is about 62 years old and will continue to be a creative entrepreneur and
expand his business empire with the aim to be the biggest group of companies in Sri
Lanka.
CREATIVE ENTREPRENEURSHIP IN TRADITIONAL TEA
Merrill J . Fernando joined a British-owned bulk tea exporting company as a tea
taster in 1950, and was later promoted to the post of CEO. During his time with this
company, he has visited England and saw how various tea grades were mixed to produce
value-added tea before it reach the consumer. There, he got the idea of supplying fresh
Ceylon tea direct to the consumer right from its origins, Ceylon. This idea later transpired
to be the vision for his own business.
In 1960, he left his job and started his own bulk tea trading company under the
name Merrill J . Fernando & Co. Ltd. By 1970, he had become one of the 10 leading bulk
tea suppliers to world’s leading tea brands and also had his own tea plantations in Sri
Lanka.
He faced unexpected problems when the socialist government came to power in
1970 and took over his tea plantations. Disappointed by this turn of events, he sold his
company and made plans to leave the country. However, persuaded by his business
colleagues, he formed a new company under the name MJ F Exports (Private) Limited in
1974. Since then he has achieved great success and by 1979, became a leading bulk tea
exporter in the country.
Keeping to his vision, he imported the first tea-bagging machine to Sri Lanka in
1980, without any orders in hand for tea bags. With a lot of hard work, he established a
printing company to make tea bags, that was also carried out with no orders in hand.
Thereafter, he visited leading supermarket chains in Australia, with ready-to-use samples
to canvass orders for tea bags under their private labels. After two years of persuasion, in
1983 he won his first contract for tea bags from the Australian supermarket giant, Coles
Myer Ltd.. His price to them was 40% lower than the multinational suppliers, but his
goods were of very high quality. Soon, other supermarkets came to him and he had to fly
in two new bagging machines to meet the demand.
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Merrill Fernando, with a vision of “Supplying the end user the taste of original
freshness of finest Ceylon tea direct from Sri Lanka”; established his own brand
“Dilmah” in 1980. (Dilmah comes from the names of his two sons Dilhan and Malik) To
ensure the highest quality of his product, he established all tea bagging operations in the
same compound under his control. He instilled his vision at all levels of his workforce and
trained them well.
Figure 1: Merrill J. Fernando
His strong will and creativity paid dividends in 1988 with the launch of his brand
“Dilmah” in Australia. It was promoted through the same supermarket chains that
supported him with their private labels. Dilmah became an immediate success in Australia.
Soon, the company entered the New Zealand market and the business met with success
too.
Sticking to the vision of “supplying the consumers direct from origin, the quality
and freshness of Pure Ceylon Tea”, Dilmah has been on the fast track of success since
1988. By the year 2000, they were very strong in Australia, New Zealand, Eastern Europe
and some Middle-Eastern countries.
In the year 2000, they took another giant step forward by taking on the sponsorship
of the Sri Lankan cricket team in a bid to enter the markets of all cricket playing countries.
This enabled them to further enhance their global sales in Europe and Asia. Dilmah was
introduced to the Sri Lankan market only after it was done so through cricket in the
country.
Dilmah also got into McDonald’s restaurants in 26 countries including J apan.
By the end of 2003 Dilmah had reached over 90 countries. Dilmah has a market
share of 13% in Australasian region, slightly behind Twinings and Lipton which have a
17% and 19% share respectively (based on value). In New Zealand, they have market
leadership at 26%, marginally higher than the number-two brand Bell which has 25%.
Sri Lanka is the world’s largest tea exporter, but only 12 million kg out of a total
export volume of 288 million kg is in the form of consumer packs such as Dilmah. MJ F
Exports (Private) Limited is the largest packed tea exporter in Sri Lanka and Dilmah is the
only global brand of tea from a tea producing country.
Dilmah “genuine Sri Lankan Tea” may soon become the best selling brand of tea in
the world, with the commitment and vision of this bold entrepreneur and his two sons.
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CREATIVE ENTREPRENEURSHIP IN THE CHEMICAL INDUSTRY
After graduating in Science in 1982, Samantha Kumarasinghe started his career as a
sales executive at a leading chemical company in Sri Lanka. With regular promotions, he
became Marketing Manager of the company by 1990. In 1992, a new group bought
ownership of the company and many senior managers left.
Samantha Kumarasinghe left the company in March 1993 and established
Multichemi International Limited in July 1993 with a total work force of 12 people.
Samantha had a small capital which he had saved with the profits earned from trading in
the share market from 1989 to 1992. He also obtained a SME sector bank loan of about
USD 35,000 to buy land and put up a small building for the factory.
By 1993, Sri Lankan entrepreneurs who benefited from the 1977 open economy
policy were well established in the country’s market and newcomers had very little
opportunity to break in. Therefore, Samantha Kumarasinghe had to select an area that
required very little capital but also had enough room to grow, as he had a vision of
establishing an international business.
Samantha Kumarasinghe chose to produce liquid detergents that needed little
capital and at the same time only had a few competitors. His company (Mulitchemi)
created a good trade name for their detergents “Dash”, and presented it with the new
theme, “Bio Degradable & Environment Friendly Detergents.” “Dash” was also positioned
as a ‘user-safe’ detergent. Thus, “Dash” opened a new page in the liquid detergent market
in Sri Lanka. At the time of Multichemi’s entry into the market, there were other liquid
detergent brands such as “Teepol”, “Britol”, “Eazy” and “Care”. However, “Dash” stood
out against the other products as it was positioned as above them.
Multichemi’s strategy was an instant success and “Dash” became a popular name
especially in the car care segment of detergents. He was bold enough to use the tagline
“Dash - Clearly the best!” in the product’s advertisements.
With the expanding garment industry in Sri Lanka, the garment-washing industry in
the country was growing too. In 1994, Multichemi started formulating chemicals for the
garment washing industry. In the same year, Multichemi signed a formulation agreement
with the world leader of industrial enzymes – Novo Nordisk (now Novozymes) of
Denmark – to formulate their textile processing enzymes in Sri Lanka.
In 1995, Multichemi expanded its horizons by exporting textile chemicals to
Bangladesh. In 1996, the company opened its liaison office in Dhaka, Bangladesh to
extend its business operations to the country. Multichemi capitalized on the popularity of
Sri Lankan cricket in Bangladesh after Sri Lanka won the World Cup in 1996. In 1997,
Multichemi established a 100% export-oriented, Sri Lanka Board of Investment-approved
factory in Sri Lanka for exporting textile chemicals.
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Figure 2: Dash – Clearly the best!
Other achievements of the business are listed as below:
1999 – Established Multichemi Bangladesh, a Bangladesh Board of Investment-
approved factory in Dhaka, Bangladesh, to produce liquid detergents.
2000 – Introduced direct marketing of “Dash” range of consumer detergents in Sri
Lanka.
Put up a new factory in Sri Lanka to expand exports of textile chemicals.
Obtained ISO 9002 certification.
2002 – Introduced a new range of genuine nature-based personal care products,
“Nature’s Secrets” with the main emphasis on skin care, in Sri Lanka.
Figure 3. “Nature’s Secrets”
2003 – Established MCI Promotions (Pvt) Limited to handle their product
advertising and conduct promotions.
Conducted a beauty pageant “Chavi Kalyani” (Miss Beautiful Skin), the
first of its kind in Sri Lanka. This was done to position “Nature’s Secrets”
as the leading skin care range in Sri Lanka. The pageant was a great
success and will be conducted annually for at least a few more years.
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“Nature’s Secrets” has so far become the most successful product range for
his business.
Figure 4: “Chavi Kalyani“(Miss Beautiful Skin)
2004 – Established a show room for “Nature’s Secrets” in Chennai, India to reap
the benefits of Indo-Lanka FTA (February).
Established a trading office in Dubai to promote exports of textile
chemicals in the Middle East (March).
Completed a new factory to increase production of “Nature’s Secrets”
personal care products (April).
Creativity and Innovativeness of “Nature’s Secrets” Launch
Today “Nature’s Secrets” has become one of the most talked about personal care
product range in the country. This range includes moisturizing creams, vitamin creams,
fairness creams, sun screen lotions, deep cleansing milk, toner, scrub, facial wash, hand
wash, shower gel, shampoo and conditioners. All these products are genuinely nature-
based as every product contains a natural ingredient.
The creation such an image for “Nature’s Secrets” within a period of one and half
years in a market dominated by giants like Unilever, Proctor & Gamble, J ohnson &
J ohnson and many local brands that are many years old, shows Multichemi’s
innovativeness.
How did “Nature’s Secrets” achieve it?
The following steps were taken at its launch:
1. Grabbing the opportunity of the “Natural Craze” in personal care market.
2. Creating the right trade name “Nature’s Secrets” that goes with natural
products.
3. Introducing very high quality products, using the best raw materials in the
world.
4. Using genuine natural ingredients in all products, amounting to about 25.
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5. Aiming at the middle class market at the beginning and later targeting the
upper end of the market.
6. Avoiding head-on competition with the multinationals at the start.
7. Looking at low cost promotions which are more effective.
8. Deviating from traditional mass media advertising and selecting a weekly
morning quarter-hour programme on National TV, mainly watched by
housewives. Here, a more educational type of programme was conducted on
beauty care using beauticians of repute.
9. Creating a new market in skin care with events like “Ms Beautiful Skin” and
other programmes. This was the first time a beauty pageant was held in Sri
Lanka to select the lady with most beautiful skin. Both married and unmarried
women between the age of 17 and 27 years were invited to participate.
For this pageant, “Nature’s Secrets” managed to get the number one national
TV channel as the electronic media sponsor, the national carrier as the air
ticket sponsor and a national newspaper as the print media sponsor to build
the credibility of the event.
Swim suit competitions were avoided to respect cultural restrictions and to
allow more people to participate.
Preliminary rounds of the pageant were ran for a longer period of the year to
gather better publicity and more participation.
10. By above, “Nature’s Secrets” was positioned as the leading brand of skin care
range in the country, without much agitation that is found in the hair care
market, where the competiting giants with huge advertising budgets fight.
11. With an established name in the skin care sector, “Nature’s Secrets” hair care
products were able to sell without any special promotions.
Today, “Nature’s Secrets” has the best selling face-wash in the country that
competes directly with Unilever soaps and Johnson & J ohnson face-wash. It is in the
process of further strengthening its product range and image by employing a leading
cosmetic laboratory in the USA and inviting Western experts in the field to work with the
company to further develop its formulations and develop new products.
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Figure 5: “Ms Beautiful Skin”
Obstacles for Sri Lankan Entrepreneurs
The following factors hamper development of entrepreneurs and emergence of new
entrepreneurs in Sri Lanka:
• High bank interests rates
• High cost of land for expansion projects
• Environmental restrictions
• Poor infrastructure outside of Colombo
• Poor political stability and swinging government policies
• Raw materials are unavailable in the local market
Role of Government and NPO in Promoting Entrepreneurship
The government in Sri Lanka has been saddled with a terrorist problem since 1983,
and has never been able to extend support needed by entrepreneurs for development.
Especially in the last ten years, Sri Lanka has had coalition governments who were more
concerned with retaining power than looking at development of entrepreneurs.
Under these circumstances the following observations were given on the topic:
• The government has no effective policy to help local entrepreneurs.
• The government is bound by the terms of the World Bank and Asian
Development Bank to award large contracts to donor countries, thus depriving
local entrepreneurs.
• There are no NPO to help the industry, but many NGO’s funded by the West
are operating with various hyperactive sections of the society which hampers
economic growth.
Even the National Productivity Centre is not financially sound to act
significantly for entrepreneurship development.
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THAILAND (1)
Waleeporn Thanathikom
Thailand Productivity Institute (FTPI)
ENTREPRENEURSHIP
The word “entrepreneur” is derived from French “entreprendre”, refers to
individuals who undertake the risk of new enterprise with accompanying risks of profit or
loss. Carl Menger (1871) defined entrepreneurs are “change agents” who transform
resources into useful goods and services, often creating the circumstances that lead to
industrial growth. Adam Smith (1776) at an even earlier date called an enterpriser an
individual who undertook the formation of an organization for commercial purposes.
Entrepreneurs react to economic change, thereby becoming the economic agents who
transform demand into supply.
In more recent times, Landstrom and Johannisson (2001) defined entrepreneurship
as the exploitation of perceived opportunities through organizing resources and
collaborators in new patterns.
As can be seen, the concept of entrepreneurship has been around for a very long
time. In this new reality, the role of entrepreneurs is as practical visionaries who imagine
new enterprises and bring them to successful fruition. In the last ten years there has been
an explosion of interest in entrepreneurship. Today, entrepreneurship is attracting a lot of
attention around the world. Many countries view entrepreneurship development as a
means to economic power and open up new opportunities for innovation.
Holt (1992) notes that entrepreneurship is one of the four mainstream economic
factors: land, labour, capital, and entrepreneurship.
ENTREPRENEURS IN THAILAND
Learning from the success stories in other countries, the government of Thailand
foresees entrepreneurship as the country’s economic power, economic recovery
mechanism, and foundation of the economic system. Entrepreneurs are a key part of the
strategy to generate new growth businesses and contribute to employment.
The Thai government has launched various programs to create and develop new
entrepreneurs, incubation programs, as well as training courses on knowledge and skills
for doing business (such as marketing, finance, applicable laws and regulations).
One of the mega projects is the One Tambon One Product (one village one
product), or else called OTOP. The main purpose is to encourage every Tambon (village)
to create value from local raw materials and local wisdom a product characteristic of that
area. Main OTOP products are agricultural products, food, weaving products, handicraft,
pottery, etc.
Most Thai entrepreneurs appear to have entrepreneurial social backgrounds; more
often their parents are entrepreneurs. Some of them have adopted the idea of becoming
entrepreneurs while they were studying as they wanted to prove themselves; some during
their employment in a firm as they do not like to be employed for thier whole life.
Some become entrepreneurs to survive when they were unemployed. This group
may be called “necessity entrepreneurs”. Previously, necessity entrepreneurs were people
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moving out of the rural area into towns and cities. They were desperate for any work or
jobs that would enable themselves and their families to survive.
This type of entrepreneur has been multiplying after the recent regional economic
crisis in 1997. As a result of that catastrophe, many firms became bankrupt and laid off
employees. A lot of the unemployed became necessity entrepreneurs and one of the more
easy businesses to start up is the food business, which can be in various styles, such as
moving pushcarts, shacks along the roadside or small food shops.
WHY ENTREPRENEURS?
People start to be entrepreneurs when they foresee many benefits in doing so. They
seek wealth: one receives a fix amount of salary when working for a firm, while a
successful entrepreneur can earn a far higher income. Independenceis another benefit in
entrepreneurship: working for a firm requires at least 8 working hours a day with a line of
command to follow in reporting to bosses and superiors, while entrepreneurs can enjoy
independence and freedom. Entrepreneurs find fulfillment: the excitement and challenge
of owning an enterprise makes life stimulating.
However as entrepreneurs, people will not only face advantages, challenges also
await them. They face insecurity: fixed working hours, steady income, fringe benefits,
bonus, retirement earnings, etc. are not guaranteed for entrepreneurs. Risk has to be
undertaken by any entrepreneur: high returns come from high risks, especially for financial
risk. Entrepreneurs face uncertainty in the environment: the environment impacts
businesses especially the small ones with few products or services; these businesses have
difficulty in adapting to change and technology. Initiating, developing and growing an
enterprise is time consuming: entrepreneurs are responsible for their success or failure, and
have less time for their family and relaxation.
In the first three years, start-ups usually struggle with loss or only manage to break-
even. Returns will normally flow in around the third year. Unfortunately many of them
cannot overcome the continuing challenges and fail.
The future entrepreneurs must be well aware of the unforeseen problems,
challenges, business uncertainties, and financial risks, which may bring them financial
loss.
The major weakness to the growth of entrepreneurs in Thailand is the
entrepreneur’s inability to develop a business plan. Many start-ups have great dreams but
can not transform these ideas into a sound business plan and marketable product. Some
entrepreneurs may have gained business knowledge and experience, but lack the specific
business skills in areas such as marketing and finance.
CHARACTERISTICS OF SUCCESSFUL ENTREPRENEURSHIP
From successful cases of entrepreneurship, the following characteristics of
successful entrepreneurship can be identified:
• High level of creativity is at the heart of entrepreneurship to enable new ways
of thinking and working.
• Risk taking is an essential characteristic, as entrepreneurs have to break rules,
cut across accepted boundaries, and go against the status quo – since high
returns come from high risk.
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• Ability to see, evaluate, and seize opportunities – large or small – that no one
else has noticed, distinguish the successful entrepreneurs from normal ones.
• Besides, entrepreneurs must be capable of transforming their vision or
perceived opportunities into successful enterprises.
• Since the success or failure of their enterprise depends on themselves,
ambition, motivation, determination, and strong will are required as
entrepreneurs continuously face obstacles.
• They must be energetic, diligent, disciplined, and able to work under pressure
and at the same time be optimistic and flexible to respond positively to any
challenges.
• Able to marshal the resources needed to effectively achieve their goals.
Entrepreneurs need to focus on creating value by doing things better, faster
and at lower cost.
• Furthermore, entrepreneurs must have the eagerness and ability to learn the
essential knowledge and skills such as market knowledge, management and
technical skills. Most importantly, they must learn from their own set-backs
and the failures of others.
• Social skills, persuasiveness, and ability to build and manage their social
networks are unavoidable.
• Finally, entrepreneurs must be aware of when and prepare how to harvest, or
exit gracefully when it becomes obvious that the new enterprise is not
working.
CREATIVE ENTREPRENEURSHIP
Creative entrepreneurship refers to the entrepreneurs with the ability to bring
something new into existence.
Nowadays, young and energetic people dream of freedom and independence. To
become a creative entrepreneur one first needs to be creative. Second, the desire to start
something, and third, the want or need to break one’s boring routine working hours, and
change their life pattern. They may only have a minimal start-up budget, plus their
expertise or personal preferences.
Creative entrepreneurs in Thailand generally start out with a part-time home
business, or turn their hobbies into a money-making business. They may start from doing
something of their choice, and develop it into full-time ventures later on.
EXAMPLES OF CREATIVE ENTREPRENEURSHIP: BANGKOK PUPPET
The “One Tambon One Product” (OTOP) project, as stated before, is supported by
the government of Thailand. The government planned for OTOP to strengthen the
domestic economy which would further drive the economy’s circulation and growth. The
regional crisis in 1997 destroyed the value of properties of many employees but at the
same time created opportunity and wealth for many new entrepreneurs. Pirun Aemsrisa-ad
was one of them.
Pirun Aemsrisa-ad had been laid off from his career as an architect from which he
earned a sizeable salary of Baht 60,000 per month. During his unemployment, he was not
daunted, and sought to find new channels of income. With his personal liking for clay
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molding, puppet, and Thai art, Pirun spent his time learning about the puppet production at
the Royal Art Center.
Making a real size puppet consumed many months of his time and Pirun saw the
opportunity of his new business. He condensed the size of his puppet to 15 centimeters
while other functions such as the details and the moving parts remained. His small-sized
puppet was first presented at a fair under the brand of “Bangkok Puppet”, and received
good response from customers. From then on, his small puppets were found on shelves in
Bangkok’s shops and department stores.
However, Pirun was still not satisfied with his small puppets. He refined the
puppet’s face, costumes, and packaging. From that improvement, the price of his small
puppet was marked up from Baht 800 to Baht 2,000. Moreover, he created a new
production lineof dolls in traditional Thai costumes which generated value, allowing him
to price them for Baht 4,000-5,000.
The reason his puppet is able to command premium prices is because the small
puppet is neatly handmade at every step. Every small puppet is subjected to quality
control by Pirun himself.
Today, small puppets and dolls in traditional Thai costumes are popular souvenirs
among Thais and foreigners, and in export markets, namely J apan and USA. Bangkok
Puppet has been selected as the 5-star OTOP of the district in 2003.
Pirun used his savings to invest in future projects such as building his own
showroom for his small puppets and dolls. Also, he plans to expand his market to the
European and English puppet and miniature collectors.
More often, OTOP entrepreneurs can run their business smoothly on a smaller
scale. Some have successfully expanded their business to a larger scale, but many of them
fail as their management skills are not as good as their expertise.
INNOVATIVE ENTREPRENEURSHIP
Innovative entrepreneurship refers to the entrepreneurs that transform creative ideas
into useful applications in new or unusual ways to provide value to society with improved
products, technology, or services.
Innovation is the act of creating something new and worthwhile. Innovative
entrepreneurship is the act of bringing an innovation to the market and commercialising it.
Entrepreneurial skills are about identifying and using innovation in a way that is
commercially sensible.
Successful entrepreneurs which produce and market an innovative product or
service that never exist before often start their business with clear vision and concrete
business plan. More often, they have higher education with knowledge of information and
financial sources to support their business.
Examples of Innovative Entrepreneurship: Banrai Coffee
Saichon Payaonoi was working as geological architect in the real estate company,
“Land and House”. During his vacation, he loved to drive his own car while traveling. On
his trips, Saichon observed that travelers favored coffee as they stopped by gas stations to
get some refreshments and relax. At that time, only canned coffee was available at gas
stations.
One day, Saichon saw local people served fresh traditional Thai coffee along the
road side. He felt that the brewing method was very enchanting and thus ignited the idea
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of combining the enchanting coffee brewing process with an accessible, clean, and nicely
decorated serving place.
While on vacation during the period of 1995 – 1997, Saichon stopped by every gas
station to talk to mini-mart cashiers and collect information on the sales volumes of coffee.
He named his approach “Rustic Marketing”. At first, Saichon planned for his coffee
project as an additional income apart from his normal salary. The start-up budget of Baht
150,000 was not the problem; the real problem was the location.
With his expertise as a geological architect, Saichon designed his coffee outlet in
the Thai traditional style. His clear vision was transformed into a “wooden cabin for
coffee lover and traveling caravan” at a PTT gas station in the suburb of Bangkok in 1997.
His first outlet was served by three staff: his brother, his nephew and, himself. It started
up nicely with a forecasted net income Baht 10,000 per month. But 13 days after the
inauguration, a car accidentally crashed into his cabin, and that was the tragic end of his
first project as an entrepreneur.
However, Saichon persevered and presented his idea to many gas stations. Finally,
the J ET gas station company was satisfied with Saichon’s concept as it aligned with their
differentiation strategy. “Banrai Coffee” – “Coffee Garden” was then reborn at the J ET
gas station, Rangsit branch in April 1998. It succeeded with incredible sales volume, and
six more Banrai Coffee outlets followed.
In 1999, Saichon quitted his job and became a full-time entrepreneur. Banrai
Coffee uses native product and services, such as coffee planted by The Royal Project,
coffee roasted by a factory in Saichon’s home-province, Saraburi, and served in handmade
baked clay cups from the same province.
The distinguishing characteristics of an optimistic and diligent learner inspired
Saichon’s systematic thinking and clear vision. 4 years later, at 35 years of age, Saichon
operates a total of 100 branches of Banrai Coffee in almost every region of Thailand, with
monthly sales volume of some Baht 100 million. Saichon sets his goal to expand his
outlets to neighboring countries in the near future.
SERIAL ENTREPRENEURSHIP
The traditional entrepreneur is the owner-manager who usually runs one business at
a time. Though found in several locations, the business is still run by one company.
However, some entrepreneurs have a different approach; they start several businesses at
the same time or one after another.
As a general rule, entrepreneurs are not risk-averse people – and for serial
entrepreneurs, this characteristic is even more pronounced. Starting the first firm is only
another step toward their ultimate success. They might make the first business a success,
sell it and go on to start another. Others start several separate firms to test the market and
diversify risk with an acceptance that some of them might fail. Other serial entrepreneurs
have strategies in their mind, they start several firms but all are in related in some way.
Examples of Serial Entrepreneurship: Oishi Group
Oishi in J apanese means delicious, but for Tan Pasakornnathi, it means success.
Everything he grasped becomes value-added business. Tan said that the phenomenon is
not because he was smarter than others, but because he saw the opportunities before the
others.
Before Oishi Group, Tan started and failed several scattered businesses: bookshop,
coffee shop, food shop, land and property, etc. Those failures turned out to be his lessons.
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He then sought his success by venturing into a wedding studio business. With the
lessons learnt from his earlier business failures, he then, introduced the concept of
networking in his new enterprise. Today, his wedding studio is a part of 19 brands and a
19-company wedding studio chain. All studios have different shareholders. Tan, as the
central shareholder, coordinates all the studios for the purpose of managing cost, namely
advertising budget, sharing resources, or even borrowing resources.
On 9 September 1999, he started Oishi Group, another related line of business with
‘spider marketing’ – a new concept of marketing he developed from previous business
experience - creating valued-added original products or services with co-marketing or co-
raw material utilization. Tan started Oishi as a J apanese restaurant business, but
differentiated it by serving in buffet style, which was first launched in Thailand. From that
point on, he started several food businesses, employing his effective cost management
objective, to make bulk purchases, share resources (such as cooks, machines, logistics) and
utilize resources. The leftover raw material from one dish can be a valuable component of
the other dishes, for example fish bones from Oishi Buffet fish menu can be very good
stock for Oishi Ramen (J apanese noodles).
Today, there are 6 Oishi J apanese Buffet restaurants, 7 Oishi Ramen restaurants, 2
Oishi Sushi Bars, 8 Shabushi Buffet branches, 1 Grill N’ More Steak Cabin, with Oishi
Inter and Oishi Trading as the central kitchen serving others in the chain. Last but not
least, In&Out Bakery was started when he recognized the opportunities that were present
as his food business chain were using baking services of over Baht 1 million per month.
The Oishi brand is very well known and widely accepted by consumers. Oishi
utilizes their food shop branches as distribution channels for new products, such as moon
cakes during the Chinese moon festival (the mid-Autumn festival).
Tan’s latest move was shook up the beverage market in Thailand. In his Oishi
J apanese Buffet restaurants, green tea coolers are provided for diners. Enjoying its taste,
some customers wanted to buy green tea home. Oishi then responded by filling green tea
in ordinary plastic bottles for take away. With good response and increasing demand from
consumers, Oishi green tea is presented in attractive packaging, both in bottle and tetra
pack boxes, and distributed through various channels, including supermarkets and
convenient stores.
Today, green tea has become the most popular beverage for the younger generation
in Thailand. In 2003, the green tea beverage market is valued at over Baht 1,000 million.
Moreover, the green tea fad has spread to other products, anything with magic word
“Green Tea” interests consumers; green tea milk, green tea yogurt, green tea bread, green
tea soap, green tea shampoo, green tea lotion, green tea tooth-paste, and even to green tea
sanitary napkins!
The success of Tan Pasakornnathi came from continuous business development,
and the courage in handling risks or obstacles placed in his way. He revealed that doing
business is not just starting a business, but also designing the business. Tan’s main
strategy is cost effective management and resources utilization. Tan is preparing to bring
his group of food companies for listing on the Stock Exchange Market of Thailand and to
further expand his J apanese restaurants through franchising.
SOURCES OF INFORMATION
Department of Industrial Promotion (DIP), Ministry of Industry.
The Office of Small and Medium Enterprises Promotion (OSMEP).
Institute for Small and Medium Enterprises Development (ISMED).
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National Science and Technology Development Agency (NSTDA).
Entrepreneurship and Innovation in the Knowledge-based Economy: Challenges and
Strategies ?APO 2003, ISBN: 92-833-7023-6.
Good Practices of SMEs, Thailand Productivity Institute, 2004.
Holt, David H., Entrepreneurship: New Venture Creation, Prentice Hall: 1992.
Menger, Carl Menger Principles of Economics, 1871.
Smith, Adam, Wealth of Nations, 1776.
“Soo Laew Ruay”, Kantana Publishing, 2001.
http://www.manager.co.th
http://www.businessthai.co.th
http://www.ce-cioceoforum.com
http://www.bangkokpuppet.com
http://www.banriecoffee.com
http://www.oishirestaurant.com
http://biz-methods.com
http://www.celcee.edu
http://www.wsis-online.net
http://www.acca.co.uk
http://www.derbymanagement.com
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THAILAND (2)
Wiwat Chutiwanichayakul
Kenan Institute Asia
INNOVATION NETWORKS AND SUCCESSFUL CREATIVE
ENTREPRENEURSHIP IN THAILAND
Since the 1980s, the concept of the National Innovation System (NIS) has been
gaining popularity as a core conceptual framework for analyzing technological change.
Technological change is considered to be an indispensable foundation of Thailand’s long-
term economic development.
The NIS concept rests on the premise that understanding the linkages among the
institutions – especially how these institutions relate to each other as elements of a
collective system of knowledge creation, diffusion and application - is a crucial instrument
for improving Thailand’s innovative performance. These institutions include both “things
that pattern behavior” like norms, rule and laws (e.g. patent systems and technical
standards) and “formal structure with an explicit purpose” such as firms, industrial
research and development (R&D) laboratories, universities, and public R&D institutes.
The key components of the Thai NIS are major industrial clusters which are
networks of firms, knowledge producing agents, bridging institutions and customers linked
with each other through shared information needs, related value chains and via significant
levels of interaction and interdependence.
As the Thai economy has lost its competency to compete in the late 1990s and is no
longer able to sustain development. Innovation is a significant factor in re-structuring,
especially in the technology sector and could create a quantum leap in the nation's
competitiveness. Therefore, upon recognizing the critical importance of innovation in
enhancing the value of the Thai economy, the 9th National Economic and Social
Development Plan (2002-2006) has identified the development of innovation as an
important mechanism for improving the country’s level of competitiveness. Apart from
that, innovation is one of the ways to improve science and technology strengths by
emphasizing the implementation of science and technology in manufacturing and local
innovation development, thus reducing reliance on imports.
By 2004, innovation was accepted as a very significant public policy issue in
Thailand. Policy makers have begun to recognize the importance of innovation to
Thailand’s competitiveness. The government has played an important role in the invention
and the transfer of technology by providing financial support, technical support, and legal
patent protection. The organizations that provide SME support include the National
Science and Technology Development Agency (NSTDA), Thailand Institute of Scientific
and Technological Research (TISTR), Thailand Research Fund (TRF), Innovation
Development Fund (IDF) and Department of Intellectual Property.
To encourage 'Practical Innovation' among Thai organizations and Thai innovators,
many organizations including the government, academic institutions and the private sector
have organized many innovation-related awards – for example, the “Thailand's BEST
Innovation Award 2003” organized by Accenture (Thailand) and The Nation newspaper.
The program aims to encourage Thai organizations and the Thai people to generate,
develop and create new theories, new work processes and new innovations, all of which
Creative Entrepreneurship in Asia
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must be practical and bring crucial benefits to the country. Most importantly, they must
enhance work processes and create a better quality of living.
SUPPORT AND SERVICE MECHANISMS FOR SMES AND
ENTREPRENEURSHIP IN THAILAND
In Thailand, small and medium-sized enterprises (SMEs) constitute some 99
percent of manufacturing businesses in the country, representing 50 percent of the GDP.
SMEs also employ more than 60 percent of the country’s workforce.
Major SME promotion and development agencies in Thailand include:
• the Department of Industrial Promotion (DIP) under the Ministry of Industry
• The Office of Small and Medium Enterprises Promotion (OSMEP), established
in 2001
• Institute for Small and Medium Enterprises Development (ISMED), established
in 1999
The Department of Industrial Promotion (DIP) under the Ministry of Industry acts
as the lead agency of the government to promote and develop SMEs as well as to develop
entrepreneurs in Thailand.
At present, the Thai government has a clear policy to create and develop new
entrepreneurs. The New Entrepreneurs Creation (NEC) program was developed in 1999
under the industrial restructuring budget. However, there was no budget for the year 2000-
2001. In 2002, the NEC program became active again. The DIP received a regular budget
of Baht 7.5 million and an economic stimulus budget of Baht 174.5 million for the New
Entrepreneurs Creation (NEC) project. The cabinet recently approved a plan called the
“National New Entrepreneurs Creation” in May 2003.
The NEC program aims to develop 50,000 new entrepreneurs throughout the
country by 2004. This plan also includes an effort to elevate the number of entrepreneurs
from the current 1 in a population of 130 to 1 in a population of a hundred. As of 2003 the
program is partnered with 15 academic institutions throughout the country, 3 financial
institutions and 8 independent organizations. All of which are listed below:
Academic Institutions
1. Chulalongkorn University
2. Thammasat University
3. Kasetsart University
4. Prince of Songkla University
5. Khonkaen University
6. Chiangmai University
7. Srinakharinwirot University
8. Bangkok University
9. University of Thai Chamber of Commerce
10. National Institute of Development Administration
11. King Mongkut University, Northern Campus
12. Rajmongkol Technology Institute
13. Suranari Technology University
14. Burapa University
15. Mahasarakam University
Thailand
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Financial Institutions
1. SME Development Bank
2. Industrial Finance Corporation of Thailand
3. Siam City Bank Public Co., Ltd.
Independent Agencies
1. National Science and Technology Development Agency ( NSTDA),
2. The Institute for Promotion of Teaching Science and Technology
3. National Electronics and Computer Technology Center
4. Entrepreneurial Competency Development Association (ECDA)
5. Quality Development Association of Thailand
6. Association for the Promotion of Thai Small and Medium Enterprises
7. Ingka Company
8. Than Sertakit Newspaper
These organizations organize workshops, seminars and training for
entrepreneurship development, business formulation, business management, as well as
provide consulting services, business incubation, finance and investment, and market
development. As of February 2003, the NEC program has created 902 new investment
projects, 5,664 new jobs and overall investment of Baht 3,259 Million.
The NEC program includes the following activities:
1. Short Course Training (9 Days Period)
The courses are set up for entrepreneurs who already have some business
knowledge and experience, and need to develop specific business skills in certain
areas such as marketing and finance. The courses that have been arranged, for
example, are business succession, entrepreneurship in franchising, web page design
development and preparation for SME businesses.
2. Long Courses Training (18 Days Training, 9 Days Workshop)
The courses are organized for entrepreneurs with little prior business knowledge or
experience. They are intended to train entrepreneurship skills by focusing on
business preparation, knowledge of business formulation, and applicable laws and
regulations. The courses that have been arranged include new entrepreneurs
development, entrepreneurs development for new technologies businesses, and new
entrepreneurs development for sustainable careers.
3. Market for finance and investment of SMEs
The market acts as a meeting point for SME entrepreneurs whose business plans
have been formulated, and providers of SME financing such as financial institutions
and venture capitalists.
4. Business Incubation
Setting up incubation centers at the premises belonging to the DIP and/or partnering
organizations.
C
r
e
a
t
i
v
e
E
n
t
r
e
p
r
e
n
e
u
r
s
h
i
p
i
n
A
s
i
a
-
1
2
2
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
Persons
1999
2002
2003
2000-2001
Investment Baht 4,162
Million
Investors 1,079 persons
Employments 7,184
persons
7,499 persons
1,079 persons
( 14.38%)
4,141 persons
46 persons
(1.11%)
NoBudget
“NEC”
Economy Stimulating Budget of Baht
174.5 Million
Regular Budget of Baht 7.4 Million
“NEC”
Regular Budget of
Baht 123.2 Million
As of J uly 2003
Figure 1: Results of New Entrepreneurs Creation, by the DIP, from 1999-2003
“NEC”
Industrial Restructuring Budget
of Baht 7.4 Million
Thailand
- 123 -
BUSINESS INCUBATION IN THAILAND
Thailand has been involved with SME incubation projects since the birth of
Thailand’s National Development Plans in 1970s. However, a clear focus of the issues,
and consequently active policy implementation for smaller-scale businesses did not come
into the spotlight until after the recent regional economic crisis in 1997.
The Thai government now has five broad policies addressing business incubation,
namely: capital and finance, official SME institutions, SME laws and legal procedures,
land and space supports, and taxation. Having identified these five policy areas, the Thai
government is now putting these policies into action at great speed. For financial matters,
the Thai Ministry of Finance is now in charge of providing support and suggestions to
SME investors. The SMEs official institution (ISMED) has been set up since 1999 as a
core technological center that serves as an interface between SME owners and the
government. SME laws covering various aspects, ranging from basic legal rights to
business protection also came into effect. The Thai National Housing Authority, under the
supervision of the Ministry of Defense, is responsible for land use matters, especially
emphasizing land taxation and property transfers. Last but not least, the Thai Ministry of
Commerce is taking care of general SME taxation by providing favorable tax schemes to
all SME investors.
ORIGIN AND DEVELOPMENT OF BUSINESS INCUBATORS IN THAILAND
Thai business incubator development and adoption is primarily within the purview
of academic institutions and the government, not the private sector. While statistics and
literature on Thai business incubators are sparse, the more notable examples include the
joint government and industrial park projects such as software parks, science parks, and
incubator units of academic institutions.
On the government side, the Department of Industrial Promotion (DIP), Ministry
of Industry, takes the lead role in business incubation programs. The DIP began to
acquire knowledge of business incubation in 1984 when the German government assisted
Thailand in developing industrial projects. Experts from the Industrial Development
Authority of Ireland (IDA) were invited to Thailand to share knowledge of SME
development among the government officers. The experts advised on many programs in
industrial development including the setting up of Business Opportunity Centers (BOC),
industrial clinic activities etc. The DIP’s officers also had an opportunity to visit Ireland
to gain first-hand experience in SME development including the business incubation
center. However, a lack of budget and resources froze the project before it could be
implemented.
The first government incubation program was created under the Thai national
master plan for the development of SMEs in Southern Thailand. The objective was to
contribute to the economic development of Southern Thailand through increased SME
activities. With funding and technical support from the European Union (EU), the first
incubation center was established in 1999 by the DIP, and the Institute of Small and
Medium Enterprise Development (ISMED). The pilot center was set up on the grounds of
the regional Industrial Promotion Center (region 11) in Hat Yai, Songkhla. The
infrastructure occupied an area of 650 square meters, offering both in-wall and out-wall
facilities and the capacity to incubate 7 industry units. The incubation center at DIP
region 11 is considered to be the pilot incubation center and is still operating as of today.
Creative Entrepreneurship in Asia
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A significant business incubator emerged in Thailand in 2002 using a new budget
for stimulating the economy from the government. The project “New Entrepreneurs
Creation” (NEC) was re-launched with an aim to promote entrepreneurship development
throughout Thailand. The business incubation center was one of the major activities
under the NEC program. At present, there are many business incubation centers operating
in Thailand using the models as listed below:
Models of incubators
There are different models of business incubators in Thailand.
If classified by space utilization we can group them into two groups:
• In–wall: An incubator in-wall refers to an actual physical infrastructure that
houses the start-up businesses. While service offerings vary among incubator
units, a full-service center provides everything a venture will need, including
office space and infrastructure, access to networks of contacts, technology
resources, human resources, operational expertise, and legal and accounting
support. The infrastructure usually covers an area of 1,200–1,600 sq.m.
• Out-wall/Out-reach: An incubator out-wall does not provide office
infrastructure. These centers accelerate the process of starting a venture, which
may already have their own office and equipment, by offering expertise and
services only. This may include consulting services to bolster the business plan,
repositioning the firm, validating the business model, or bringing products to
market.
If classified by incubation functions, there are four groups:
• Incubator in Specific Industry: this type of incubator is established for the
purpose of incubating new start-ups in a specific industry such as the
agricultural transformation industry, software industry, and ceramic industry.
• Hiding Incubator: these small incubators usually operate under some
organizations for specific business purposes.
• High-tech: incubators have experts or expertise in particular fields such as bio-
technology, life sciences etc. and use their knowledge to support incubatees.
• Information Technology (IT): incubator provide IT infrastructure and provide
consulting for IT and IT related issues.
Table 1: Result s of SMEs Business Incubation under the NEC Program
Incubators Incubatees Business
created
Employments Note
Economic Stimulus Budget 2002
1. King Mongkut
University, Northern
Campus (In-wall)
- Mechanical
&Automotive field 3
- Plastic field 3
- Furniture & wooden
products 5
- Electronic field 4
15
4
58
-
Thailand
- 125 -
2. Rajmongkol Technology
Institute (In-wall)
- Leather products 3
- Ceramic products 4
- Bakery products 11
- Apparels products 3
21
13
110
-
3. Software Park (In-wall) 20 5 131 -
4. Engineering faculty,
Prince Songkla University
-In-wall 16
-Out-wall 7
22
7
102
-
5. Industrial Promotion
Center, region 9
- General industries 11
- Food & Agricultural
transformation and
Packaging 10
21
7
93
-
Regular budget
6. Excellent Business
Management Co., Ltd.
23 16 64
Total 122 52 558
Table 2: Performance Results of Business Incubation Activities on 2003
Organization Target Participant
1. Industrial Promotion Center, region 1 In-wall : 3 In-wall : 3
Out-wall : 2
2. Industrial Promotion Center, region 3 In-wall : 3 2
3. Industrial Promotion Center, region 4 Out-wall : 3 3
4. Industrial Promotion Center, region 5 In-wall : 2 2
5. Industrial Promotion Center, region 7 Out-wall : 5 5
6. Industrial Promotion Center, region 8 Out-wall : 2 2
7. Industrial Promotion Center, region 9 In-wall : 10
Out-wall : 10
30
8. Industrial Promotion Center, region 10 In-wall : 1
Out-wall : 14
In-wall : 1
Out-wall : 14
9. Industrial Promotion Center, region 11 Out-wall : 17 17
10. Bureau of Industrial Enterprises and
Entrepreneurs Development
In-wall : 10
Out-wall : 10
In-wall :10
Out-wall : 10
Srinakharinwirot University In-wall : 10
Out-wall : 10
In-wall : 10
Out-wall : 10
Software Park In-wall : 8 8
NUMBER OF INCUBATORS IN THAILAND
There are two kinds of incubators in Thailand, government-own organizations and
privately-owned organizations. Currently, there are 19 incubators in Thailand belonging to
Creative Entrepreneurship in Asia
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both the government and private sectors, 18 are government organizations and only one is
a private incubator as shown in the Table 1.
According to information from Department of Industrial Promotion (DIP), Ministry
of Industry of Thailand: from year 2003, the number of organizations involved in the new
New Entrepreneurs Creation (NEC) project will increase. An additional 11 government-
owned universities and 8 independent organizations will participate in the NEC project.
It is expected that the number of incubators will increase accordingly with new
startups being created.
Types of Incubators
Almost all of the government-owned incubators are industry specific except for the
two incubators, Software Park and Science Park which are Information Technology (IT)
and high-tech incubators, respectively.
The industry specific incubators usually offer space for business operations, provide
consulting services in business management and administration but are not deeply
involved in the terms of production technology. Incubatees set their own direction in the
industry that they have selected.
Software Park and Thailand Science Park play different roles. They provide space
for business operations, consulting in business management, administration and IT
infrastructure, and deploy expert IT consultants or particular technology experts to their
incubatee.
Thai Incubator Dot Com Co. Ltd. is a private incubator that is classified as the IT
type. The Thai Incubator provides the same functions as mentioned in government
organizations plus financial support. Table 3 shows the types of incubators in Thailand
and their characteristics.
Table 3: Incubators in Thailand and their characteristics
No. of incubatees
2002 2003
No. Incubator Sector Type of
Incubator
Main function of
Incubator
Total
no.
Business
Established
Total
no.
4 I. National University Gov.
1.1 King Mongkut
Institute of Technology
Gov. Industry
specific
15 4 0
1.2 Rajamongkol Institute
of Technology
Gov. Industry
specific
21 13 0
1.3 Songkhla Nakarin
University
Gov. Industry
specific
22 7 0
1.4 Srinakarinwirote
University
Gov. Industry
specific
i. Office space with
equipment furnished
ii. Technical and
technology support
from experts
iii. Management and
administration
consultant
0 0 20
11 II. Industry Promotion
Center (area 1-11) : 11
places
Gov. Industry
specific
i. Office space with
equipment furnished
ii. Management and
administration
consultant
21 7 81
Thailand
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1 III. Bureau of Industrial
Enterprises and
Entrepreneurs
Development
Gov. Industry
specific
i. Office space with
equipment furnished
ii. Management and
administration
consultant
0 0 20
2 IV. Independent
Organizations
Established by
Government :
Gov. Information
Technology
(IT) and
Innovation &
High tech
4.1 Software Park Gov. Information
Technology
(IT)
i. Office space with
equipment furnished
ii. Management and
administration
consultant
20 5 8
4.2 Thailand Science Park Gov. High-Tech i. Office space with
equipment furnished
ii. Technical and
technology support
from experts
iii. Management and
administration
consultant
4 0 20
1 Thai Incubator Dot
Com Co., Ltd.
Private
sector
Information
Technology
(IT)
i. Office space with
equipment furnished
ii. Technical and
technology support
from experts: IT
iii. Management and
administration
consultant
iv. Financing Support
10 0 6
19 113 36 155
OPPORTUNITIES FOR BUSINESS INNOVATION AND
INCUBATION IN THAILAND
Currently, growth rate of small-scale business is still small. In 2001 the growth rate
of small-scale business was 3.6% whereas medium scale business showed growth of 9.8%
(in terms of number of business). Some sources of information (magazine) claim that the
number of successful SMEs is still small because after several years of operation at the
commercial level, they face many problems and finally shut down. Therefore the level of
competition among established SMEs is not high. There is a room for new players under
incubation to grow in each business or industry in Thailand.
Resources: Thailand has human and natural resources. At present, the Thai
Government has set out a special budget for training new graduates to be entrepreneurs
and has created many related and continuous learning programs to guide them to establish
their own businesses (NEC projects). After completing the programs they can be one of
the incubatees in any incubation center.
Creative Entrepreneurship in Asia
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As Thailand is located in the tropical region with a sizeable agriculture sector it has
the potential to develop new technology in agriculture-related areas such as biotechnology
and agricultural technology.
Thailand started the idea of business incubation several years ago (Year 1999). The
country is in the start-up stage of business incubation. It is looking for the opportunity to
improve its incubation activities as well as opportunities to develop the know-how of
incubation from advanced countries such as Taiwan, US etc., which have moved on from
the start-up stage to record achievements in business incubation.
BARRIERS TO “BUSINESS INNOVATION AND INCUBATION”
IN THAILAND
No precise budget from Thai Government has been assigned to incubators or
business incubation organizations in both the Government sector and in the private sector.
The budget for incubation activities has been grouped together with other budgets to
develop and support industrial sectors.
The Thai culture and perceptions contradict the idea of incubation. Thais have
highly individualist attitudes and are very independent. Therefore, sometimes some
entrepreneurs choose not to use the incubation space provided by government
organizations or “in-wall” incubation but set up their own “out-wall” offices which lead to
higher cost and expenses. At the same time, they feel awkward consulting government
appointed consultants because of the close scrutiny that will be placed on all their
transactions.
Apparently, the measurement of achievement from government agencies and
private sector is different. The government measures the achievement of incubation
projects using employment capability of each project while the private sector measures the
achievement of incubated projects using the “Break Even Point” which means self-
financing. There is no commonly used benchmark to determine the success of incubation
at the moment.
THE DEVELOPMENT OF A CLOSE TIE IN INCUBATORS AMONG
DIFFERENT COUNTRIES
Thailand is a small country and is in the stage of developing its economic, industry
and social sectors. Therefore, the support and collaboration from the advanced countries is
necessary. An international seminar can bring about closer relations and build a network
which can support collaboration between Thai and international incubators.
Possible ways for collaboration on business incubation include:
1. Exchanging experiences and knowledge in incubation from international
incubators in both the private and government sectors regularly, eg. semi-
annually. This could be achieved through an international seminar.
2. Staff exchanges between incubators in Thailand and countries that already
have successful track records in business incubation such as Taiwan and US.
The purpose of these interactions is to share and exchange incubation
problems between incubators and incubatee in depth, general problems, and
work at the coordinating level to solve the problems.
Thailand
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3. Set up a special program to educate SME entrepreneurs in Thailand. The
program topics may cover success stories of incubation in various countries
and various incubation types, and provide opportunities for them to observe
business incubation in foreign countries.
4. Regular seminars among incubatees and incubators to be held in each
country. The purpose of these seminars is to gather information for the
development of business incubation, for incubators to learn about the
efficiency and problems of incubation occurring between incubators and
incubatees.
5. Create a means such as a web site for incubators and SME entrepreneurs to
discuss and exchange information widely as well as receive different point of
views. In addition, the website could be a central information center on
incubation, act as a reference point for incubators and SME entrepreneurs
and use in the incubation development strategy.
CONCLUSION
Thailand’s NIS is still at an early stage of development. The initial signs are
encouraging. However, only time will reveal the success of various programs. It is clear
that more needs to be learned from the success of incubators in other countries. With
patience and perseverance, it is hoped that Thailand’s SMEs will grow and flourish with a
number of them making their names on the global stage.
SOURCES OF INFORMATION
Department of Industrial Promotion (DIP), Ministry if Industry
The Office of Small and Medium Enterprises Promotion (OSMEP)
Institute for Small and Medium Enterprises Development (ISMED)
National Science and Technology Development Agency (NSTDA)
http://www.derbymanagement.com
- 130 -
VIETNAM
Pham Gia Minh
Trung Minh Company Ltd.
“CREATIVE ENTREPRENEUSHIP” FOR BUSINESS GROWTH
Successful growth within any business is the product of a complex mix of variables
that are both internal and external to the firm. Such variables are frequently called
“enterprise resources” which include all assets, skills, capabilities, organizational
processes, attributes, information or knowledge under the enterprise’s control, that can
used to develop competitive positional strategies.
Not all enterprise resources will be valuable in the development of competitive
advantage. Those resources that do offer competitive advantage are critical to creative
entrepreneurship in firms. Our empirical examinations show that the source of critical
resources for creative Entrepreneurship is in the internal rather than external environment,
and it is derived from the way an enterprise uses its resources creatively relative to its
competition.
Successful growth within a small business is dependent upon the capacity of the
owner to manage the expansion within the limits of his/her resources. The creative
entrepreneurship resources found within the firm includes the financial, physical and
human resources as well as the experience, leadership, ideas and control base of the
entrepreneur. Key resource issues facing the growing small firm are the lack of technical
and managerial skills, inadequate organizational adaptability, and the ability to acquire or
use technology.
As the business grows owners must learn to transfer their own expertise and
knowledge to their staff in order to free themselves for further developmental work on
their business rather than in it. This requires the small business to shift from having an
organization culture-based around the personality of the owner, to a “systems-based”
structure that can successfully reproduce and maintain itself without the presence of the
original owner.
MODEL OF SUCCESSFUL SMALL BUSINESS GROWTH
Drawing on our empirical studies of a group of 36 small firms (see table 1 on the
demographics of the sample) over four year period in Vietnam (20 in the South and 16 in
the North, 30% of them manufacturing and 70% service companies) we found a strong
relationship between high growth and the group of four significant factors derived from
the questionnaire survey.
Key Data Awareness
This factor consists of two variables. The first relates to the owner having clearly
identified the critical information needed by them in order that they continually exceed
their customers’ expectations. The second concern whether or not the owner has examined
how he or she gets business and identify what information they require.
Vietnam
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Not Price Driven
It comprises of two variables. The first relates to whether or not an increase in the
firm’s prices will affect demand for its products. The second is whether price is considered
to be a real factor in determining customer-buying decisions.
Table 1: The Demographics of the 36 Firms
No. Title
Number
of firms
Average
age of
business
Product
service
Average
No. of
employees
Average age
of
entrepreneurs
I
Manufacturing firms in the North Vietnam
1 Food processing 3 7
Vegetable and
food export
150 36
2
Detergent and
cleaning liquid
1 12
Bio-detergent
powder and
liquid
70 42
3 Mining 1 9 CaCo3 powder 200 45
II Service firms in the North
1 Hotel 2 8 Hotel service 350 41
2 Travel agency 2 12 Tourism 56 32
3 Trading 2 10 Trading service 130 37
4
Multimedia
service
1 9 Multimedia 25 32
5 Consulting 2 11 Law service 15 38
6 Bank 2 15 Bank service 300 45
III Manufacturing firms in South Vietnam
1
Portery & ceramic
export company
1 12
Garden &
interior portery
150 32
2
Furniture
companies
1 8
Furniture
outdoor
500 38
3 Seafood export 2 9 Catfish 800 42
4
Building
component &
material
1 12
Construction
structures
300 40
5 Garment 1 10 J eans 2000 47
6
Agriculture
production
1 10 Grape fruit 50 36
IV Service firms in the South
1 Hotel 4 13 Hotel service 500 46
2
Architecture
design
1 8
Construction
service
15 31
3 Computer service 3 5 Maintenance 45 32
4 Trading 3 7 Trading service 200 43
5 Education 2 9
Vocational
training service
55 47
Creative Entrepreneurship in Asia
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Business Generating System
This consists of four variables. The first is concerned with the owner’s focus on
growing their business by selling proven products or service to more customers. The
second relates to the firm’ capacity to plan for and allocate sufficient resources to the
development of new markets. The third involves the owner’ view that long-term prospects
in their primary markets are excellent. Finally the last variable is whether or not the firm
has effective business-generating system in the place to create new customers.
Use Experts and Family
It consists of two variables. The first is related to the owner’s awareness of and
ability to access grants and expertise available to assist their business. The second is a
more personal one and concerns the owner’s ability to make time for family and friends.
CASE STUDIES
In order to investigate this model of business performance, a series of case studies
were developed with members selected from the original panel of 36 respondents. The
purpose of these cases was to examine first hand, the relationship that appeared to be
found in the data analysis. The application of each business was examined and the sample
was divided into the high and low performing firms. In the following sub-sections two
case studies are provided. These examples illustrate the relationship between the four key
success factors and market performance.
Case Study 1 – Small Manufacturer
This small manufacturer has experienced substantial growth over the previous three
years, expanding its employment base from six to 120 employees (including casual
labour). The firm has also started a nation-wide expansion moving its operations interstate
from South to North. Its product - an industrial building component – was sold to a small
number of large customers usually involving three-year contracts.
In terms of ‘key data awareness’ the firm’s owner made it clear that his company
spent a substantial amount of time monitoring the activities of both his customers and
competitors. His main competitor was a large international company with lower cost
structures. Faced with such competition, the owner targeted six potential new customers.
He spent time finding out what their requirements were and narrowed his field down to
three who seemed to be favor his products over his competitors. By focusing on the needs
of these three rather than all the six, he was able to secure three good contracts and left the
rest of the field to the competitors. Constant environmental scanning by the owner was
deemed crucial to avoid being ‘wrong footed’ by the larger competitors.
In terms of pricing, the firm had commended a premium price approximately 5
percent above the industry average. The owner did not consider that his company made
‘super profits’ but he did not compete on price for contracts and sought to make a better
than average profit margins within his prices and is of the view that there is room to charge
more.
The owner identified customer service as an important aspect of his ‘business
generating system.’ He described customer service as ‘one of the key planks in the
company.’ The owner indicated that he was still responsible for most of selling. He
stressed the role of innovation in winning new business. He sought to provide his
customers value-added by carefully monitoring customer needs. According the owner he
Vietnam
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attempt to place himself in the customer’s situation and think of what he can offer that is
new or innovative. By doing this he was able to approach them and offer a solution to a
problem. This had led to substantial dividends as he explained:
“We had a case recently where one of our competitors offered our biggest
client much better price than ours. The customer told me this in his office. He
had a big desk and he said all the paper on his desk represented problems that
he was trying to solve, but not one of these problems related to my company
so there wasn’t any need to change. So that is the kind of thing that happens
when you’re willing to work hard on customer service.”
In addition to servicing the needs of its exiting customers the company also devoted
resources to the development of new products and new markets. The owner explained how
he was seeking to empower his employees to assume greater levels of responsibility so he
could be occupied with more strategic concerns. The interstate move was absorbing more
of his time and he needed to establish entirely new business operations in these cities. He
had to plan for this carefully to ensure that his existing operations did not falter. Team
building within his company has become a key focus.
The company also demonstrated its willingness to use experts and family members
to assist the business. According to the owner his wife was a major participant in the
business. She joins him in sorting out various problems and he relies on her help. Equally
important was the relationship he had developed with his bank. He describes spending two
years developing a close working relationship with his banker. This was critical to his
operations as the business had cyclical cash flows with higher sales during the summer
months; four times larger than at other times of year. However, the company had to gear
up borrow during the winter to fill its inventory so as to meet the summer orders. The bank
had greatly expanded his overdraft facility enabling the company to meet its short-term
debts and wages bills during the winter. This partnership with the bank is now a key
element in the firm’s success.
Case Study 2 – Small Service Firm
This small firm was engaged in high quality post-production work for television
commercials, documentaries and film work. In recent years it has begun expansion into
multimedia and website design. The company had grown strongly in recent years
commencing with three staff and currently employing 13. The employment comprises of
audio and video editors, and graphics specialists. Its customer base was small but consisted
of about 100 to 200 key clients. Over the previous three years the company made
substantial investments in new equipment and production facilities.
According to the owner, it was difficult to monitor key indicators as the
environment – both internal and external – changed so rapidly. He expressed concern over
the need to remain aware of such information and described how the company had
originally performed around 90 percent of its work for the corporate sector and had now
reduce this to 15 percent. The firm sought to monitor its customer satisfaction levels and
had a well-defined customer service policy. These customer service levels had not been
formally addressed within the company in its early years and the owner was since seeking
to do so. He has introduced a formal system of monitoring customer satisfaction and held
‘mini-seminars’ for his staff using graphs to illustrate customer service performance.
In addition to monitoring the existing customers, the owner described how he was
now monitoring the external environmental changes which are taking place within his
Creative Entrepreneurship in Asia
- 134 -
industry. It was noted that some of his customers were beginning to establish ‘in-house’
facilities to do the work he had performed. Some of these customers are likely to become
competitors over time. Therefore he is looking for new markets to generate new business.
The company began to look overseas for opportunities and had set a 12-month horizon to
achieve certain goals.
The company did attempt to “delight its customers” although this was not easy
within their industry as “advertising people are quite fickle.” As the owner explained:
“We try to handle their wants, like “I want” as opposed to “I need”. We give
better customer service than the average, like a car yard or whatever. We
hope to constantly please customers but customers are always quick to find
fault.”
The owner was monitoring his financial information on the weekly basis and
monitored his break-even points against it. In terms of prices competition, it is difficult
within his industry to charge a premium price on all jobs. However, the owner indicated
that his main aim was to work smarter not harder and this meant seeking those jobs that
offered the better margins. His only suppliers were videotape manufacturers and therefore
it was staff time that the company was essentially selling.
The owner also indicated that he was willing to use experts, family and friends to
assist his business. He had a strong personal relationship with his accountant and worked
with a business mentor to assist in business development. In addition to professional
advice, the owner drew support from his circle of business friends and colleagues to
discuss business related issues.
MANAGERIAL AND RESEARCH IMPLICATIONS
These two case studies are typical of several similar cases that demonstrate a link
between the four-factor model shown in Figure 1 and business growth.
The four significant factors associated with the growth index measure used in the
study highlight additional issues that the small business owner-manager needs to address.
They suggest that the small business owner-manager seeking growth will need to gather
“key data” on how they attract their customers and seek to monitor the level of satisfaction
they deliver to these customers. The development of a “business generating system” will
be important. This will require a focus on identifying long-term market opportunities and
selling proven products or services into these markets. Attention will also need to be given
to planning for new market developments that will require allocation of resources to
achieve this.
To develop successfully in any market the small business owner–manager should
avoid competition based purely on price. Avoiding being “price driven” will require
adding value to products or services to enable customers to buy for reasons other than
price and justify any premium prices charged.
Finally, the findings suggest that success growth can be assisted by use of experts
and family. The owner–manager who can access expertise and other forms of support– e.g.
grants–will widen their base of skills, ideas or resources. This is a partnering focus that
should contribute to the small business growth process. Incorporated into this appears to
be the need for the owner to consider holistic life planning, whereby they include time for
family and friends in their activities. Given the important association that often exists
Vietnam
- 135 -
between family and business life for many small business owners, this would seem a
logical consideration.
Key data Awareness
Possess key data on customer to
ensure customer delight
Knowing how business is won
and knowing what information to
get
Business Generating System
Selling proven products to
established markets
Planning for new products &
markets
Outlook for current markets
Possession of new business
generating system
Not Price Driven
Price increase will not affect
demand for products
Price is not the key buying
criteria for customers
Use of Experts & Family
Owner’s use of experts for
assistance
Owner’s ability to make time for
family and friends
Figure 1: Four – Factor Model of Small Business Growth
The sample size and the use of sales growth as a dependent variable limit this study.
A more robust measure of growth is required to fully examine the causal relationship
between growth and the four factors. Future research into this model is planned using a
larger sample. If the results can be replicated it can provide a useful framework for guiding
small business growth.
Business Growth
- 139 -
List of Participants
India Mr. Kamal Dev
Deputy General Manager
National Thermal Power Corporation (NTPC)
Ministry of Power
EOC Sector 24, Noida
New Delhi
Indonesia Mr. Susanto Joseph
Vice Secretary General
Employers Association of Indonesia (APINDO)
Plaza Great River 15 F
J l. HR. Rasuna Said X-2 Kav. 1
J akarta-12950
Islamic Republic of Iran Dr. Mahmoud Ahmadpour Daryani
Chairman of Entrepreneurship Center
University of Amirkabir
No. 37, beside Art University
Shahid Balavar Alley
opposite Daneshjoo Park
Enghelab Street, Tehran
Republic of Korea Mr. Lee Yong Geun
President
J oin Electrical Construction Co., Ltd.
8F, Hwaryun Bldg.
753-5, Bangbae Dong
Seocho Gu, Seoul 137-060
Mr. Myung Kwan Kim
Assistant Manager
Small Business Corporation
23-4, Yeouido-dong
Yeongdeungpo-gu
Seoul 150-718
- 140 -
Malaysia Mr. Zainal Abidin bin Othaman
Head
Business Training, Advisory and Promotion Unit
MARA Negeri Sembilan
Majlis Amanah Rakyat
6F, Yayasan Negeri Building
J alan Yam Tuan
70990 Seremban
Mongolia Mr. Dashdorj Banzragch
Chief Officer for International Settlement
Credit Bank of Mongolia
Sukhbaatar Square
Ulaanbaatar
Nepal Mr. Sukunta Lal Hirachan
President
Federation of Contractor Associations of Nepal
Anamnagar, Kathmandu
Philippines Dr. J ustino R. Arboleda
Chief Executive Officer
Coco Technologies Corporation
4 F, R&G Tirol Bldg.
831 EDSA Cor. Eugenio Lopei Street
South Triangle, Quezon City
Singapore Mr. Adrian Lim Meng Yan
Managing Director
The Young Entrepreneur Mastery Limited
35 J alan Pemimpin
Wedge Mount Industry Bldg.
#05-02
Singapore 577176
Tel: 65-63231833
Fax: 65-63231838
e-mail: [email protected]
Dr. Aloysius Tay Ban Hock
Executive Director
Association of Small and Medium Enterprises
199B Thomson Road
Goldhill Centre
Singapore 307636
- 141 -
Sri Lanka Mr. Samantha Sathischandra Wanniarachchi
Kumarasinghe
Chairman and Managing Director
Multichemi Group of Companies
23B, Pagoda Road
Nugegoda
Thailand Mr. Wiwat Chutiwanichayakul
Senior Business Consultant
Business Advisory Center
Kenan Institute Asia
Queen Sirikit National Convention Center
2F, Zone D, Room 201/6
60 New Ratchadapisek Road
Klongtoey, Bangkok 10110
Ms. Waleeporn Thanathikom
Management Consultant
Thailand Productivity Institute (FTPI)
12-15 F, Yakult Bldg.
1025 Phahonyothin Road
Phyathai, Bangkok 10400
Vietnam Mr. Do Chi Thien
Trading Manager
Phu Lam Footwear Company
71C Ly Chieu Hoang Street
6th District, Ho Chi Minh City
Mr. Pham Gia Minh
Director
Trung Minh Company Ltd.
Room 301, No. 32 Batrieu Street
Hanoi
- 142 -
List of Resource Persons
Malaysia Dato’ Mustafa bin Mansur
President
Federation of Malaysian Manufacturers
and
Group Chairman
Manentech-Bele Sdn.Bhd.
Wisma Belle
No. 18 & 20, J alan Wanasa
Taman Wanasa Permai
52200 Kuala Lumpur
Republic of Korea Dr. Moon-Kyum Kim
Professor of Entrepreneurial Finance
Soongsil University School of
Entrepreneurship and SME Management
1-1, Sangdo-Dong, Dongjak-ku
Seoul
Singapore
(Chief facilitator-cum-resource person)
Prof. Tan Wee Liang
Professor
Singapore Management University
Tanglin Post Office
P.O. Box 257, Singapore 912409
Republic of China Prof. Kuang-Chao Fan
Professor
Department of Mechanical Engineering
Director
NTU Incubation Center
National Taiwan University
Taipei 10617
Dr Chao-Tung Wen
Professor
Graduate Institute of Technology and
Innovation Management
National Chengchi University
64, Zhi-nan road
Sec. 2, Wenshan, Taipei 11623
Mr J ackson Chang
Chairman
Inventec Appliances Corp.
37, Wugung 5
th
Rd.,Wuzu Shiang
Taipei 248
- 143 -
Program and Schedule
Study Meeting on Creative Entrepreneurship
[18–21 May 2004, Taipei, Republic of China]
Day 1 – Tuesday, 18 May 2004
Forenoon Opening Ceremony
Presentation by Prof. Tan Wee Liang
“Implementing Creative Entrepreneurship in Corporations”
Afternoon Presentation by Mr. J ackson Chang
“Product Innovation and Business Model: the Case of OKWAP Phone”
Country paper presentations (I)
Group discussion
Day 2 – Wednesday, 19 May 2004
Forenoon Presentation by Dr. Chao-Tung Wen
“Can Entrepreneurship be Taught? The Experience of Taiwan”
Presentation by Dr. K.C. Fan
“The Strategy to Create an Entrepreneurial Incubator: the NTU Case”
Afternoon Visit National Taiwan University Innovation Incubation Center
Day 3 – Thursday, 20 May 2004
Forenoon Presentation by Dato’ Mustafa bin Mansur
“An Interface between Entrepreneurship, Creativity and Innovation: The
Malaysian Experience”
Country paper presentations (II)
Afternoon Presentation by Dr. Moon-Kyum Kim
“Creative Entrepreneurship and Innovation: The Korean Experience”
Country paper presentations (III)
Group discussion
Day 4 – Friday, 21 May 2004
Forenoon Syndicate discussion/
Outcome presentation by groups/summing up and closing
doc_966112467.pdf
Creative Entrepreneurship in Asia
From:
Creative Entrepreneurship in Asia
©APO 2005, ISBN: 92-833-7035-X
Report of the Study Meeting on
Creative Entrepreneurship held in Taipei, Republic
of China, 18–21 May 2004
Edited by Prof. Tan Wee Liang
Published by the
Asian Productivity Organization
1-2-10 Hirakawacho, Chiyoda-ku,
Tokyo 102-0093, Japan
Tel: (81-3) 5226 3920 • Fax: (81-3) 5226 3950
E-mail: [email protected] • URL: www.apo-tokyo.org
Disclaimer and Permission to Use
This document is a part of the above-titled publication, and is provided in PDF
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The responsibility for opinions and factual matter as expressed in this document
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accuracy of information herein provided.
Bound editions of the entire publication may be available for limited purchase. Order
forms may be downloaded from the APO's web site.
ASIAN PRODUCTIVITY ORGANIZATION
Objective
The Asian Productivity Organization (APO) is an inter-governmental regional
organization established by Convention in 1961 to increase productivity in the countries of
Asia and the Pacific through mutual cooperation.
Membership
APO membership is open to all Asian and Pacific Governments that are members of the
Economic and Social Commission for Asia and the Pacific (ESCAP) of the United
Nations. Governments outside Asia and the Pacific may become Associate Members.
APO member countries are: Bangladesh, Republic of China, Fiji, Hong Kong, India,
Indonesia, Islamic Republic of Iran, J apan, Republic of Korea, Malaysia, Mongolia,
Nepal, Pakistan, the Philippines, Singapore, Sri Lanka, Thailand and the Socialist
Republic of Vietnam.
Organization
The supreme organ of the APO is the Governing Body. It comprises one Director for each
member country designated by their respective governments. The Governing Body
decides on the policies and strategies of APO programs, and approves its budgets,
finances, and matters relating to membership.
The Secretariat, based in Tokyo, comprises the Secretary-General and Secretariat staff
who execute the annual programs approved by the Governing Body. It has established
operational networking with the designated National Productivity Organizations (NPOs)
which act as national change agents for productivity promotion and as implementing
agencies for APO programs in member countries. It also has close working relationships
with other international organizations.
Roles
The APO serves as think tank, catalyst, regional advisor, institution builder and clearing
house for productivity information to member countries. It assists member countries
through human resource development, technical expert assistance and dissemination of
knowledge and know-how on productivity.
Programs and Activities
APO's programs cover the industry, service and agriculture sectors, with special focus on
socio-economic development, small industry development, human resources management,
productivity measurement and analysis, quality management, production and technology
management, information technology, development of NPOs, green productivity,
integrated local community development, agribusiness, agricultural development and
policies, resources and technology, and agricultural marketing and institutions.
Its activities include basic research studies, surveys, symposia, study meetings, training
courses, seminars, fellowships, technical expert services, study missions, publications, and
audio-visual training materials.
Report of the Study Meeting on Creative Entrepreneurship held in Taipei, Republic of China
from 18 to 21 May 2004.
This report has been edited by Prof. Tan Wee Liang.
The opinions expressed in this publication do not reflect the official view of the APO. For
reproduction of the contents in part or in full, the APO’s prior permission is required.
©Asian Productivity Organization 2005
ISBN: 92-833-7035-X
FOREWORD
The APO co-organized the Study Meeting on Creative Entrepreneurship in Taipei,
ROC, 18–21 May 2004, with the China Productivity Center. Since its inception in 1961, the
APO has consistently placed great importance on the productivity and quality improvement
programs and activities of its member countries. Small and medium enterprise (SME)
development constitutes one of the APO’s thrust areas, and one key aspect of SME
development is the fostering of entrepreneurs.
The study meeting, with the theme “Creative Entrepreneurship” was a timely event.
Entrepreneurs often create significant breakthroughs and bold innovations in all fields of
business. Entrepreneurial organizations similarly create new value and contribute to the
economic growth of nations. The study meeting offered a valuable opportunity to examine
not only creative entrepreneurship in SMEs but also in large corporations and how to foster
creative entrepreneurs in the business sector.
The event brought together a panel of distinguished speakers, both from the ROC and
overseas, to cover a broad range of issues ranging from the key success factors for
entrepreneurial creativity in firms to implementing creative entrepreneurship in established
firms, incubation of innovative enterprises, and new product development, which is an
important aspect of value creation. The panel was chaired by Professor Tan Wee Liang,
Singapore Management University, to discuss the following themes at the study meeting:
• Relevance of creative entrepreneurship for business growth and economic
prosperity
• Critical examination of success factors for entrepreneurs
• Role of stakeholders, especially the government or NPOs, in promoting
entrepreneurship
• Measures available to access entrepreneurial activities in an economy and their
economic impact
• Development of enterprise “ecosystems”
This volume is a compilation of the papers and views presented at the study meeting.
The APO greatly appreciates the efforts of Professor Tan in editing this volume. We hope
that the contents will provide information on policies, best practices, and current
developments that will be of use to policymakers, entrepreneurs, and enterprises engaged in
fostering creative entrepreneurship.
Shigeo Takenaka
Secretary-General
Tokyo
December 2005
CONTENTS
Foreword
Integrated Summary …………………….……………………………………...... 3
Resource Papers
An Interface between Entrepreneurship, Creativity and
Innovation: The Malaysian Experience………….......... Dato’ Mustafa bin Mansur
13
Implementing Creative Entrepreneurship in Corporations …….…. Tan Wee Liang
19
Product Innovation and Business Model: The Case of
OKWAP Phone ………….…………………………………..…….. J ackson Chang
28
The Strategy to Create an Entrepreneurial Incubator — The
NTU Case …………….. Kuang-Chao Fan, Helen Y.C. Hsiao and Lee H.S. Luong
40
Selected Country Papers
Indonesia ………………………………………………………….. Susanto Joseph
51
Malaysia …………………………………………….…Zainal Abidin bin Othaman
64
Philippines …….……………………………………….……… J ustino R Arboleda
71
Singapore (1) ……………………………………….…..... Aloysius Tay Ban Hock
79
Singapore (2) ………………………………..………….… Adrian Lim Meng Yan
86
Sri Lanka ……………..… Samantha Sathischandra Wanniarachchi Kumarasinghe
103
Thailand (1) …………………………………………...… Waleeporn Thanathikom
112
Thailand (2) ………..………………………………..… Wiwat Chutiwanichayakul
119
Vietnam …………………………………………….…………….. Pham Gia Minh
130
Appendices
List of Participants ….……………………………………………………………....
139
List of Resource Persons …………..……………………………………………….
142
Program and Schedule ……………………………………………………………...
143
- 3 -
INTEGRATED SUMMARY
BACKGROUND
Entrepreneurship is the driving force bringing innovations to the marketplace and
establishing a community of high-growth firms. A creative entrepreneurial sector or
community within an economy can contribute significantly to its prosperity. With change
as the constant in today's globalized world, entrepreneurs constantly seize any arising
opportunities to create new wealth. Peter Drucker in his book Innovation and
Entrepreneurship noted that: “Entrepreneurs see change as the norm and as healthy. He or
she always searches for change, responds to it, and exploits it as an opportunity.”
Embracing creativity and innovation, an entrepreneur’s products or services can
bring about business growth, productivity improvement, job and wealth creation, an
enhanced image for the economy, and ultimately a better quality of life for all. Policy
makers have recognized that creative entrepreneurship needs to be encouraged through
appropriate policies that foster entrepreneurship, innovation, and technological
development. Some countries have introduced science parks in the hope that the provision
of infrastructure will spark the development of high-tech ventures leading onto new
innovations and inventions which can become global products and services.
Within enterprises, there is a need for creative entrepreneurship. Some enlightened
corporations have fostered creative entrepreneurship within their organizations by
providing opportunities for innovation, intraorganization venture financing, and ownership
of employee-initiated projects. More needs to be done in this area to motivate the
involvement of incumbents in a corporation through tangible and intangible means. This
study meeting sought to promote the exchange of knowledge of, experience in, and
approaches to creative entrepreneurship and creativity and innovation as a strategy for
business excellence and growth in APO member countries.
Sixteen participants from the 12 member countries India, Indonesia, Islamic
Republic of Iran, the Republic of Korea, Malaysia, Mongolia, Nepal, Philippines,
Singapore, Sri Lanka, Thailand, and Vietnam contributed to the deliberations of the
meeting. Three APO resource persons from Malaysia, the Republic of Korea, and
Singapore provided resource inputs in addition to two local resource persons. To
supplement the learning with practical examples, a field visit was organized to the
National Taiwan University Innovation Incubation Centre (NTUIIC), where two of its
successful tenants, Universal Vision Biotechnology and Genozyme Biotech, were
introduced to the participants.
PROCEEDING OF THE STUDY MEETING
What is Creative Entrepreneurship?
Professor W.L. Tan of Singapore Management University introduced the meeting to
the coverage of the study meeting; namely:
a. Spheres of creative entrepreneurship:
• Who—new ventures, serial entrepreneurs, existing ventures (by
themselves), existing ventures (together with others), regions, and
networks.
• What—new products/services based on innovations or technology, new
markets, new processes, or new business models.
Creative Entrepreneurship in Asia
- 4 -
b. Challenges hindering the growth of creative entrepreneurship and how
enterprises overcame them on their own or with assistance from the private
sector and/or government.
The main themes to be covered were:
• Creative entrepreneurs
• Public policies driving creative entrepreneurship
• International creative entrepreneurs
• Technology and innovation
• Corporate entrepreneurship
Corporate Entrepreneurship
Professor Tan highlighted the potential that most enterprises neglect when they
consider ways to be creative and entrepreneurial, is that, they fail to engage the creativity
of their workforce. Corporate entrepreneurship spans a continuum of possibilities,
beginning with an R&D department, to involving only middle managers, to permeating the
whole organization.
Whatever the level or extent of the organization one wishes to engage in corporate
entrepreneurship, there is a need to change organizational factors. Certain factors have
been identified by researchers as important for fostering corporate entrepreneurship. The
most important are the attitudes of the intended employees. The proper attitudes toward
corporate entrepreneurship will lead to objectives and subsequent actions. Other factors
include organizational culture, practices, flexibility, and sponsorship of employee
innovation projects. An organizational culture that results in creative entrepreneurship
allows employees to remain with their projects (continuity), encourages communication
across areas and levels of the firm, creates cross-functional teams, encourages decision
making by all even at the lowest level of the organization, and permits project teams
multiple options so that they are not confined to procurement from limited sources. It does
not encourage risk aversion or conformity. Such organizations train and develop their
workforces, encourage creative decision making, do not frown upon projects with small
beginnings, and spread any innovation throughout the whole organization. There is
flexibility in the operation of the teams and the organization sponsors projects. In his study
of Singapore middle managers, Professor Tan found that organizational culture, flexibility,
and sponsorship influenced middle managers to become internal corporate entrepreneurs
(intrapreneurs).
Product Innovation and Business Model (the Case of OKWAP Phone)
Mr. J ackson Chang, Chairman of Inventec Appliances Corporation, expanded on
Professor Tan’s presentation by showing how his company was able to involve its project
teams in developing Taiwan’s most popular locally produced mobile telephones, with the
brand name of OKWAP. The phones have the same features as the internationally known
brands Samsung, Nokia, and Sony Ericsson.
He introduced the participants to the various considerations of an effective product
innovation process and business model: strategy (positioning, entry segment, competing
edge), execution (resources, process, and integration), and deployment (marketing and
promotion, community service, and sustaining competitiveness). Taking these into
consideration, Inventec developed its unique mobile phones with local content functions
such as the Taiwan personal digital assistant and dictionary; culture-related content such as
Integrated Summary
- 5 -
Web site support for free downloads; and access to local customized services and features
such as promotional events, community and special interest groups.
Entrepreneurship Development in Taiwan
Professor C.T. Wen explained how he developed a program at National Cheng-chi
University to develop creative entrepreneurs and entrepreneurial teams. He made a study
of overseas programs including the MIT e-Lab, University of Southern California Student
Incubator Hatchery, University of Washington New Venture Creation Lab, Osaka Venture
Factory, and Innocamp of Norway. He concluded that to foster creative entrepreneurship
in the university environment, there is a need to create activities and an environment
within which the students can develop ideas, work through those ideas, and involve
university programs and resources to refine them, and interact with the mentors provided
by the university to result in new ventures (Figure 1).
At his university, he has encouraged entrepreneurship through the mentoring of
business plan teams for the Taiwan Innovation Competition that is based on the MIT 50k
Business Plan competition. He shared his conviction that for creative entrepreneurship to
occur, a suitable milieu must be created wherein individuals can choose the combinations
that work for them. Business plan competitions by themselves do not lead to
entrepreneurship but often only create gamesmanship. He noted that there has been a
decline in student interest in such competitions.
Figure 1: Facilitating Creative Entrepreneurship at
National Cheng-chi University
Strategy for Creating an Entrepreneurial Incubator: The National Taiwan
University Case
Taiwan is a showcase for successful ecosystems for creative entrepreneurship in its
incubators. There has been an increase in the number of incubators established after the
international success of firms incubated at the Hsinchu Industrial Park, in particular at the
Industrial Technology Research Institute (ITRI). ITRI is a primary R&D center for
Seminar in Entrepreneurship
Workshop Saloon
New Venture Development Seminar
Technological Enterprise
Entrepreneurial Finance
Digital Content
Summer Camp Creativity Generation
and Practice
TIC
WE
WIN
New Venture in the
Service Industry
Academic Practical
College
Ph.D.
Master’s
YEF
Republic of
Creativity
EMBA Practical
Community
Creative Entrepreneurship in Asia
- 6 -
industry in the ROC. In 1973, when ITRI was founded, there was very little high-tech
industry in the country. Today, the ROC is a world-class player in semiconductors,
personal computers, and many other high-tech sectors. ITRI has played a significant role
in this transformation.
Professor K.C. Fan outlined the way in which National Taiwan University (NTU)
created its entrepreneurial incubator center, one of many being developed by universities
and funded by the government. The entrepreneurial incubator center enables professors’
involvement in consultancy, students’ involvement in internships, and the university’s
involvement in setting up laboratories, facility utilization, and entrepreneurial programs.
The additional expected benefits include commercialization of technology developed on
campus, the formation of academic team groups as new start-up teams, and linkages
between the university and industry. However, the center will face challenges, as Professor
Fan noted that other university incubators have not been financially self-sustaining if
financial support from the university or government is cut. Further, their contributions to
universities are still not satisfactory in terms of equity returns. Perhaps the way forward is
to permit universities to attract private investment in the incubators, as is being tried in
China and in Malaysia.
NTU Incubation Center Site Visit
The participants learned more about product innovation through a site visit to the
NTU’s entrepreneurial incubator center. Professors K.C. Fan and Chau-Chen Yang
introduced the NTUIIC to the participants. As an incubator, the NTUIIC created an
environment for “start-ups” and “innovation” with the objectives of lowering the risk of
start-ups, improving the R&D capability of enterprises, assisting traditional enterprises to
seek advances in technology, and to extend R&D conducted at the NTU until the final
stage of commercialization.
The incubator is structured as a company that is the interface between the tenants
and the other stakeholders (internal and external). It has had modest success and has been
able to attract university alumni and notable businesspeople to act as mentors. Since its
formation in 2002, it has “graduated” 28 small and medium enterprises (SMEs)
representing 14 in information technology, 11 in engineering, and three in the field of
biotechnology. It is presently incubating 19 firms.
Two of its tenants, Universal Vision Biotechnology and Genozyme Biotech, were
introduced to the participants. Universal Vision Biotechnology is the first management
consultation company in the field of professional ophthalmic treatment and the first to
specialize in ophthalmic biotechnology in the Taiwan. It is in the incubator because one of
its projects is R&D involving the NTU faculty to improve vision biotechnology techniques
using excimer lasers, the vision treatment commonly associated with high myopia called
LASIK. The other tenant, Genozyme Biotech, focuses on biotechnology applications for
the livestock industry and produces enzymes for feed improvement and tests for the
detection of toxins in feed which ranchers can use to improve livestock yields.
The Interface between Entrepreneurship, Creativity, and Innovation: The Malaysian
Experience
Dato’ Mustafa Mansur drew from the Malaysian experience to demonstrate how
Malaysian entrepreneurs and enterprises have continued to find niches and expand their
markets. He presented two case studies: Royal Selangor International and Air Asia.
Royal Selangor International is a world-renowned producer of pewterware and
high-end gift items, including jewellery. Although it has its share of competitors who have
Integrated Summary
- 7 -
tried to mimic its products, Royal Selangor has employed an innovative marketing strategy
involving creatively displayed showrooms, on-line shopping opportunities since 1996, and
new design collections. It has found innovation to be critical because its products have
short life cycles, and its designs can be easily copied by competitors and are nonessential
luxury items.
AirAsia is Asia’s first low-fare, no-frills airline to introduce ticketless travel. It
operates frequent flights and plies routes not covered by mainline operators, saving costs
through the use of modern technologies to manage its operations like on-line booking and
payment facilities, a multilingual Web site offering real-time holiday packages, mobile
phone short message booking and checking of flight schedules, and a direct “B2B engine”
with agents and virtual credit cards. The interesting element is that the creative team did
not come from the airline industry but from the music industry. They infused techniques
used in the promotion of services and advertisements in the music industry in the new
airline.
Creativity and Entrepreneurship
Dr. M.K. Kim of Soongsil University focused on the theory of creativity and how it
interfaces with entrepreneurship. In particular, he stressed that creativity is a collective
capability that the whole organization can embrace. There are steps that organizations
need to take: they should develop skills and capabilities that make it unique both in the
present and in the future. The uniqueness is collective in nature, founded on the culture of
the organization, in particular the way it operates and communicates as a team, rather than
the creative skills of a few elite employees. The creative capability of the organization is
shaped by the way the entire staff works and feels about the organization. Therefore
creativity often involves organizational development processes rather than recruitment and
career management tasks.
SUMMARY RECOMMENDATIONS
The participants devoted time in syndicate groups to a discussion of creative
entrepreneurship. They agreed that various definitions existed but adopted Professor Tan’s
proposed definition of “any new business activity involving creativity and innovation.”
The definition is important as the type of enterprises and mindsets that the countries,
companies, and individuals seek to establish are identified based on the definition.
Through the discussions, the participants concluded that to encourage creative
entrepreneurship, policy makers need to encourage the various stakeholders in society to
enhance the adoption of technology and encourage innovation within enterprises. These
stakeholders include governments, trade associations, and tertiary educational institutions.
The Role of Governments, Trade Associations, and Other Stakeholders
It is important for governments, trade associations, and other stakeholders to assist
entrepreneurs in sharpening their skills in management and leadership qualities and to
provide the necessary tools to identify opportunities. They often provide the external
impetus and staff experience that lead to productive changes in management processes
facilitating the creation of new products and services. Their suggested main roles are:
Government: foster the environment conducive to creativity and the adoption of
technology.
Creative Entrepreneurship in Asia
- 8 -
Trade/industrial bodies and societies: act as catalysts for business growth,
facilitators of governmental policies, and channels for businesses information.
Institutions of higher learning: provide specialists and researchers, platforms for
technology development, and tools for management and serve as focal points for
economic literacy.
They can provide platforms for entrepreneurs to move forward in the right
environment to create, innovate, and adopt technologies to succeed or to survive. There are
six elements in successful and positive environments for creative entrepreneurship: market
support, intelligence support, financial support, legislative support, technology support,
and infrastructure support. These elements of the environment should be freely accessible
to entrepreneurs. They should work hand-in-hand to promote the efficiency and
productivity of enterprises leading to a synergistic outcome.
Pertinent to creative entrepreneurship is the role of these stakeholders in the
promotion of innovation and technology adoption. The participants recommended the
following:
Networking
Networks should be encouraged as they are means for the exchange of ideas.
Alumni networks, trade associations, industrial bodies, and informal business contacts
could provide a good platform for like-minded and complementary business people to
interact, exchange best practices, and possibly ignite technology transfers among
enterprises. Networks can facilitate the rapid dissemination of knowledge and know-how.
In addition, trade or industrial bodies and societies can be screening agents for promising
business matchmaking opportunities, thus enhancing the ability of businesses to
collaborate.
Government Policies
Governments could assist in providing conducive environments for the creation of
innovation and the adoption of technology. In many countries, governments could provide
technology upgrading incentive schemes and financing schemes to ease cash flows or
increase capital for R&D activities within enterprises. Governments may pass laws or
guidelines to protect SMEs from intellectual property rights abuses. This will encourage
small businesses to innovate and reinvent. The main objective of government policies on
these issues is a substantial net increase in the level of high-quality R&D in enterprises
and to ensure an integrated and unified approach to research-related activities. These
should cover industrial R&D, process development and innovation, and technology
acquisition.
Communication
Organizations should be encouraged to promote open channels of communication
among all levels of management so that no ideas are brushed aside. Stakeholders could
play a significant role in the provision of information and intelligence to enterprises. For
example, industrial associations could provide regular updates on changes in government
policies and new incentive schemes to enterprises. This would make it easier for enterprise
decision makers to utilize government incentive schemes.
Integrated Summary
- 9 -
Incubators and Mentors
Incubators run by universities and research groups could assist businesses,
especially SMEs, to grow in a conducive environment. Researchers, specialists, and
consultants should be available to the enterprises being incubated. The credibility of the
“host” incubator could lend weight to the tenants, thus attracting better funding from the
government or business “angels.” Access to R&D facilities is the main advantage for
promising SMEs to be based in incubators. Mentors can lend their experience to the
incubating enterprises and guide them through the potentially disruptive innovation
process.
Education
Educational institutions could provide the technical know-how and the innovation
process management skills to senior managers in corporations. Studies have also shown
that general education can enhance innovation. The adoption of technologies is more rapid
in countries with higher literacy rates. Thus education and academic institutions can play a
significant role in the adoption of technology and innovation creation in an economy.
Business plan competitions, which incorporate technology adoption and innovation,
are a good opportunity to start young budding entrepreneurs thinking about innovation at
an early age. In some countries, business plan competitions have already been established.
APO Entrepreneur of the Year Award
To encourage innovation and to measure the success of entrepreneurship, the
participants suggested the introduction of the APO Entrepreneur of the Year Award (EYA).
The award could provide a consistent platform to measure successful entrepreneurship.
One main criterion for the APO EYA should be the ways entrepreneurs encourage the use
of technology and the promotion of innovation retain enterprises. This may be the
hallmark of a successful entrepreneur.
CONCLUSION
Overall, the study meeting met its intended objectives. There was lively discussion
of the issues faced by member countries seeking to develop creative entrepreneurship. The
mix of policy makers, entrepreneurs, and representatives from trade and professional
associations facilitated the discussions. The country papers and case studies revealed the
myriad forms that creative entrepreneurship can take in an economy. Positive feedback
was obtained from the participants, and some of the entrepreneurs found common interest
in business ventures and may pursue collaborative alliances.
- 13 -
AN INTERFACE BETWEEN ENTREPRENEURSHIP,
CREATIVITY AND INNOVATION: THE MALAYSIAN
EXPERIENCE
Dato’ Mustafa bin Mansur
Federation of Malaysian Manufacturers
Technological know-how and the ability to manage intellectual assets are critical
considerations in every entrepreneur’s bid to gain competitive edge in today’s highly
globalize environment. The stakes are continually raised, driven by the speed of
technology advancement and comparatively lower cost of manpower in emerging
economies.
Standardization or commonization of parts and components has allowed new
upstarts and seasoned producers in lower cost countries to venture into the production of
state-of-the-art consumer electronics products, ahead of long established market leaders.
For example, China’s Xoceco was mass producing flat screen televisions for their own
Chinese market when electronic giants like Sony were only beginning to roll out in
volume. Xoceco used inexpensive standardized parts from the Republic of Korea and the
US. While it took three years for DVD players to go from US$1,000 to less than US$300,
the same price drop took only two years for DVD recorders. The same domestic price
decrease is happening to computers and cellphones. Established manufacturers could no
longer assume that it would take years before rivals could match their products.
1
The lead-
time to exploit first mover advantage in the market has become shorter.
Being skillful, competent and cost competitive is also no longer sufficient when
emerging powerhouses such as China are jumpstarting their learning curves by enforcing
technology transfer. In addition to securing competitive prices, China is pushing for high-
end designs and technologies to be transferred to her entrepreneurs as conditions for
awarding state contracts worth several billions dollars. For example, General Electric Co.
(GE) and its competitors were required to form joint ventures with state-owned power
companies. They had to transfer to their new partners, technology and advanced
manufacturing guidelines for one of its turbines which cost GE more than US$500 million
to develop. These demands are similar to those made by Japan in the 60s and 70s. Japan
subsequently outpaced US in the electronics and other industries.
2
Long established market leaders respond to the challenging market environment by
developing more complex designs that can not be easily duplicated; keeping their
intellectual creativity as trade secrets instead of applying for patents, or developing market
strategies to sell the entire package of parts and components to rivals to achieve the same
lucrative role as Microsoft or Intel in the PC industry.
Other examples include the following: Philips supplies electronic circuitry for
nearly one third of DVD recorder models sold worldwide; Sony is the world’s biggest
supplier of a key microchip at the heart of most digital cameras; and Motorola sold its
most advanced third-generation cellphone to major rival Siemens AG of Germany. Sharp
Corp. is withholding key information such as the type of equipment used, ordering parts
1
“Upstarts are Crafting Components of Change in Consumer Electronics”, Evan Ramstad and Phred Dvorak, Asian
Wall Street Journal, December 16, 2003.
2
“China Makes Power Play to Score Technology from Foreign Partners”, Kathryn Kranhold, Asian Wall Street
Journal, February 26, 2004.
Creative Entrepreneurship in Asia
- 14 -
from different makers and has even stopped patenting some factory processes because
“Patents can be hints”, said Zempei Tani, Vice President, Sharp.
3
It is clear from the above few examples that other than focusing on costs, product
and process quality, speed and efficiency, businesses must also strive for new sources of
innovation and creativity.
4
Businesses have to develop technology rapidly and to
continuously introduce new and better designs and business strategies to stay ahead of the
competition. As Jodie Ray, CIO of Texas Instruments cited, “It used to be that the
efficiency of transactions was all that mattered. Now, the capability to change quickly is
more precious than money – it’s more important than having the lowest transaction cost.”
Hence, the illiterate of the 21
st
century would not be those who could not read and write.
They would be those who could not learn, unlearn and relearn.
ENTREPENEURSHIP, INNOVATION AND CREATIVITY
According to Peter F. Drucker, “a commitment to the systematic search for
imaginative and useful ideas is what successful entrepreneurs share…entrepreneurship
can occur in a business of any size or age because…it has to do with…innovation, the
disciplined effort to improve a business’ potential…from a conscious, purposeful search
for opportunities – within the company, industry and larger social and intellectual
environment…from pulling together different strands of knowledge, recognizing an
underlying theme in public perception, or extracting new insights from failure. The key is
to know where to look
5
.”
Mr. Drucker went on to identify seven key areas in which entrepreneurs should look
for innovation opportunities namely:
a. Unexpected occurrences, including failure; for example Ford learnt from the
Edsel failure that the automotive market was segmented by lifestyle instead of
income group and promptly produced the Mustang;
b. Incongruities were used to explain Alcon Laboratories’ monopoly for its
enzyme product to dissolve the ligament in cataract removal. The enzyme was
readily accepted by eye surgeons because the product resolved the problem of
having to cut off the ligament, a step that eye surgeons were not comfortable in
performing;
c. Process needs – for example linotype made it easy to produce newspapers
quickly and advertising allowed news to be distributed practically free of charge;
d. Industry and market changes - Drucker attributed the success of brokerage
firm Donaldson, Lufkin & Jenrette to its founders’ recognizing that the market
for institutional investors would predominate in future;
3
“Upstarts are Crafting Components of Change in Consumer Electronics”, Evan Ramstad and Phred Dvorak, Asian
Wall Street Journal, December 16, 2003.
4
“The Future of Competition – Co-Creating Unique Value with Customers”, C. K. Prahalad & Venkatram
Ramaswamy, Harvard Business School Press, 2004.
5
“The Discipline of Innovation”, Peter F. Drucker, Harvard Business Review, 2000.
An Interface between Entrepreneurship, Creativity and Innovation
- 15 -
e. Demographic changes, such as when the Japanese were quick to recognize the
baby bust and education explosion around the 1970s and used the change to
move strongly ahead into robotics;
f. Changes in perception, which could dramatically bring about innovations as
with the Americans’ obsession with health and keeping fit. Their obsession had
launched magazines, health foods and exercise classes;
g. New knowledge that could require long lead times and convergence of other
kinds of technologies, such as an operational digital computer, which did not
materialize until 1946 despite knowledge about it being available by 1918.
It is noted that a combination of these areas could account for the successful and
highly profitable innovations for companies like Sony. Sony had introduced many bold
new products such as the Sony Walkman that encouraged the growth of the MTV and
innovation, development invention of the compact-disc player; the Sony Play Station,
which brought the company early leadership in the new high-end computer game business;
the Sony Everquest, which takes the lead in the on-line computer games sector, selling
low–margin hardware as a platform for high-margin software.
6
We see the interplay of exploiting the incongruities and process needs of personal
stereo, which was once considered bizarre, into a portable music device; industry and
market changes in the high-end video game entertainment industry; and new knowledge in
electronics had allowed Sony to be the only company in the world offering a broad gamut
of consumer electronics. In other words, the interplay of entrepreneurship, creativity and
innovation to allow Sony to not only create new and innovative products but also to set the
standards in dozens of product lines.
MALAYSIAN CASE STUDIES
Based on the seven key areas for innovation opportunities pointed by Drucker, we
are proud to note that Malaysia also has some good examples of companies, which have
demonstrated the same interplay of entrepreneurship, creativity and innovation. For
today’s presentation, we will highlight two cases:
a. Royal Selangor International Sdn. Bhd., “Royal Selangor” the world –
renowned producer of pewterware and high-end giftware, including jewellery;
b. AirAsia Sdn Bhd, Asia’s first low-fare no-frills airline to introduce “ticketless”
traveling.
Royal Selangor International Sdn. Bhd.
Royal Selangor
7
, was founded in 1885. Since then, the company has continuously
introduced new innovations in design and product items in line with industry and market
changes, process needs, and the development of new knowledge. Royal Selangor began
crafting mainly incense burners and candle holders for the Oriental market during the 18
th
century before expanding their selection to tankards, ashtrays and tea services for British
colonials. Since the 1970s, Royal Selangor has diversified into the design, manufacture
6
“Sony Needs Innovation More Than Efficiency”, Skarzynski & Switzer, Asian Wall Street Journal, November 26,
2003.
7
All information obtained from Royal Selangor International Sdn. Bhd.’s website – www.royalselangor.com.
Creative Entrepreneurship in Asia
- 16 -
and marketing of precious jewellery and 925 hallmarked sterling silver lines of business
which are still in operation today.
Creativity and innovation in marketing is another strength of the Royal Selangor,
which had introduced on-line shopping since 1996 – a time when many businesses in
Malaysia were only beginning to learn about the worldwide web and e-mail. As an
indication of the level of entrepreneurship demonstrated by Royal Selangor in its
marketing strategy, only 70 FMM member companies had e-mail facilities in 1997 when
FMM launched its website, FMM Net. These 70 companies represented less than 4% of
FMM’s total membership.
The innovative strength of Royal Selangor lies in the continual introduction of new
designs in anticipation of market demands as demonstrated through the company’s various
collections – from working with the Victoria and Albert Museum of London in 1996 to
create a tableware range inspired by 17
th
and 18
th
century pieces; to the launch of the Lord
of The Rings collection to cater to the demands of fans of the epic movie trilogy.
Creativity and innovation coupled with quality and style are critical to the company
because the products that they are dealing with have very short life cycles and the designs
are easily copied by its competitors, even though the reproductions are not of the same
high quality of craftsmanship or materials. In addition, the products are essentially luxury
items, regarded as decorative than functional in many cases.
The experience and knowledge gained from working with pewter is expanded
through diversification into jewellery and sterling silver items. Royal Selangor’s
acquisition of its silverware branch had included intellectual assets comprising an archive
of over 35,000 drawings, patterns and moulds, and a long-established and prestigious
brandname.
Royal Selangor is clearly a knowledge-driven company, where its entrepreneurial
founder and successors have deeply entrenched innovation and quality craftsmanship in
their operations together with the ability to accurately discern market needs and public
perception. The company, though established in the 18
th
century, has succeeded in
remaining relevant and retaining its standing as a market leader in this particular niche
through constant innovation and lateral expansion of its core competency and adjacent
8
strategies into jewellery making and silverware.
Airasia Sdn Bhd
AirAsia Sdn. Bhd.
9
, “AirAsia” established in 2001, could be considered as one of
the dynamic new upstarts, which could compete with long established operators – even
moving ahead in some areas especially in terms of innovative use of technologies. AirAsia
was purchased for RM1 or US$0.26 together with a US$36 million debt from the original
owners. Today, the airline is reportedly operating at a profit, with margins of 15% on the
US$36 million in revenue, generated within the first five months of 2004.
AirAsia provides a simple “no frills” service at fares that are generally significantly
lower than the traditional full-service airlines. As a comparison, AirAsia charges US$9 for
a flight from Kuala Lumpur to Penang while main line operators’ charge US$45.
Modeled after successful operations of the United States’ Southwest Airlines and
Dublin-based Ryanair, the entrepreneurship of AirAsia lies in its bold venture to take on
an ailing operation in a highly competitive and capital-intensive environment and turning
it around in about two years. AirAsia’s entrepreneurship also demonstrates the capability
8
“Beyond the Core: Expand Your Market Without Abandoning Your Roots”, Chris Zook, Harvard Business Review.
9
Information obtained from AirAsia Sdn. Bhd.’s website – www.airasia.com.
An Interface between Entrepreneurship, Creativity and Innovation
- 17 -
to take the lead [and risks] to introduce “no frills” service to the Asian market and plying
routes that the main airline operators were not covering and/or had perceived as not viable.
AirAsia’s innovative entrepreneurship also extends to its use of modern
technologies to manage operations and to be directly accessible by its customers. AirAsia,
with its on-line booking and payment facilities, is Asia’s first airline to record over RM130
million sales over the Internet alone. It is also the first airline in Malaysia to allow
customers to pay for their telephone bookings using credit cards or cash at the designated
banks. The ticketless service also lets customers bypass the hassle of collecting tickets.
In order to cater to the growing number of destinations covered, AirAsia is the first
Asian airline to have a multilingual website with seven languages and an Internet-based
real-time holiday package program – GO Holiday. In August 2003, AirAsia scored another
first by being the first airline in the world to introduce Short Messaging Service (SMS) to
customers to book seats, check flight schedules or obtain the latest updates on its
promotions through their mobile phones. This innovative facility is clearly driven by the
recognition of the process needs and market changes – centering on the observation that
the ubiquitous handphone is an extension of nearly every individual, even among
schoolchildren.
AirAsia has also extended its innovative information technology practice to its
agents, who have access to an Internet-based real time inventory booking engine.
AirAsia’s agents make payment via a virtual AirAsia credit card. The convenience of
booking and payment is further strengthened by the high frequency and wide coverage of
flight service. The airline has a quick turnaround time of 25 minutes, which is said to be
the fastest in the region. AirAsia is thus able to offer more flights to more areas, especially
to the lesser plied routes.
AirAsia involves local celebrities in its advertising to achieve high impact among its
target segment, the younger set of customers. This strategy could also be attributed to the
firm’s recognition of market and demographic changes in air travel in Asia, where
traveling among the younger generation and budget travels are becoming more popular.
KEY POINTS TO NOTE FROM MALAYSIAN EXPERIENCE
Having noted the above cases of Malaysian companies that have displayed
entrepreneurship, creativity and innovation in their operations, it remains for us to point
out a few pertinent key success factors:
a. These companies are considered pioneers in their respective fields of business.
However, these companies have not been complacent and demonstrate
professional will in leadership. Professional will
10
refer to the will to achieve the
following:
• Creating superb results
• Demonstrating unwavering resolve for the best long term results
• Setting and keeping standards for enduring great companies
• Looking in the mirror to apportion responsibility
10
“Putting People First & Winning the War for Talent”, Manny Lopez, Amrop Hever Taiwan at BusinessWeek – DNM
Strategies Event, 2002.
Creative Entrepreneurship in Asia
- 18 -
b. These companies are also prepared to invest in new technologies and skills,
expand their skill sets and competencies, innovate, and to design better, and
wider choices for their customers;
c. These companies are strong brand owners in direct and close contact with their
customers. The leadership instills the culture and discipline for strategy
execution, including hands-on management
11
; and
d. These entrepreneurs have capitalized on their core competency and prior
network skills and strengths their new ventures. They employ a more dynamic
management approach that constantly reinvents itself.
Taking cognizance of the above, we could conclude that the interplay of
entrepreneurship, creativity and innovation must be supported by leadership having the
following qualities:
a. Having the professional will to succeed;
b. Being prepared to continuously invest in new technologies;
c. Learning, unlearning and relearning skills sets to enhance competency; and
d. Direct contact with the market, transacting business under their own brandname
and through their own showrooms/booking facilities.
CHANGE IN ENTREPRENEURIAL DEVELOPMENT IN MALAYSIA
Supported by constant innovation and creativity these companies have today
become major benchmarks for entrepreneurial development. Royal Selangor’s expertise in
marketing and brand name development is constantly tapped upon through their
participation in various Government committees. Recently, the company was appointed
the chairperson of Malaysia’s Third Industrial Master Plan’s Technical Resource Group on
Marketing and Branding. AirAsia is also participating in the formulation of the same plan
on the logistics front.
More importantly, these companies signify the increasing change in entrepreneurial
development from being original equipment producers for large multinationals to
becoming brand name owners. Spurred on by the “Malaysia Boleh” spirit, which has now
been reinforced by our new Prime Minister’s clarion call to achieve “Excellence, Glory
and Distinction”, there are already several Malaysian companies which are also
developing the same brand of innovative entrepreneurship, particularly in the
manufacturing sector.
The manufacturing sector in Malaysia will develop faster in these areas because the
sector is very open and has been continually exposed to intense competition from new
upstarts in low cost emerging countries and concurrently being pushed by their customers
to carry out R&D. Brand ownership and brand consciousness is also strengthening as we
see more homegrown brands being promoted – such as Supermax in the rubber gloves
industry; Bonia in the leather goods sector; Silverstone, which is already well-established
in the upmarket range of tyres; Globetronics in the electronics sector; and so forth. Clearly,
Malaysia will have many more innovative entrepreneurs to show in the future.
11
“The Strategy Trap: Emphasizing Formulation, Ignoring Execution”, Neoh K. C., CEO – Asia Pacific, Atos Origin
at DNM-Business Week Strategies Event “The 12
th
Asia Leadership Forum”, December 4, 2003.
- 19 -
IMPLEMENTING CREATIVE ENTREPRENEURSHIP
IN CORPORATIONS
Prof. Tan Wee Liang
Singapore Management University
Republic of Singapore
EXECUTIVE SUMMARY
Creative entrepreneurship within organizations requires various factors to be in
place, chief of which is the organizational setting. If there is to be creative
entrepreneurship in corporations with middle managers and others striving to be
innovative and creative, there must be the right organizational culture, communications
and reward systems.
INTRODUCTION
Many market leaders in various industries today have come to the realization that
in the current turbulent environment, success is not only derived through productivity and
efficiency as understood in the traditional sense. In contrast, they require creative
entrepreneurship. Creative entrepreneurship efforts in corporations have been called
organizational entrepreneurship, corporate entrepreneurship and intrapreneurship. We
shall refer to it as intrapreneurship. Intrapreneurship has its biggest impact on long-term
organizational performance, specifically adaptiveness and survival (Gibson et al, 1985).
Miller and Friesen (1982) find that both market turbulence and competitive intensity
cause firms to be more entrepreneurial than their counterparts which face more benign
environments. As market and technological turbulence increase, new market
opportunities accumulate, giving rise to increases in intrapreneurship, at least in those
firms with climate that fosters intrapreneurial activity.
The distinction between entrepreneurial firms (large, medium or small) and firms
that have stagnated in their growth, is the element of creative entrepreneurship. In the
case of small and medium-sized enterprises (SMEs), when owner-managers of firms are
able to build entrepreneurial teams, infuse their organizations with the means and desire
to be entrepreneurial, and put in place systems that facilitate creative entrepreneurship, the
creative entrepreneurship initially embodied in the founder of the firm continues. Large
corporations are keen to continue to be entrepreneurial. Researchers in creative
entrepreneurship within organizations have been intrigued by the elements needed for
intrapreneurship to take place. The basic premise of such elements is simple: many hands
make light work. There are creative individuals in every organization whose energies
have not been harnessed towards adding value in the organization’s inventions,
innovations and processes. Intrapreneurship, if implemented by the entrepreneurial firm,
seeks to empower individuals within the corporation to function like entrepreneurs.
Instead of a firm of employees, the intention is to create a community of entrepreneurs
(Kao, 1997).
One does not need to go far to find examples of creative entrepreneurship in
organizations. The classic example is one multinational corporation known by its
acronym, 3M. Plenty of creativity in an informal working environment helps the “Post-It”
Creative Entrepreneurship in Asia
- 20 -
giant 3M to stand out in rigorous competition. “Anything that sticks or scraps, 3M
makes,” goes the saying. 3M started off making sandpaper and sticky tape, but because
of its relentless innovativeness, it developed Post-it Notes, medical laser imager, Fibrlok
fiber optics splices, Scotch-Brite Never-Rust-Wool soap pads, and even hydrofluoraether.
The company stipulates that 30% of each year’s sales must come from products less than
four years old (3M, 2004a). McKnight’s Principles form the basis for the corporate
culture that encourages employee initiative, innovation and provides secure employment.
He said:
"As our business grows, it becomes increasingly necessary to delegate
responsibility and to encourage men and women to exercise their initiative.
This requires considerable tolerance. Those men and women, to whom we
delegate authority and responsibility, if they are good people, are going to
want to do their jobs in their own way.
"Mistakes will be made. But if a person is essentially right, the mistakes he
or she makes are not as serious in the long run as the mistakes management
will make if it undertakes to tell those in authority exactly how they must do
their jobs.
"Management that is destructively critical when mistakes are made kills
initiative. And it's essential that we have many people with initiative if we
are to continue to grow."
(McKnight Principles enunciated in 1948. Source: 3M (2004b)
One of 3M’s corporate goals is the promotion of entrepreneurship and insistence
upon freedom in the workplace to pursue innovative ideas. Its management believes that
it is essential to provide an organizational structure and work climate which respects the
dignity and worth of individuals, encourages initiative, challenges individual capacity,
provides equal opportunity for development, and equitably rewards effort and
contribution.
WHY INTRAPRENEURSHIP?
There are various reasons why companies adopt intrapreneurship. Firstly, there is a
rapidly growing number of new and sophisticated competitors (Miller and Friesen, 1982).
The specific job of entrepreneurship in the business enterprise is to make today’s business
capable of creating the future, and of re-inventing itself into a different business.
Organizational entrepreneurship will enable today’s already existing – and especially
today’s already successful – businesses to remain in existence and to remain successful in
the future. Firms need to continue to innovate and change in order to avoid stagnation
(Miller and Friesen, 1982). Secondly, it would prevent an exodus of some of the best and
brightest people who are leaving corporations to become entrepreneurs. An
intrapreneurial climate helps to reduce the turnover of innovative-minded employees
disenchanted with bureaucratic organizations (Kanter, 1983; Pinchot, 1985). Lastly, a
conducive environment allows the corporation to tap the innovative talents of its
employees and managers (Kuratko and Hodgetts, 2000).
In addition to the preceding reasons, there are three more immediate benefits from
intrapreneurship. Firstly, relationships with customers will be improved. Since
customers are one of the most important sources of information, more attention is paid to
their needs, concerns and ideas. The outcome of this is more satisfied customers and
Implementing Creative Entrepreneurship In Corporations
- 21 -
repeated patronage. Secondly, the organization will be a better place in which to work. It
will be more fun, more stimulating and more rewarding. This will help improve morale
and the relationships between organizational members. Although the products and
services of the organization are the primary focus of intrapreneurship, employees will also
begin to pay more attention to the process of their work. Thirdly, organizational
entrepreneurship can also help improve the relationship with outsiders, which will lead to
a more socially responsible organization (Cornwall and Perlman, 1990).
At this juncture it must be highlighted that what this paper covers with respect to
organizations could be extended to economies. Like an organization that needs to
encourage and reward entrepreneurship, countries may need to do likewise to engender
mindset changes among their populations. In the same way that corporations have to put
into place available finance for corporate ventures, countries have to provide
infrastructure and encourage a vibrant venture capital industry.
IMPLEMENTING INTRAPRENEURSHIP
At What Level
Assuming that the powers that be, the leaders of the firm are keen to implement
intrapreneurship, there is a need to consider the levels within an organization that will be
empowered to be entrepreneurs. If intrapreneurship is to be seen at all levels of the
corporation, there are implications for approach to intrapreneurship has implications on
the systems that need to be in place for empowering innovation at all levels. Pinchot
(1997b) suggests that organizations must keep their systems open to all levels of
innovation all the time: continual improvement, process breakthroughs, line extensions,
new products and services, new ways of working together, new internal services and new
organizational patterns. These systems are needed because changes in innovation is more
than just ideas; in fact, the bottleneck for innovation is generally in the implementation
(Pinchot, 1997a). The changes in organization systems will create the conditions for
intrapreneurship.
Creating the Conditions for Intrapreneurship
Fuller (1995) identified the typical process of empowered innovation as
encompassing the following steps:
1. Generation of a new idea
2. Discussion with a facilitator
3. Questions asked by the facilitator
4. Submission of an idea proposal to the facilitator
5. Review and comment by a group of consultants
6. Review of consultants’ contributions
7. Development of implementation plan
8. Search for sponsorship
The innovative process can only take place smoothly if it is well supported by
conducive organizational climate that encourages intrapreneurship. Research has shown
that there are five groups of conditions that lead to the internal stakeholders in an
organization - managers and employees – to acting as corporate entrepreneurs. Hornsby,
Kuratko and Zahra (2002) found that such an environment would:
Creative Entrepreneurship in Asia
- 22 -
• Provide management support
• Allow work discretion
• Institutionalize rewards
• Make time available for intrapreneurial pursuits
• Principles to encourage activities outside the organization boundaries and thus
may be risky.
We elaborate on each of these conditions in the subsequent sections.
Management Support
Providing management support may entail the corporation making available
funding resources or hiring the right people and establishing cross-functional teams that
cut across departments in their organizational structures. An instance where
intrapreneurship took place can be seen in the example of Trek 2000 [Vignette 1]. In this
instance Henn Tan knew he needed new skills for an innovation. He hired the key team
members and gave them the required resources. He became the champion and mentor. It
was necessary for resources to be drawn from the various parts of the organization for the
team.
Allowing Work Discretion
This has been lauded by the popular accounts of the practice in companies like 3M
and Hewlett Packard. Not many companies expressly provide for discretionary but the
culture is unwritten within each firm. This corporate culture would have norms that favor
innovation and intrapreneurship, and an understanding that employees have the
opportunity and decision-making on the part of employees.
Rewards
If one is expecting all the employees to do more than their job descriptions, it is
therefore not surprising that there must be reward systems to address their efforts.
Tangible rewards in the form of bonuses, incentives or share options are important but
need to be augmented with intangible motivation. Intangible motivation could be by way
of recognition within the organization. Recognition could project these individuals as role
models for the others and helps to build an internal organization culture that is pro-
enterprise and pro-new ventures. The critical element here is for the organization to be
consistent in their words and actions. A word of caution is needed, the rewards and
recognition must not be perceived as a system to get them to work harder; if not, the
intended objective would thus fail.
Vignette 1: Trek 2000
Henn Tan started his business as a distributor of electronic components and
customized systems, serving the supply chains of large multinational corporations such as
Sanyo, Sony and the like in the South-east Asian region. His customers were the
multinational corporations, their subsidiaries and subcontractors.
Implementing Creative Entrepreneurship In Corporations
- 23 -
The creative entrepreneurship present at the start-up stage was his acquisition of an
existing business as his vehicle so that he could project the image that the firm had been
around for a number of years and was not a new company. He left employment in a
Japanese multinational where he had learnt the ropes about the electronics industry and
their supply chains, and acquired Trek Technology. He also acquired another company,
Shing Components which enabled him to tap into Shing’s network of suppliers and
regular clients. He was successful in building Trek Technology into a trading company
that was acknowledged as a regional distributor of electronic components. Such
impressive track record prompted Sanyo to make an offer to buy a controlling stake in his
company.
Henn Tan would not be an example of continued creative entrepreneurship had he
been content to stop and be satisfied with a successful distribution business. Instead he
built an entrepreneurial engineering department. He did not select individuals based on
professional or academic qualifications alone. He built a team that was as excited as he
about building a technology-based firm. The team he built was highly motivated. In
1999 he recruited a young polytechnic graduate who became the technological father of
the Trek thumb drive - the flash memory portable hard disk.
Although Henn Tan has not called it as intrapreneurship, that is what he has done.
He built and shared his vision of being more than a components supplier with his
engineering team. It has sought to provide complete solutions for the users of their
components. Their early projects included the development of the decoder cards and
subsystems for the video compact disc (VCD) players. The engineering department
sought projects in which they could imbed software or systems onto generic components
to deliver added value for the customers. For this to happen the team members must
believe that Henn had faith in them, know that they would be suitably rewarded, provided
with the necessary resources, and empowered to carry out the necessary to achieve the
goals.
The thumb drive project was driven by Henn’s project manager. He and the team
used the flash memory invented by Masouka at Toshiba with the Intel Universal Service
Bus (USB) together with their custom-designed software to provide Trek Technology
with the product that made its listing on the secondary board SESDAQ exciting. With the
thumb drive, Trek 2000, the listed vehicle that consolidated Trek Technology and Shing
Components, became an original equipment manufacturer. The thumb drive is used by
IBM and labelled as its mobile storage device, Memory Key, and by Sonnet as its range
of portable flash drives-Piccolo.
Prepared by Oscar Hauptman and Tan Wee Liang
Boundary Spanning Activities
The organization must be prepared to extend their scope beyond their core
business. The second vignette “Popular E-Learning” is an example of this. Popular’s core
business was book publication, distribution and retail. The CEO of the company decided
it was time to consider e-learning as an area for business development. Not having any
competences in house, the CEO recruited the expertise required and assembled a team
around the project.
Related to the extension of the business beyond boundaries, is the need for the firm
to continually be on the look-out for new technologies. In order for this extension to
happen, there needs to be technology scanning activity on the part of the firms. The firm
needs to have teams and involve others to be on the look out for technology that is
Creative Entrepreneurship in Asia
- 24 -
relevant to their operations and even technology that is unrelated to their existing
businesses.
Vignette 2: Popular E-Learning
Popular Holdings is a second-generation family business in educational materials.
It began as a chain of book stores spanning Singapore, Malaysia and Hong Kong. In the
late 1990s its current CEO Chou decided to embark upon e-learning as one of the key
pillars of the company's strategy for the 21st century. As the skills and know-how was not
present in his company, he searched for suitable individuals whom he could recruit to
spearhead this new venture.
Chou recruited by Hee, who had worked for an educational software company and
had working experience with the Ministry of Education in Singapore. Hee was familiar
with the e-learning issues and challenges confronting educational institutions. Thus it was
not difficult for him to develop the strategic roadmap for the company and to assemble the
needed team members.
Popular’s e-learning strategy is not built on Hee’s team alone. It is also built upon
the capabilities of the firm in its existing team of educationists and a production team
being able to develop material for the Singapore, Malaysia, Hong Kong and Canadian
markets. It also relied upon the software capability within the firm which that had been
responsible for primary school CD-ROM based material. Hee also built the strategy
around distribution channels that Popular has in its retail chain and logistics arrangements.
Bringing in additional experts, Popular is poised to the leader in e-learning for the
preschool and primary school levels.
This case highlights the importance of attracting and using the right professionals
for creative entrepreneurship in firms. Had Chou been afraid to lose control over his
empire, and have insisted to persist in an area where he did not have the requisite
knowledge or expertise, Popular would not be able to excel. Chou was not afraid to recruit
creative people, to put in place and to allow them to lead. Firms desiring to be creative
must be willing to facilitate the creative process in which one key is to bring in the right
people.
ORGANIZATIONAL ENVIRONMENT & INTRAPRENEURSHIP
In the previous sections, we have outlined some of the research and conditions
suggested. The prescriptive literature advocates that the creation of the organizational
climate is needed to sustain intrapreneurship. It is hypothesized that in so doing, the
individuals in the firms would give their best ideas or efforts to the firm and hence, the
firm would benefit from intrapreneurship. If so, the presence of these factors would have
an impact on the managers’ attitude towards intrapreneurship and would have prompted
action in that regard.
To explore this question, the author conducted a survey-based study conducted on
middle managers in Singapore. The instrument comprised twenty-seven questions
developed from the literature such as Pinchot (1985), and Cornwall and Perlman (1990)
on the organizational climate (culture and practices), measures of the individual’s
attitudes and behaviours, and the characteristics of the organization. In addition to the
statements on organizational climate, the respondents responded to a statement each on
the extent to which innovativeness contributed to the growth and profit of their
organizations, whether they had sufficient knowledge and skill, and whether they would
Implementing Creative Entrepreneurship In Corporations
- 25 -
like to be intrapreneurs. The questions were deliberately kept to the minimum to fit a two-
page survey to encourage the return of completed questionnaires. A seven-point Likert-
like scale measured both the items and the dependent variables.
A sampling frame was developed to select the top 600 companies with the largest
annual sales volume above S$60million from the Singapore 1000 Directory representing
the service, electronics, manufacturing and construction industries. The companies were
classified into four broad categories. The service industry included the financial
institutions and hotels. The oil and chemical sectors were included in the manufacturing
industry. Six hundred companies were telephoned to identify middle managers who
would agree to participate. Middle management in the areas of Engineering, Human
Resource, Marketing, Production, Public Relation, and Research & Development (R&D),
were chosen because of their involvement in both strategic and tactical decisions.
Resulting from the phone calls we sent 434 questionnaires (about 72 percent of the
prospects) by fax. A total of 106 completed questionnaires were received, which
translated to a response rate of 24.4 percent. Four questionnaires were rejected because
they had missing, incomplete or invalid responses. The responses represented the targeted
industries satisfactorily.
It was found that the organizational climate factors appear to have a direct effect
on intention of being intrapreneurs. Organizational culture, organizational flexibility and
innovativeness appear to influence intention. Detailed findings of the regression analysis
are shown in Table 1 below. The finding that we confine ourselves to discussing is
regression 3 [R3].
This study provided empirical evidence that conducive organizational culture and
flexible organizational structure had significant impact on intention of middle managers to
become intrapreneurs. Corporations should thus be encouraged to continue work
developing such environments to encourage greater intrapreneurial efforts. They should
inculcate an intrapreneurial organization culture that allows inventor/innovators and their
teams to continue with the project. Continuity harnesses commitment to the project and
avoids information loss that occurs when large corporations stick to the usual practice of
transferring projects to different teams. Organizations should have upward and horizontal
open communication system which allows feedback on new ideas to occur
quickly. Employees should be empowered without being constrained in the options
available for their needed resources, approvals or intended markets. They should foster a
tolerance for mistakes, encourage “trying” or risk-taking, experimentation without fear of
failure. An intrapreneurial organization culture should not insist on conformity as any
pressure to conform would inhibit the creative process.
Where organizational flexibility is concerned they should allow organizational
flexibility enabling employees to cross the boundaries of existing structure of
organization, avoiding the jealous tendency to turfiness blocks innovation. Companies
should also employees promote innovation and highlight its contribution to growth of the
companies. Employees who perceive that their innovativeness contributes to the growth
and profit of the corporation are more likely to act innovatively. Recognition of the
contribution and publicity about innovation and intrapreneurship would thus be needed.
Together with intangible recognition, companies should also provide for tangible rewards
systems. Clear criteria should be articulated for risk-taking and innovation. This will
promote risk taking and employees will get the assurance that their companies take into
consideration their innovative spirit when assessing them.
Creative Entrepreneurship in Asia
- 26 -
CONCLUSION
There is a growing realization that creative entrepreneurship is needed in corporations. A
growing enterprise needs to sustain its competitiveness. An established business can ill
afford not to continue to find new capabilities, strengths, products and services to build its
competitive advantage. In this paper, we have examined some of the factors in a
corporation’s internal environment that may be needed.
REFERENCES
3M (2004a), McKnight Principles,
<http://www.3m.com/about3M/history/mcknight.jhtml>, (Accessed 16 May 2004)
3M (2004b), A Century of Innovation, < http://www.3m.com/about3m/century>,
(Accessed 14 May 2004).
Cornwall, Jeffery R., and Perlman, Baron (1990), Organizational Entrepreneurship,
Homewood, IL: Boston-Irvin.
Fuller, Brad (1995), A Process for Intrapreneurship,
<www.bradfuller.com/Publications/innovate.html>, (Accessed 16 May 2004).
Gibson, J. L., Ivancevich, J. M., and Donnelly, Jr., J. H. (1985), Organizations (5
th
ed.),
Plano, TX: Business Publications
Kanter, Rosabeth Moss (1983), The Change Masters, London: Routledge.
Kao, Raymond W. Y. (1997), An Entrepreneurial Approach to Corporate Management,
New York: Prentice Hall.
Kuratko, Donald F., and Hodgetts, Richard M. (2000), Entrepreneurship A Contemporary
Approach, Thomson Learning.
Miller, Danny, and Friesen, Peter H. (1982), “Innovation in Conservative and
Entrepreneurial Firms: Two Models of Strategic Momentum”, Strategic
Management Journal, 3.
Pinchot, G. (1985), Intrapreneuring, Harper & Row: New York.
Pinchot III, G. (1997a), Innovation,
<http://www.pinchot.com/pinweb/instruments/climsurv.html>, (Accessed 16 May
2004).
Pinchot III, G. (1997b), What Senior Managers Can Do,
<http://www.pinchot.com/senior.htm>, (Accessed 16 May 2004).
Zahra, S., Hornsby, J., & Kuratko, D., (2002). “Middle Managers' Perceptions of the
Internal Environment for Corporate Entrepreneurship: Assessing a Measurement
Scale.” Journal of Business Venturing, 17(3): 253-273.
I
m
p
l
e
m
e
n
t
i
n
g
C
r
e
a
t
i
v
e
E
n
t
r
e
p
r
e
n
e
u
r
s
h
i
p
I
n
C
o
r
p
o
r
a
t
i
o
n
s
-
2
7
-
R6
Action
**0.363
-0.126
0.138
0.107
0.032
*0.217
0.053
0.137
0.44608
***9.36178
102
R5
Intention
*.228
-0.120
*0.207
*0.240
-0.042
**0.254
**0.227
0.47189
***11.99914
102
R4
Action
***0.452
-0.153
0.181
0.202
0.031
0.36112
***10.85261
102
R3
Intention
*0.302
-0.156
*0.230
***0.354
-0.026
0.33874
***9.83545
102
R2
Feasibility
0.114
-0.177
0.064
**0.363
0.070
0.14737
**3.31864
102
R1
Desirability
0.191
0.018
0.034
0.125
-0.002
0.09106
1.92353
102
Table 1: Multivariate Regression Analysis on Desirability, Feasibility, Intention, and Action
Culture
Practices
Flexibility
Perception
Sponsorship
Desirability
Feasibility
Intention
R-square
F
N
* indicates probability level of 0.05 ** indicates probability level of 0.01 *** indicates probability level of 0.001
- 28 -
PRODUCT INNOVATION AND BUSINESS MODEL:
THE CASE OF OKWAP PHONE
Jackson Chang
Inventec Appliances Corp.
Republic of China
IDEA AND INNOVATION
People sometimes get confused about the difference between ‘idea’ and ‘innovation’
even though a clear definition of ‘innovation’ can be easily found in many management
books. Normally, in our understanding, we would recognize that ‘idea’ is a part of
‘innovation’. Innovation is a process that consists of three major portions - an exciting idea,
the implementation method of the idea, and the approach that brings implementation to the
market. Idea is just the start (or initial step) of innovation. Idea is like the seed of a flower,
which needs to be incubated to become a real innovation. A business cannot be successful
with only great ideas, but without the implementation and marketing steps.
Furthermore, for any specific great idea, the product innovation process (which
implements the idea) and the business model (which brings implementation to the market)
might also be very different. It is important to know that one cannot put all ideas into one
format of innovation process and business model; and hope that all the ideas will always
be successfully implemented and marketed. Therefore, it is rational to say that a “good
idea” needs an “effective product innovation process” to implement and an “effective
business model” to market the implementation result. Product innovation process and
business model which are effective to a specific idea, may not be as effective for other
ideas.
Under the constantly changing environment and competition, the company of today
should try to create value for users and customers through continuous innovation as a way
of survival. In this paper, we describe the manner in which Inventec Appliances
Corporation has sought to apply this in its innovations to ensure a fit between its ideas, the
product innovation process and an effective business model.
INVENTEC APPLIANCES CORPORATION’S (IAC) GLOBAL OPERATIONS
Inventec Appliances Corporation (IAC) has operations in seven cities globally, with
a total of six main facilities in Taipei, Shanghai, Nanjing and Dallas of the U.S. There are
more than 1,200 engineers among its 7,000 employees. Main resources are located in
Greater China (China and Taiwan). IAC, with its headquarters in Taiwan, is one of the
major supplier to Original Equipment Manufacturers (OEMs) and Original Design
Manufacturers (ODMs) of the smart handheld and network appliance product ranges.
IAC is also developing and marketing OKWAP brand cell phone in Greater China, besides
its global OEM and ODM business.
Consolidated Revenue and Target
The consolidated revenue of IAC (including Taipei, Shanghai, Nanjing and Dallas)
was US$960 million in year 2003, more than a 100% growth in revenue over 2002’s
earnings. IAC’s compound average yearly rate is 100% for the period from 2001 to 2004.
Product Innovation and Business Model: The Case of OKWAP Phone
- 29 -
It has set a revenue target US$1,600 million for 2004 (its revenue in 2001 was US$200
million). Based on its revenue in 2003, IAC is ranked number 43rd in the list of the Top
1000 companies in Taiwan manufacturing sector.
1
Dual Business Models
Traditionally, almost all Taiwanese companies in the manufacturing sector started
their business as original equipment manufacturers (OEMs) to build up their production
skill. Between the 1970s and 1990s, they thereafter moved on to using the original design
manufacturers (ODMs) business model with design capability for global or regional
brands. The OEM and ODM business style matched the resource characteristics in Taiwan:
- lower cost of labour, a harder working and more flexible workforce, and a domestic
market constraint by a population of 23 millions people.
Many companies have successfully expanded their business from their original
small operations through connections with major OEM and ODM customers all over the
world. IAC also has the characteristic of Taiwanese companies – where majority of the
business is concentrated on some key ODM customers. IAC has improved the ODM
business model, developing it into an Integrated ODM (IODM) business model by
integrating global of engineering and supply chain together to obtain better performance in
Time-To-Time (TTM) and Time-To-Volume (TTV) production. This IODM business
model has been proven to be very effective in meeting customers’ needs in the preceding
three years (2001, 2002 & 2003). To keep the company growing as well as to raise the
level of technology in IAC’s engineering, IAC operates (in parallel with its IODM
business model) a second business model called “Community Own Brand Marketing”
(COBM) relies on COBM which adopts cell-phone products as its main source of sales
revenue. OKWAP is IAC’s own brand for its COBM cell-phone business.
As of today, almost 80% of IAC’s revenue comes from the IODM business model.
This IODM business model has the following characteristics – it is easier to ramp up
business scale, very sensitive to efficiency and cost, and is highly focused on the
customer’s needs. The COBM business model generates the remaining 20% of IAC’s
revenue. This type of business has potentially higher margins but is coupled with higher
risk as well. However, getting feedback by direct interface with end-users in COBM has
proved to be a very good training experience for all employees and therefore, a very
beneficial activity for the whole organization. In general, employees in the organization,
have become more proactive in finding ways to solve problems having receive more
knowledge directly from the field.
Companies with two business models naturally have more complicated operations
compared to companies with only one business model. Keeping the operations of two
business models in balance inevitably poses some levels of difficulties, especially in the
area of resource allocation and prioritization of strategy. Nevertheless, the experiences and
knowledge learnt from the market through the COBM business model could be a very big
advantage over the other pure ODM competitors in doing business with IODM customers.
Meanwhile, the operational efficiency achieved by IODM customers could be a very good
benefit to COBM business as well.
1
Note: A survey conducted by Common Wealth Magazine 2003.
Creative Entrepreneurship in Asia
- 30 -
Product Ranges and Smart Phone
IAC’s product range cover smart handheld and network appliances. Taking a bird’s
eye view of the electronic industry map, under the technology umbrella of the Internet, the
entire industry can be partitioned into three major blocks namely the computer-related
industry, communication-related industry and networking-related industry.
Computer-related industry and communication-related industry can be seen as being on
either end of the map with the networking-related industry sitting between them. There is
another dimension that we call the ‘consumer’ – which is not physically independent of the
three industries but overlapping them. Since the influence from consumers on electronic
products is more visible than ever before, this consumer can be depicted at the bottom of
the industry map.
Smart handheld and network appliances are converging products emerging from
concept to real application in past years. They are products that are the convergence of the
three domains of computing, communications and networking. They adopt many forms of
technologies from industries. For example, data processing capability comes from the
computer industry, wireless and wired communication capability comes from the
communications industry, and internet or network connection capability comes from the
network industry. One common characteristic of these converging products is that they are
all equipped with a connection capability that allows the exchange information with the
other devices irregardless of computer, communication or network technology. IAC views
this kind of products, including smart handheld and network appliances, as ‘access
terminals’– terminals capable of accessing and exchanging information with other devices.
Smart handheld is smaller in form and consumes less power for its mobility requirement.
IAC has made a reasonable strategic decision to build up the COBM business
relying on the product category of ‘smart phone’ in the first beginning. Selection of this
category is mainly concerned with preventing product and technology conflicts with its
key IODM customers all of whom have very strong positions in either PDA, or music
player, or network products areas. Selection of added value to this category is also a very
natural consequence of IAC’s strengths in software and Chinese cultural-based
applications. The target market of the COBM business model lies in Greater China
where there is increasing consumer demand for smart phones and other handheld devices.
CONFIGURATION OF IDEA, INNOVATION PROCESS AND BUSINESS MODEL
For any organization, the availability of a good innovation process to generate,
collect and filter ideas, and incubate the ideas into a product marketable to users is
critical for business growth. The operational efficiency of the process would play a key
role in determining the performance of a business or an organization. An organization may
adopt different approaches or multiple incentives to stimulate the generation of ideas from
inside or outside the organization. Ideas should also be collected and filtered based on the
purpose and target of the project, before being fed into the innovation process.
Normally, there are several stages in the innovation process. The whole process is
divided into the Strategy and Planning Stage, the Execution Stage and the Deployment
Stage. In the Strategy and Planning Stage, strategic decisions on product direction, product
definition and project planning are the key activities after the collection and filtration of
ideas from inside or outside the organization. In the Execution Stage, commitment and
arrangement of resources to start design and implementation of the product are the main
activities, where internal verification and external validation are needed to ensure the
quality of the executed results. After the Execution Stage, the products have been
Product Innovation and Business Model: The Case of OKWAP Phone
- 31 -
developed. In the Deployment Stage, product release is used as preparation of mass
production in order to launch the product and start sales of the product in the market
thereafter. Sustaining activities are necessary in continuously and effectively enhancing
product popularity and lengthening the product life cycle in the market. In this stage,
services and inventory control need to be executed in parallel with the product life cycle.
A well-defined business model to link all resources and the necessary supports is
crucial to the success of a product promoted to the market. The business model in detail
should include not only the product innovation process, but also other supporting
processes. A business model may be strongly related to the style of the organization in
running a business. However, a suitable business model for a specific, especially
innovative, product may not exist in the organization before the product is developed.
Thus, it is very important for the organization to identify which is the occasion to use an
available business model or to build up another one which is not yet available to meet the
specific requirements of the new product. A traditional business model in the organization
may not guarantee success for all new products. Building and adopting a new business
model would most certainly increase the risk and resource commitment by the
organization, at least, in the beginning.
Considerations of Effective Product Innovation Process and Business Model
In the case of the OKWAP smart phone for IAC, the major strategic decision
outcome is to have a more complete product innovation process and a new business model
(COBM) to cope with the requirements in marketing this product in Greater China; in
contrast to the traditional product innovation process and business model (IODM) which
IAC has applied since 2000.
A well-defined business model should be equipped with details derived from a clear
vision of the environment and the market, plus a clear understanding of customers,
technology, alliances and suppliers. These details would cover management, operation and
integration of different processes inside or outside the company. It is more than the product
innovation process. An effective business model should be tightly, inseparably linked and
integrated with product innovation process, and position the product innovation process as
the core for resources arrangement.
The considerations in implementing an effective product innovation process and
business model for the OKWAP smart phone were raised since 2000. Certainly those
considerations were not completely set up from the beginning, but were gradually formed
and improved as IAC progressed in its development of OKWAP. Table 1 below shows
the considerations that IAC had to resolve in the development of its business model.
Table 1: Considerations in Development of IAC’s Business Model
Strategy Consideration
• Positioning:
What is IAC’s position in the industry?
What does the OKWAP smart phone mean to users?
• Entry segment:
How to enter into market and through which product?
Who are the target users?
• Competing edge:
What is the industry situation?
What is our competence?
Execution Consideration • Resources:
Creative Entrepreneurship in Asia
- 32 -
Where are IAC’s resources from?
What can these resources do?
• Process:
Is the current process sufficient for this product
innovation?
What are the other processes needed to support
product innovation?
• Integration:
How to integrate these resources seamlessly and
operate efficiently?
How to integrate external resources with internal
resources?
Deployment Consideration
• Marketing and promotion:
How to market and promote based on the
characteristics of these products?
• Community:
How to leverage and integrate more external resources
to obtain a positive effect from feedback gathered to
support promotion?
• Service:
Where and how to set up service shops and what are
the services users need?
• Sustaining:
How to enhance the product popularity and life cycle?
How to make a good ending of product in its
end-of-life?
How to manage and control the inventory issues in the
product life cycle and post end-of-life?
We discuss these considerations and how IAC approaches them in the following
sections.
STRATEGY
The Cell Phone is not Limited to the ‘Phone’ Itself
Nowadays, the cell phone has become a personal electronic product that people
carry every day. Sales volume of cell phones has been in excess of 400 million sets in
2000 and over 500 million in 2003. China has been the biggest market of cell phones, with
a yearly consumption of over 50 million sets. Taiwan, with population of mere 23 million,
has been the country with the highest density of cell phone subscribers in the world. The
demand for cell phone is contingent on the following factors – people’s life, industry’s
progress and society’s economy. However, the cell phone business only took off when the
GSM phone system was introduced, giving users the benefit of roaming everywhere and
freedom in choosing handsets which are independent of the SIM cards, through which
carriers would charge their service fees.
With such a huge business opportunity which gives the end users value mainly by
‘talking to each other’, plus other features, such as SMS and WAP, etc. IAC has a vision
that the cell phone should not only be limited to what it is at this moment but will be able
Product Innovation and Business Model: The Case of OKWAP Phone
- 33 -
to serve as a personal platform for the industry to continuously put more features in it. The
‘Smart Handheld’ is the vision IAC has for the cell phone. Thus, IAC has clearly defined
its product roadmap of the cell phone based on the concept of ‘making it smarter for users
to use’ and call the developed product ‘Smart Phone’ from this point of view.
Which Opportunity is More Feasible for Value Innovation?
As the business sales of cell phones is increasing, handset suppliers and carriers are
constantly thinking of potential opportunities to drive the business’s growth. In late 20
th
century and at the beginning of the 21
st
century, majority of the industry’s analysts were
expecting the deployment of 3G wireless technology to take the telecommunication
industry to another peak in the following years. There was huge amounts of investment
bidding for the bandwidth for 3G technology from carriers all over the world.
Unfortunately, that expectation has not been met for many years and the deployment of 3G
technology has been quite slow due to the lack of killer applications and some technical
problems with the handset. It is unattractive for end users to switch service from the
current 2.5G to 3G without convincing reasons.
On the other hand, high demand for cell phone has attracted IT companies and new
start-ups that compete in a market that sees the convergence of telecommunications, IT
and computer technology. The race is on to combine more functions of the cell phone with
computer and consumer products. Over time, rollouts of a bunch of devices with many
different form factors and features combining computing with communications were
available in the market. The common problems for those units were ? too large size, short
standby time, not well integrated features, not user friendly, among other problems. Finally,
debuts of converged devices faced the same problem of slow acceptances in the market
except for a few exceptions.
IAC considered that the added-value to end users under the transit stage of the
whole environment and industry should not be dependent on the technology driven
communication approach (3G) and the computer approach (converged device). There
should be a way to meet end user needs by integrating applications in addition to these
voice functions. These applications would be appreciated and be used very frequently by
end users. With the addition of these applications which have never been integrated in cell
phone, IAC viewed that it was the right way for building up the company’s reputation by
users’ recognition in this smart phone category. This approach is quite different from the
other two approaches mentioned above, which were carried out by many other suppliers.
OKWAP Smart Phone – Practice of Value Innovation
One of the major trends in the current electronic industry is its great reliance on
hardware evolution, from components to system, as main driving force of business growth.
This phenomenon is very obvious when we look at the development history of the
Personal Computer (PC) business which is the kernel of the IT industry. Certainly the
software system and applications of the PC also play critical roles in advancing the whole
industry to a higher level. However, the rollout speed of software is relatively slower as
compared to the newer versions of the Central Processing Unit (CPU). The evolution of
CPU speed, according to Moore’s Law, has been a key feature of all new PCs for many
years.
As time goes by, it is clearer that the clock speed of CPU is not so influential to the
whole PC industry nowadays compared with a few years previously, owing to the lack of
continuous improvement in the user’s perception and appreciation of the feature.
The communication industry has an even more complicated ecosystem which
Creative Entrepreneurship in Asia
- 34 -
includes many different members, for example ? technology enabler, network provider,
handset manufacturer, carrier, content provider and user. Leading players of the ecosystem
are continuously pushing forth new technologies and new standards to the system, but the
speed of users’ reception is always slower than expected by the leading players. The basic
reason is that members of the ecosystem need a longer period of time to synchronize with
one another from an out-of-pace situation. Before the ecosystem has formed a
well-synchronized environment to demonstrate its maturity in managing the
interoperability of the planned new technology or standard among different players, end
users are not easily convinced to pay any extra service charge until the ecosystem delivers
demonstrable value. For this to happen, there is participation by all players in the
communications industry ecosystem as such changes does note come about as quickly. It
is also important to note that there are no dominant players in the communications industry,
who can manage and control targets of technology and dictate the industry standards.
Unlike the IT industry, such that the whole ecosystem in the communications industry
participated by all players would not act so quickly compared with what happened with the
IT industry.
IAC’s strategy for the OKWAP Smart Phone is to provide end users with value in an
alternative way. The local contents and local touch are two major areas where value is
added, in addition to the basic features. These basic features are supported by almost all of
the other handset suppliers in general, derived from hardware improvement on
components and new protocol or services applied in the network. Examples of such
improvements in components are ? color LCD, polyphonic ring-tone and camera.
Examples of the new protocol and services are ? GPRS, WAP, MMS, etc. From the IAC
point of view, those improvements are classified under the ‘hardware and firmware’
category, which is not ‘soft’ enough. In addition to incorporating those improvements in
hardware, protocol or services as basic features of the OKWAP phone, IAC has bundled
local content with the cell phone and sought to build up activities with a local touch to
promote the phone. This approach has been recognized as value innovation of the OKWAP
phone, which differentiates OKWAP products from the others. Local content that the
Chinese can appreciate include - PDA and dictionary functions, very useful cultured
related features (i.e. Solar/Lunar calendar conversion, world time, auto setup of network
connection, Smart Chinese/English input) and free download of ring tones and graphics
from the OKWAP website.
Meanwhile, the OKWAP phone has held numerous promotion and service activities
to guide users to better utilize all features in the OKWAP phone. IAC has also compiled
training information in its website and held training courses in its own OKWAP shop to
teach users to personalize on phones or accessories. Since the target user of OKWAP
phones are mainly young people (around 85% between the age of 15 to 35), the local
contents and local touch have been widely welcomed. In mid 2000, while IAC believed
at the outset that this strategy was a very good way to differentiate products from the
others, they realized there were numerous ambiguous factors and risks. Nevertheless, the
first OKWAP phone i3698 was launched in the Taiwan market in December 2000. The
claimed concept of ‘Five machines in one body – Cell Phone, PDA, Dictionary, Game and
Internet Browser’ actually attracted a lot of attention, even though its weak points of
bigger size and not-so-fancy appearance left some negative impression on the market.
For the past four years, there has been more than ten models announced by IAC in
the Taiwan market. As a result of continuous efforts and improvements in product
development, marketing and services, the concept and implementation of local content
plus local touch for the OKWAP Smart Phone have grown unique in the end users
Product Innovation and Business Model: The Case of OKWAP Phone
- 35 -
perspectives and experiences. Experiences and feedback from end users has been
extremely favorable and the word-of-mouth effect has drastically boost the market share of
the OKWAP phone from zero in the beginning to about 10% in 2004.
OKWAP Smart Phone – Value Expansion
IAC expanded its OKWAP product series from one to three gradually. The A series
is aimed at young people, with fashionable appearance and easy-to-use functions. The I
series is aimed at the technology hobbyist, with many applications from the most advanced
features to evolution any component and system design. The S series is aimed at office
people with software and database integration, planned and designed specifically for users
processing information frequently. The contents and services are also defined and designed
for individual series and models through cooperation with content providers and external
alliances.
Expansion of the product series is very normal business practice and useful in
addressing the users’ needs in different market segments. The effectiveness of value
innovation and value expansion has made OKWAP become a major brand of cell phone in
Taiwan. This is the reason why IAC OKWAP is able to command a premium price for its
units (value share about 30%-40% higher than its unit share in Taiwan market). The unique
appeal of the OKWAP phone with local contents and local touch has become a core
competency of IAC.
EXECUTION
Resources, Process and Integration
The efforts that the other suppliers invest in developing a cell phone might only be
half of the whole efforts that OKWAP normally puts in. The major difference is that the
OKWAP phone has included much more functions and bundled much more contents inside
and outside the phone at the same price level. This is the essential quality and real value of
the OKWAP phones.
There are more than 500 dedicated engineers and supporting people in total in
Taiwan and China responsible for the cell phone’s development. These engineers and
supporting personnel are grouped into different project-based teams and are responsible
for all aspects from product planning to market. Besides these internal resources, there are
external consultants and alliances for specific technical supports. The resources available
include good material management, mass production and a quality management system all
of which are shared by all products of all business units in IAC.
IAC has re-defined a new process package for OKWAP product development and
services to users. The OKWAP process package involves project-based team work with a
high degree of responsibility being reposed on the various teams. Since the resources span
across the Taiwan Strait, project management is very dependent on the efficiency and
stability of the IT infrastructure. To best protect intellectual property (IP) rights on product
innovations, application of IP rights before the completion of product development is
strictly enforced.
Since the level of function and complexity of the OKWAP phone is higher than
regular phones from other manufacturers, it is necessary to develop the product in parallel
with the services needed to support it and community activities based on the characteristics
of the product to shorten the time-to-market (TTM). Integration of product, service and
community activities is a large-scale engineering effort which would involve managing
people in different locations, different departments and different working times. It is
Creative Entrepreneurship in Asia
- 36 -
always a crucial challenge for project-based teams to manage resource integration to
ensure the success of the project. Initial deployment of this process encountered numerous
failures before achieving eventual success. This capability has now grown to become
IAC’s strength.
Value Participation of Internal Resources
The process package for product, service and community is a value innovation
process. Team members from different departments of individual functions inside the
company join this process package. From this sense, it is also suitably acknowledged as a
value participation process for all team members. In general, product development is the
kernel layer of value of all developments. Nevertheless, service activities are another layer
of value added to the kernel, and community activities are, again, another layer of value
added outside of the former two layers.
The process package operates like a spiral with people of different functions linked
to it. Marketing, sales promotion and community activities play an important role for value
creation. Development and quality staff are responsible for value implementation.
Operation staff including program managers and supply chain managers are responsible
for value realization. Service personnel, including after-sales and value-added service, are
the key resources for value extension and fortification. There should be no gaps among all
functions to ensure continuity between processes, in order to achieve the high efficiency of
operation needed for value innovation. Improvement measurements should be taken from
time to time.
Alliance Collaboration with External Resources
IAC seeks to mirror the same process package in their partner’s organizations.
Value innovation where external partners are involved requires the identical process to be
in place to link the internal with the external resources. The external resources which have
characteristics different from that of internal resources should be arranged in a
management system of alliance collaboration. Certainly, the management style of external
alliances could not be the same as that for internal resources. However it could be
conceptually similar in approaching value innovation by managing this process efficiently
with considerations of the business model on sharing benefits created by this process
accepted by all participants.
The external alliances include - network operators (carriers), channels, retailers and
content providers.
DEPLOYMENT
General Situation
The deployment stage starts from the moment the product is released for mass
production. Product, service and community activities are developed in parallel in
execution stage prior to this stage. Product release for mass production is a key milestone
for operation in companies such as IAC, which still relies on manufacturing as its main
activity.
Marketing and sales personnel should have prepared a series of promotion activities
for the new product launch, which is a consequence of the product release for mass
production. The promotion activities are specifically designed for any model based on
targeting specific user segment(s), price band and sales channels. The initial promotion
activities are arranged for sales channels and retailers to access to product information and
Product Innovation and Business Model: The Case of OKWAP Phone
- 37 -
to understand the product’s specialty. Thereafter, the promotion activities are expanded
into the user groups through all kinds of media ? TV, newspapers, radio, bus
advertisements, magazines and Internet websites etc.
IAC’s many experiments in adopting new methods to promote the OKWAP phone
have shown good results with lower expenses. The key concept is to find out which media
the target users normally access and put a reasonable promotion budget on it, instead of
pouring all the promotional budget, without focus, on all kinds of media.
Service, including after-sales service and value-added service, is a critical factor for
own-brand products. IAC has set up seven OKWAP stores in Taiwan besides the service
network linked to sales channels and retailers. The OKWAP stores are places where end
users utilize OKWAP services, participate in the OKWAP community groups and content
download service without any charge. The OKWAP stores are very helpful for IAC to
understand users’ needs directly in addition to the other feedback methods, such as:
telephone call to call center, e-mail, and user groups in websites.
There are many website contents and web activities prepared for OKWAP users.
Users do not need to pay for most of the contents which IAC has licensed. The web
activities are held quite often (about once every one or two weeks) with wide varieties for
users’ preferences and choices.
IAC has developed sustaining models – in addition to the core models of OKWAP
phones – planned and launched for specific groups of users and hobbyists. The sustaining
models are marketed to effectively lengthen the life cycle of core models. A good
understanding of the target segment is necessary before deciding on the process of
sustaining the models. Topics of sustaining models might be - color and outlook variations,
famous icons in fashion, or even some special meanings of seasons or festivals.
Daily tracking and checking of goods sold in the market is the most important
information that IAC would like to know, in order to get the first hand knowledge of
market which determines the flexibility of goods supply. An IT infrastructure which can
collect all information from individual sales points of retailers on daily basis is the key to
success in managing inventory.
OKWAP Community
To further promote OKWAP phones, IAC has sought to build a community of users.
The OKWAP community is conceptually formed by several portions. The constituting
portions are - OKWAP.com, OKWAP users club, OKWAP dealers club, OKWAP service
system and OKWAP Internet alliances. IAC’s vision for the OKWAP community is to
build up a community with high quality of virtual images and physical experiences to
strengthen relationships with OKWAP users.
Some valuable situations and results of the OKWAP community are as follows:
OKWAP.com
• Over 11 million downloads have been made from OKWAP website by end users
• Around 300K page views and 30K downloads per day through WAP, SMS, MMS
and PC to the OKWAP phone
• On-line shopping for download-services and accessories for the OKWAP phone
OKWAP Users Club
• Over 1.2 million OKWAP phones have been sold in Taiwan
• Over 500K members of OKWAP users club
• OKWAP college to train users about operations and Do-it-Yourself features
Creative Entrepreneurship in Asia
- 38 -
• Frequent road shows and activities on a wide variety of topics
OKWAP Dealers Club
• Market information and operation management support to dealers
• OKWAP value added program (to users)
• OKWAP incentive program (to dealers)
OKWAP Service System
• OKWAP-owned stores, for after-sales service and value-added service
• Quick service and repair system
OKWAP Internet Alliance
• Alliances with major content providers
• Alliances with major cell phone websites
• OKWAP phones are often rank at the top of the hottest phone list
Successful execution and deployment depends not only on internal resources and
processes but also on the process of external alliance collaboration. It is crucial to know
that success on synchronization of these two processes. Thus, managers should be able to
detect problems occurring from the internal and external resources of the company, and
possess the capability to manage these resources to solve problems.
Market Information
From the results of a survey conducted by GfK marketing Services in Taiwan,
several results concerning OKWAP are as follow:
• Market share of OKWAP phone (by all networks based on units) has grown from
2% in September 2002 to around 10% in February 2004; while Nokia has
dropped from 34% to 14% and Motorola has dropped from 32% to 20% over the
same period.
• Market share of OKWAP phone based on units is 9.6% in February 2004.
Nevertheless, the value share is 12.7% which is about 32% higher than its unit
share. According to the survey, the value share of OKWAP is ranked second after
Motorola (16.4%) and ahead of Nokia (12.0%).
SUMMARY
Product innovation is a complex, dynamic and systematic resources integration and
utilization process. However, carrying out the process effectively is not easy. Very often
organizations fail to build up the business models needed for product innovation for many
reasons. Resources in an organization which lacks a new business model are largely
arranged for the core business and key customers, and are not in favor of new product
innovation. However, in many cases, business model innovation is very necessary for
product innovations to secure much needed resources.
IAC has considered the OKWAP smart phone as a product category that has
uniqueness in the market. Thus, IAC chose to build up a new process package to manage
and integrate the internal and external resources, and synchronize the operations of these
resources. Hence, the OKWAP practice is a good example of the product innovation
process and a business model which effectively transforms ideas into products and
Product Innovation and Business Model: The Case of OKWAP Phone
- 39 -
successfully promotes the products in the marketplace.
Creating value through innovation is as important as cutting cost through enhancing
efficiency for any company. Certainly, it is better to have competence in both innovation
for value creation and efficiency for cost reduction instead of just having competence in
one.
- 40 -
THE STRATEGY TO CREATE AN ENTREPRENEURIAL
INCUBATOR—THE NTU CASE
Prof. Kuang-Chao Fan
National Taiwan University
Helen Y.C. Hsiao
University of South Australia
and
Lee H.S. Luong
University of South Australia
INTRODUCTION
Business incubation is a dynamic process of business development of SMEs during
its startup period, placed under the management of an incubator. The business incubator is
a body providing space, services, and hands-on management assistance in order to nurture
young firms, helping them to survive and grow during the start-up period when they are
most vulnerable (NBIA, 2003). It provides a facility in which a number of new or young
businesses are located; and in which these businesses have access to shared staff and
services, and receive a pro-active incubation program of advice, training, introductions,
and access to resources that may not otherwise be available to them (Harley, 2001). Ever
since its first development at Batavia town in New York State in 1959, the number of
incubators in the world has gradually increased. Up to 2003 the number is around 4,000
worldwide, as shown in Table 1 (Finer, 2004).
Table 1: Incubator statistics up to 2003
Type In US Outside US
Government based non-profit 700 2,700
For-profit private 300 300
Total 1,000 3,000
The traditional government-based non-profit incubators have the common mission
of creating a new economy in society. They are developed by: (1) state or city
governments, (2) universities (3) special purpose government agencies. In addition to the
annual budget which is sponsored by the government they may take extra fees, royalties,
or a 1-5% equity stake from tenant companies. After 1990, with the interest of
corporations and VC firms, for-profit private incubators grew rapidly. Their aim is to take
their technologies to the market quickly (rapid technology commercialization) thereby
growing the companies with the view of maximizing their investment through stock
market listings or sale. These are the so-called “accelerators” or “catalyst groups” with the
internet business model of “without the wall”. They normally take a 10-30% (for
corporation type) or a 20%-60% ownership stake in their clients’ business (for VC type) by
direct investment at the early stage.
Current university incubators are mostly positioned as non-profit organizations. In
addition to the general missions of government developed incubators, university
incubators have the following special features:
The Strategy To Create An Entrepreneurial Incubator—The NTU Case
- 41 -
1. Development by universities and funding by government.
2. Professorial involvement in consultancy, student involvement in internships,
university involvement in lab and facility utilization, and entrepreneurship
programs.
3. commercializing campus technology and corporatizing the academic team as a
new start-up.
4. Channel the linkage between university and industry.
Although its contribution to society is significant, most of the university incubators
are not financially viable if the financial support from the university or government is cut.
In addition, their contributions to the universities are unsatisfactory in terms of equity
return. Since the last decade, some countries have launched a new policy to permit the
corporatization of the public universities and for-profit university incubators have been
inaugurated in those countries, such as China (Tsuo, 2000; Harwit, 2002), Malaysia
(USAINS, 2004) and Australia (ITEK, 2003). Although the business model is more
multi-directional and flexible, the history of for-profit university incubators is, however,
still young. So far, there is no significant statistics demonstrating the success of such
incubators in terms of financial sustainability. Nevertheless, it is correct for such
incubators to seek their own long-term viability.
INCUBATION MODELS
Traditional Model
During the early stage of the period from 1960 to 1990, the main reason for the
establishment of incubators in most places is to recover from economic recession by
means of job creation, regional economic revitalization, and fostering of new types of local
business. The profile of incubation model thus developed can be seen in Figure 1
(Smilor, 1987).
Figure 1: Incubation system before 1990 (Smilor, 1987)
P
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Incubator Affiliation
Entrepreneur
New Business
Incubator
Economic Development
Technology Diversification
Job Creation
Profits
Viable Companies
Successful Product
T
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Support Systems
Secretarial
Business Expertise
Administrative
Facilities
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Incubator Affiliation
Entrepreneur
New Business
Incubator
Economic Development
Technology Diversification
Job Creation
Profits
Viable Companies
Successful Product
T
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C
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Economic Development
Technology Diversification
Job Creation
Profits
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Successful Product
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Support Systems
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Secretarial
Business Expertise
Administrative
Facilities
Creative Entrepreneurship in Asia
- 42 -
Modern Model
After 1990, venture capitalists (VCs) started to influence the market ecology.
Holding immense funds VCs seek potential companies to invest in, rather than establish a
brand new company. This business also began to look for potential SMEs. Since then the
incubation system also included the joint venture of investment services. A modified
incubation model is shown in Figure 2 (Hsiao, 2001).
Development
?Governments
?Non-profit organizations
?Private Companies
?Universities
Investment
?Venture Capitals
?Angels
?Private Sectors
Mentor System
?Technology
?Management
?Marketing
?Laws
Incubator
?Physical Facilities
?Administration
?Personnel share
?Knowledge & Information
?Events
Tenants
?Technology Innovation
?Product Development
?Job Creation
?Company Profits
?Sustainable growth
Figure 2: The modern incubation system after 1990
Integrative Model
A new incubation model, that integrates venture funds into the incubation system so
that incubator can invest in some potential startups, as shown in Figure 3 (Grimaldi, 2003),
is being carried out at North Carolina Technology Development Authority in USA
(NCTDA). The NCTDA accomplishes this mission through three primary business sectors:
entrepreneurial support, including the development of business incubators; capital
formation for emerging companies through direct investments; and research
commercialization that moves research from university laboratories into companies
(Brotherton, 2000).
Figure 3: Emerging merits of business incubation model (BIC) and private
incubation model (CPI & IPI) into university business incubation (UBI)
BICs
UBIs CPIs IPIs
The Strategy To Create An Entrepreneurial Incubator—The NTU Case
- 43 -
For-profit Private Incubator Model
As indicated earlier, most for-profit private incubators are developed by
corporations or VC firms. They select potential start-ups and own a significant stake in
ownership through investment, before starting to incubate these hi-tech companies
“without the wall” (Acorn, 2003). In Taiwan, some VCs have started to establish private
incubator corporations to look for long-term investment. It is a new industry encouraged
by the government. Towards the end of 2002, there are only six for-profit private
incubators (Chang, 2003). The incubation model is shown in Figure 4.
Investors
Incubator
T1
T2
Tn
Figure 4: Private incubator model, Ti means the ith tenant.
University Incubator Model
Figure 5 illustrates the relationship of a normal university-based incubator in which
the university, incubator, and tenants are independent entities. The degree of relationship is
pretty low. The incubator would not deem the tenants as its own asset. Rather, the tenants
are treated as clients only. Whenever any tenant fails, the influence to the incubator and
the university is not significant. Due to the low operational cost of tenant companies at
their start-up stage, the success rate is 80% – compared to other independent start-ups in
the range average of 50% – is certainly high. How many can eventually grow to enter the
stock market? Although there is no published information on the success rate, the author’s
experience indicates that it is extremely low not withstanding that seven years have
elapsed since the introduction of incubators in Taiwan. It has been noted that the
university’s incubator only holds 1% to 5% (normally 1%) of the tenant’s stake. It can be
realized that the incubator would not obtain significant profit at the end. The feasibility of
sustainability is suspectable.
THREAT AND SUSTAINABLE FACTORS TO INCUBATORS
From previous research (Fan, 2000) it was pointed out that possible weaknesses of
current university incubators, especially for the project type, in Taiwan, could be
summarized as below:
• Incubator directors do not have adequate entrepreneurship experience,
• Project type incubators do not have funding sources to last through difficult
Creative Entrepreneurship in Asia
- 44 -
periods,
• Incubators cannot be treated simply as a university/industry cooperation program,
• The University’s mentor system does not work closely enough with the tenant
companies due to lack of incentive,
• The incubator itself does not have a well planned strategy for sustainable
management,
• Incubator’s profit returns to the sponsoring university is insufficient.
University
Incubator
T1
T2
Tn
Figure 5: University incubator model in Taiwan
In addition, recent reports have depicted some failure and success factors for a
sustainable incubator (Harley, 2001; Finer, 2004; Lalkaka, 2001; Chinsomboon, 2000). In
summary, any incubator should possess the following characteristics for sustainability:
1. Sustainable revenue generating businesses.
2. Deliver quality expertise.
3. Conduct adequate due diligence of their stake-owned SMEs.
4. Sufficient VC/professional/university linkage.
5. Adequate government policies, initial funding and support.
6. Recognized brand name in their industry
7. A large meaningful database of contacts.
INTEGRATIVE INCUBATION MODEL OF NATIONAL TAIWAN UNIVERSITY
In order to gain a breakthrough despite the above cited barriers, a feasible solution
is to form a closer tie among the development body, the incubator and the tenant
companies. What does “a closer tie” mean? This paper proposes that the incubator should
become a partner of each potential tenant company so that the incubator team could get
involved in the company’s business, rather than just nurturing the company. On the other
hand, the funding body should also become a share owner of the incubator. In other words,
the incubator must form an integrative framework to get involved and to share the duty
The Strategy To Create An Entrepreneurial Incubator—The NTU Case
- 45 -
with each potential tenant company and the funding body. We name this model as the
“mutual life body.” The conceptual model of this kind is illustrated in Figure 6, in which
T
1
and T
2
mean tenants only under pure incubation and T
m
to T
n
are those invested
potential tenants.
Figure 6: Closely linked incubation system
A feasible new university incubator could be in the form of an Incubator Company,
which operates not only in the field of business incubation but also in business investment
so as to attract investors, including venture capitalists, angels, private corporations, alumni
and staff, to invest in this incubator company. It has been mentioned in previous sections
that many public universities are not allowed to take investments from academic funds and
the university has already contributed intangible assets to the incubator. These intangible
assets could be counted as part of the capital in the name of “technology share” or “equity”
of the incubator company. In other words, the investors should donate part of their shares
to the university. By this way, the bottleneck of investment regulation restricted to many
public universities can be broken through.
NTUIIC (NTU Innovation & Incubation Company) is the only incubation company
founded by the National Taiwan University, in 2002 with capital which is from all
investors (NTUIIC, 2003). The company is authorized to run the university’s incubation
business and to invest in potential tenants. In return, the NTU takes 20% share from the
company as donation. The organization chart of this company is shown in Figure 7. The
integrative framework of the incubation system is shown in Figure 8. The internal flow of
NTUIIC system among the university, NTUIIC and tenant companies is shown in Figure 9.
It is clearly seen that the sponsoring university provides only the intangible assets, rather
than the funding capital. It must be emphasized that alumni and mentors are major partners
and investors in the ventures due to their closer relationship with the university.
Those start-ups established through technology transfer from the university, also
called the spin-off companies or TLO start-ups (Gregorio, 2003), pay additional licensing
fees to the incubator company under negotiation. Collecting rental charges (including
services) in cash as well as equity and licensing charges in stock, the incubator company
returns the university normal rental fees plus a significant percentage share of its annual
profit. A close linkage can be seen; that if the tenants succeed, the incubator company gets
Incubator
Investors
University
T1
T2
Tm
T
n
Incubator
Investors
University
T1
T2
Tm
T
n
Creative Entrepreneurship in Asia
- 46 -
the profit. Consequently the sponsoring university shares profit from the Incubator
Company. This is the essence of “mutual life body” as emphasized in this study. This
system is also named the “entrepreneurial incubator” in this study.
Figure 7: Organization chart of NTUIIC
Figure 8: NTUIIC integrative framework.
I
N
V
E
S
T
O
R
S
G
O
V
E
R
N
M
E
N
T
O
F
F
I
C
E
S
Investment
T
E
N
A
N
T
C
O
M
P
A
N
I
E
S
INCUBATOR
National Taiwan University
R & D Commission Office
Incubation
C
O
M
P
A
N
Y
Investors Board University
CEO
Incubation Investment
Investors Board University
CEO
Incubation Investment
The Strategy To Create An Entrepreneurial Incubator—The NTU Case
- 47 -
Space
Facility
Technology
Facility
Students
Investors
Board of
Trustee
Incubator
Team
Investment
Team
Experts
Campus
Spin-off
Companies
Regional
Start-up
Companies
Equity
Rent
Equity
Rent
Incubation
Investment
Resource
University Tenants
Royalty Licensing
Incubator Company
Figure 9: Internal flow of NTUIIC
CONCLUSION
An integrative framework of the new university incubator is proposed in this paper.
This system integrates the merits of government-based university incubator and for-profit
private incubator. Owing to the constraints on public universities for direct investment this
study also proposes the feasible approach of technology sharing from the incubation
corporation, which cooperates closely with the original university incubator. Such a
system has been implemented in National Taiwan University since 2002. It is still in the
experimental stage. Potential profit would be gained from the investment return after
several years. Transforming the non-profit system to the for-profit system is the first step
toward the entrepreneurship of university incubator.
REFERENCES
Acorn campus, http://www.acorncampus.com/, Internet access, Dec. 2003.
Brotherton, P., “TDA Announces Service Provider Partnerships To Benefit Incubator
Tenants”, NCTDA News Release, Aug. 7, 2000.
Chang, C.H., “Study on the Development Model of Private Incubators in Taiwan”, Master
Thesis, National Cheng-Chih University, July 2003.
Chinsomboon, M., “Incubators in New Economy”, Master Thesis, MIT, 2000.
Fan, K. C., “A Study of Collaborative Model of University Incubator and Industrial
Development”, Proc. of the Workshop on Cross-Strait Education Innovation Toward
the21st Century, Wuhan, China, pp. 53-58, October 2000.
Finer, B. and Holberton, P., “Incubators: There and Back”, MIT Enterprise Forum of
Cambridge, http://www.mitforumcambridge.org/index.html, Internet access, April
2004.
Creative Entrepreneurship in Asia
- 48 -
Gregorio, D.D. and Shane, S., “Why do Some Universities generate More Start-ups than
Others”, Research Policy, Vol. 32, pp. 209-227, 2003.
Grimaldi, R. and Grandi, A., “Business incubators and new venture creation: an
assessment of incubating models”, Technovation, 2003, in-press.
Harley, B., “Business Incubators: Good Models vs. Exciting New Models”,
http://www.apctt.org/presentations/itbi_barbara.ppt, Internet access, 2001.
Harwit, E., “High technology incubators: Fuel for China’s new entrepreneurship”, China
Business Review, Volume 29, Number 4, July-August 2002.
Hsiao, Y.C., “A Study of Incubation Scheme”, Master Thesis, University of South
Australia, 2001
ITEK Pty Ltd, Introducing ITEK- Staff Profile and Service Guide, University of South
Australia, July 2003.
Lalkaka, R., “Technology Business Incubators: Characteristics, Benefits, Performance”,
APTCC-GOI International Workshop on TBIs, Bangalore, India, January 2001.
NBIA, “Seven Strategies for Reaching Financial Self-Sustainability”, Internet Access,
http://www.nbia.org, June 2003.
NTUIIC, Internet access: http://www.ntuiic.com, 2003.
Smilor, R.W., “Managing the Incubator System: Critical Success factors to Accelerate
New Company Development”, IEEE Transactions on Engineering Management,
Aug. 1987, pp. 146-155.
Tsuo, T.C., “Comments on the University Incubator in China”, Chairman’s comment on
the Workshop on Cross-Strait Education Innovation Toward the21st Century,
Wuhan, China, October, 2000.
USAINS Group, http://www.usains.usm.my/usainsMain, Internet access, January 2004.
- 51 -
INDONESIA
Susanto Joseph
Employers Association of Indonesia (APINDO)
The development of a country has been recently shown to be strongly dependent on
the growth and advancement of its economic and industrial sectors. It is also made very
clear that this increase and advancement can be achieved if the country has a significant
number of tough and independent entrepreneurs who are sensitive, respond to change and
also able to adapt, so as to contribute to the country. True entrepreneurs are also patriots as
they create job opportunities and handle unemployment which if left unchecked could lead
to a reduction in poverty.
The 1997 Asian economic crisis, followed by manifold crises in Indonesia have
shaken the country’s macro economy. Many companies became bankrupt and there was
large scale capital outflow. All this happened amidst the political changes taking place in
Indonesia. These changes were triggered by the decline in power of Soeharto regime,
beginning in 1998.
Economic growth has since been relatively low with the country’s GDP registering
between 3-4% per year. Unemployment has increased, resulting in 40 million unemployed
people. Yet, Indonesia survives because of the contribution from the informal sector and
the Small Medium Enterprises (SMEs) which in many countries are considered to be led
by tough, pioneering entrepreneurs. Their contributions to regional development within a
country, role in supporting larger industries and capacity for innovations have been widely
acknowledged.
In Indonesia, there are approximately 67% workers in the informal sector and with
the rest in the formal sector. According to a survey carried out in 37 countries (2002) on
the relationship between unemployment and entrepreneurship
1
, it was found that when
unemployment is high, total entrepreneurial activity will also be high because the
alternatives available beyond the labor market diminish. However, a country cannot
develop and advance if it is only holding on to the informal sector, doing so will lead to
serious poverty.
In general, it is known that the informal sector is identified with low productivity,
low income, limited access to market, low finance; consequently putting the country in a
less competitive position. The informal sector is mostly dominated by small household
industries with a workforce size of between 1 to 4 people. If these micro-enterprises are
effectively empowered, these small industries could develop into SMEs. What a country
should do is to direct and transform this micro economic and informal sector into a formal
SME sector?
John Naisbitt, futurologist and well-known writer said at the Global Entrepreneur
Forum held in Singapore in 1995 that SMEs will be the main players on the world’s
economic chessboard in the future. It is easier for these SMEs to excel, be competitive
and seek new economics opportunities because they are able to make decisions and take
faster steps than others. They are not constrained by hierarchy and bureaucracy as with
large companies. This organizational flexibility enables them to exploit market
1
Marc Cowling & William D. Bygrave, Relationships between unemployment and entrepreneurship in 37 nations
participating in the Global Entrepreneurship Monitor 2002, Summary report can be downloaded at
www.gemconsortium.org.
Creative Entrepreneurship in Asia
- 52 -
opportunities, implement innovation, create new products and adapt to fast changing
consumers’ needs and tastes
2
. For example, many Japanese companies that have won a
major share of niche markets are SMEs. But of course, SMEs which are making earnest
efforts to change should be assisted by their parent companies, receive financial support
from the private sector and the government.
Thus, the informal sector must be viewed as providing a space for transition and
opportunities for learning, as well as a medium within which creative and tough
entrepreneurs are selected and emerge. This transformation process reflects the growth of
strong SMEs as the embryos of big and modern companies. However, this process needs
to involve many parties, especially the government whereby its regulatory policies should
provide economic assistance, easy access to banking institutions, low interest loans and a
proper assistance team. Community figures, especially successful entrepreneurs, can be
looked upon as role models that reflect the knowledge and skill of entrepreneurship.
These role models will accelerate the process of economic recovery of a nation and lead
the country to achieve maximal growth.
MICRO-ENTERPRISES AND SMES IN INDONESIA
It is interesting that the number of micro-enterprises and SMEs grow during and
after crises escalate in growth. In 2001, there were 90 clusters of such businesses. In 2002,
there were 332 clusters and in 2003, there were 375 clusters. The fields of such clusters
were common agribusiness of livestock, farming, fishing and agriculture. There were also
mining and electricity businesses.
According to a study conducted in 2003 by the Indonesian Central Statistic Bureau
(BPS), there were more than 42.4 million SMEs. The activities of these SMEs show their
potential for contributing to the nation’s economic growth. However, this increase does
not necessarily improve economic growth (which is relatively stagnant at approximately 3-
4%), such growth is dependent on the consumer sector. Similarly, other sources
contributing towards economic growth such as export, investment and development
expenditures did not increase. Figure 1 shows the national supply of goods and services
by source, with small and medium sized enterprises providing 43.8% of the total supply.
Although economic recovery has not been achieved for the time being, the micro-
enterprises and SMEs are valued as economic saviours for their role as motivators in
speeding up economic growth and as job creators. In 2003, the total proportion of workers
in micro-enterprises and SMEs increased by 12.2%, compared to the year 2000, in which
workers only increased from 70.4 to 79.0 million. Compared to large companies, the
micro-enterprises and SMEs show greater immunity to these crises. They are not reliant on
imported materials and are able to reach the domestic market with their products and
services. Thus, the development of the micro-enterprises and SMEs must be included
under government strategy for these enterprises provide work opportunities and reduce the
level of poverty.
The government itself through the Ministry of SME and Cooperation has
highlighted these policy directions to aid the development of SMEs:
1. Create a conducive business climate
2. Increase access to productive resources
3. Develop excellent and competitive entrepreneurs and SMEs
2
Idem, "Small businesses make an important contribution to the success of a country's economy. They are major
creators of jobs, they innovate, and they spot and exploit new opportunities.
Indonesia
- 53 -
This paper does not intend to discuss the SME problem in great depth. However, the
Indonesia SME sector still remains the supportive backbone of its national economy,
especially during economic crises. Yet when the focus is on entrepreneurship, this issue of
SME needs to be addressed. In fact, there are several successful, creative and innovative
entrepreneurs born and formed as a result of the involvement participation in the SME
business sector.
Small
Entreprises
30.0%
Medium
Entreprises
13.8%
Import
14.1%
Big
Entreprises
42.1%
Figure 1: Supply structure of goods and services nationally
Since 2002, the Indonesian government (through the Governor of Indonesian
Central Bank (BI) and Poverty Reduction Team) led by the Coordinating Minister of
People’s Welfare has established a Memorandum of Understanding (MoU) on poverty
reduction through the empowerment and development of SMEs. In 2003, a task force of
SME financial consultants and facilitators was formed as one of the alternative strategies
to increase banking access to SMEs. This strategy will succeed if the main SME players
are entrepreneurial cadres supported by a conducive business environment and receive
holistic development in many aspects, such as management, technical knowledge,
marketing, business development, as well as wide support from related parties such as
bankers, NGOs, universities, business community, and donors such as Asian Development
Bank (ADB) and World Bank.
In this paper, the discussion will be focused on the entrepreneurial aspect, such as
efforts on how to increase entrepreneurship among SMEs and the relevant constraints such
as internal factors which come from the SME’s personnel and external factors which
hinder entrepreneurs from maximizing their development. Several examples will be quoted
as possible learning models.
SUCCESS STORIES
There are many success stories of entrepreneurs around the world that have been
written and published. These success stories serve as a form of inspiration for beginners
who decide to be an entrepreneur. This is the decision undertaken by some entrepreneurs
in Indonesia who chose to start their business from ground zero. Some were financed with
their inheritance and some conspired with government officers through certain projects.
However, this issue will not be discussed as present factors have made it easier, such as
certain facilities which are not based on individual efforts.
Creative Entrepreneurship in Asia
- 54 -
The following are some of the criteria used in selecting the entrepreneurs that are
portrayed below:
1. Portraying self-reliance by starting their businesses from the bottom, thereafter
growing into large organizations without depending on support from the
government or any other group.
2. These entrepreneurs become ‘idols’ for new entrepreneurs and have shared their
experiences through numerous seminars and discussions on entrepreneurship
and SMEs.
3. Their success stories have been widely published and have inspired others to
become entrepreneurs. They must be recognized as pillars of their nation’s
economy.
Table 1 sums the entrepreneurial attributes of the three entrepreneurs.
Bob Sadino (71 years old) is one of the legendary entrepreneurial figures in
Indonesia. His name is identical to simplicity. His daily attire differs from other
entrepreneurs. The boxes motif T-shirt and short jeans characterize his attire. His speech is
uninhibited and he is an easygoing person. Bob owns one of the biggest retail business that
focuses on serving expatriates’ needs. As the founder of KemChicks Group (which as of
2004 has been around for more than 30 years), his career began as an eggs seller at South
Jakarta, a place where there were a lot of expatriates. Over time, his business grew to
include a supermarket, a sausage factory, vegetable farm, agribusiness, a travel bureau, a
snacks factory, a restaurant and a magazine company. He even became a movie star.
How did Bob start his business? His business capital was sheer optimism and
courage. “Just do it”, he said. Wasn’t he afraid to fail? He answered lightly that failing is
normal – if we haven’t failed, we do not deserve life.
According to his staff whom he considers as family, his relaxed and open attitude
puts them at ease to discuss or argue about his company activities. The implementation of
this father-and-son type of relationship is the main success factor of KemChicks Group.
The core of this kind relationship is based on being a trust 20 years ago. Then, Bob
declared that he had left his position as a decision maker and he had no difficulty choosing
professional cadre to run his business.
One of the factors justifying his selection was the company’s culture, which
recognizes employee leadership. As he says, it means choosing a leader at the operational
level and the selection is done by ‘the kids’ themselves who choose their colleague as their
leader. Bob himself plays the person who steers the company strategy through ‘signs’.
Company activities are also based on teamwork where responsibility is divided equally
among workers. Besides this, everyone has direct control over each other. Thus, Bob has
actually implemented a learning organization where as the founder; he has bravely given
opportunities to his next generation to learn from their mistakes.
According to a management expert, Bob’s leadership has succeeded in
implementing decentralization; empowering and enabling modern companies to survive in
today’s competitive world. Further information can be browsed at
Http://www.expat.or.id/sponsors/kemchicks.html.
Purdi E. Chandra (45 years old), founder of Entrepreneur University is one of
several entrepreneurs who started his business from ground zero. He started his informal
business when he was in junior high school, breeding chickens and ducks and selling them
to a traditional market. When he was 23 years old, he established an education advisory
Indonesia
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institution called “Primagama” with his friends; dedicated to serving those who wish to
continue their studies at the university. Then, he was a university student of four faculties
from two universities in Yogyakarta. As he felt that he had gained nothing from the
education, he left the universities and started his own business. In the beginning, he only
had one outlet with two students. Now, he has hundreds of outlets with more than 100,000
students per year. “Primagama” has been declared by Indonesian Guinness Book as the
biggest education adviser institution in Indonesia.
Table 1: Entrepreneur's Spirit, Behavior and Style in Practical Experience based on
their Success Stories
Bob Sadino Purdi F. Chandra Sukyatno Nugroho Other Entrepreneurs
- Dare to look different - Imaginative - Willing to take risks - Never give up, persevering
- Learn from mistake - Like to experiment - Adaptable - Diligent, hard worker
- Employee
Empowerment
- Courage to explore - Never give up - Brave to act against the flow
- Decentralization - Brave to fail - Strong will - Keep learning
- Enabling - Strong will to succeed - Persevering - Creative
- Recognition - Creative - Team work - Flexible
- Depends on the team
work
- Skills management - Innovative - Willing to take risk
- Open management - Interpersonal skills - Ready to change - Strong will to improve
- Friendly - Leadership skills - Creative - Able to compete
- Father-son relationship - Intuitive - Possess initiative - Discipline
- Family atmosphere - To survive - Diligent - Leadership skills
- Strong leadership - Optimistic - Willing to learn - Business efficiency
- Pioneering spirit - Possibility and success
thinking
- Self-reliant - Open minded
- Failure is normal - Ambitious - To make breakthrough - High spirit
- Modest
- Puts in best efforts
- Quick in responding to
market opportunity
- Sharp in reading customer
needs
- Uses of new technology
- Self-reliant
- To make breakthrough
Purdi said that he learned how to run a business from his parents, especially his
mother. Supported by his wife, he opened Primagama branches in every big city in
Indonesia. Primagama became a holding company which controls approximately 20 of the
biggest companies all around Indonesia in every field, such as formal and informal
education, telecommunication, travel bureau, restaurant, supermarket, insurance, furniture,
golf field and more. The establishment of the Entrepreneur University was a combination
of his business obsession and social obsession to create new entrepreneurs. The University
led to creation of a new work field for the unemployed in Indonesia.
His writings are widely published in the media. Purdi’s writings are influential
although his ideas are sometimes seen as irrational – however, his success refutes this
Creative Entrepreneurship in Asia
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criticism. Purdi seems convinced about sharing his experiences with readers on his
strategy to develop his business which started from ground zero and grew to a worth of a
billion rupiah in assets. In his book “Being Success Entrepreneurs” (2003) which has been
reprinted four times, he says that an entrepreneur must have the courage to dream, to try,
to explore, and to fail, and success is the first step of being a true entrepreneur.
Four main characteristics of entrepreneurs are creativity, management, interpersonal skills
and leadership. The next main factors to starting a business is to be brave, followed by
skills. Purdi said that entrepreneurs must have characteristics such as willingness to make
something big from something small, intuition, and the determination to survive even after
incurring numerous debts. An entrepreneur has to learn to adapt to and deal with debts
which exist in every business. The last characteristic is optimism. An entrepreneur is
always expected to be creative at all times. Creativity brings new ideas to goods, services
or innovations which enable them to meet the constantly changing needs of the market.
Daring to be different for others is an expression of creativity and possessing and
entrepreneurial spirit. Positive thinking is not enough. According to Purdi, we need
‘successibility thinking’. “Successibility thinking” will lead people to be introspective and
reflect on themselves. “Successibility thinking” examines the possibility of success.
Moreover, it encourages them to be forward thinking. To engage in successibility
thinking, one must marry “possibilities” with thinking about “what is likely to succeed”
In his entrepreneur university, the education syllabus is based largely on
developing emotional intelligence and cultivating a business intuition. Materials given not
only include knowledge but also entrepreneurial values such as no retreat, strong spirit,
ongoing creativity and innovation, deep intuition, acting bravely in facing high risks, and
exploiting business opportunities without test, remarks, and title. These are the qualities
that one will need (upon graduation) to succeed as an entrepreneur. This is the story of
Purdi E. Chandra, a true entrepreneur. More information can be obtained from
www.primagama.co.id.
Sukyatno Nugroho (56 years old), known as a seller of mixed fruit drinks (or ES
TELER), has many branches around Indonesia. Sukyatno, the owner and also founder of
ES TELER 77 Juara Indonesia is very popular and well-known by society. His mixed fruit
drinks business was established in 1982. The business started from a small canteen and
has now grown to become a large chain of franchised fast food restaurants spread all over
Indonesia, Malaysia, Singapore and Australia. His restaurant outlets not only sell mix fruit
drinks but also packaged food and various great tasting Indonesian traditional foods. He
has 5000 workers in his company.
His business is unique because it begins with his mother’s participation and
eventual win in the mixed-fruit drink making competition. Es Teler is a mixed fruit drink
made from avocado, coconut pulp, jackfruit, milk, sugar palm fruit and shaved ice. After a
family discussion, they eventually opened a small canteen in a shopping centre called ES
TELER 77, 77 was chosen because it is considered a lucky number. Quite often, the small
canteen had to be closed due to floods caused by bad weather. His business was threatened
many times as it was considered a disturbance. Finally, the Sukyatno family decided to
open a restaurant near a shopping centre at Gajah Mada Plaza. A few years later, they
decided to establish a small company which turned out to be the pioneer of their business
empire. Some branches were also opened in Jakarta.
As a small company, they faced constraints very often from the owner of the land
and the shopping centre manager. However, they did not give it up. Once their canteen
was unfairly shut down. They strongly willed to open five new branches at another
location. This idea resulted in the emergence of the franchising concept of ES TELER 77.
Indonesia
- 57 -
The first franchise was opened at Solo in 1987. Many people were interested to take up the
franchise. The year 1987 to 1990 was a period of hard work and learning with more than
100 branches opening during that period.
The family team led by Sukyatno as the oldest son adapted very quickly and
became an expert in this franchising business, leading to rapid business growth and the
opening of their first central kitchen and warehouse in 1997. Thereafter, the company
started to explore the international market to continue with business development.
In 1998, Sukyatno, the President Director of the company, was bestowed the title of
Doctor Honoris Causa by the American World University, IOWA, USA, with a thesis
titled “Look Globally but Think and Act Locally.” Further information can be browsed at
www.esteler77.com.
Beside the three examples above, there are other successful entrepreneurs who have
succeeded in leading their businesses and contributing to the development of the country’s
economy. It is noted by SWA Magazine, a national magazine which rates the best
entrepreneurs, that there are a lot of business figures and professionals who have
succeeded in their own field. Needless to say, it will take much time to get information
about their key success factors. Furthermore, books that published their experiences, their
successes and failure in the business world, are rarely found. They possess the spirit that
“Never give up, strong will, hard work, going against the flow, continuous learning,
creativity, readiness to change” are watch words that mark their entrepreneurial careers.
These stories of successful entrepreneurs are periodically published in various
business magazines and newspapers. One of them is KOMPAS, a well known national
newspaper in Indonesia, which regularly presents the efforts of these entrepreneurs, such
as:
Johnny Andrean (39 years old), known as a creative and innovative hair stylist and
dresser, started his unisex beauty salon business in 1978. The business grew year after
year, selling JA products such as hair foam and cream, conditioners and shampoos as the
trademark of the business. Presently, his business is expanding to the Johnny Andrean
Beauty Centre and Salon and has more than 163 branches throughout the country
including 37 training centres for hair cutting skills.
As Johnny is always on a lookout for new opportunities in line with the
development of his business, he also expanded his business network into bridal couture
and wedding services, bakery, and franchising. Many young hair stylists have since
followed his steps.
Alim Markus (54 years old), known as the king of household appliances, joined the
business world when he left junior high school at the age of fifteen. As the number one
person of Maspion Group, his business expanded into electricity, banking, real estate and
herbs. He started his career from the bottom as a salesman, a cashier and an administrator
before becoming a president director. Realizing his lack of education, he expanded his
knowledge by taking up classes such as accountancy, English, Japanese, even Korean and
Dutch. He is completely involved in all the company’s activities having followed it from
its small beginnings to its present state as a big company. He believes that people are not
professionals without knowledge. Being professional is not enough. It has to be followed
by strong will, discipline and diligence. One thing that is very important is his leadership.
It is not surprising that at the age of 30, he replaced his father’s position as the President
Director of the company in 1980.
Maspion is known as the prime producer of household tools made from plastic and
aluminium, with tens of companies are under the flag of Maspion employing thousands of
workers. He is very selective in developing his business, always choosing the best partner
Creative Entrepreneurship in Asia
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such as Du Pont (USA) who has an developed an advanced teflon technology which lets
him take the lead in the agrochemical business. Cooperating with Samsung (from South
Korea) has also led him into the electrical and electronic home appliances industry.
Markus is also very efficient in managing time, work and appearance. His workroom is not
too big and always open.
There are unique entrepreneurs such as Sofwan Aliwarga (68 years old), the owner
of printed batik, who serves his consumer wearing worn-out shirt and shorts. “I never
think of my appearance, but I think of spirit and hard work. That’s my main unique
feature”, he said: Sofwan was rewarded by the government under the producer exporter
category in 1993. PT. Windu Eka, his printed batik company, started out as a family
business. In 1970, the company started as a handwriting business. In 1972, he improved
his machine into a printing rotation machine and upgraded one year later to a
computerized machine. In 1990, his company specialized in exporting textiles to fulfill
demand from Europe, USA and several Asian countries.
According to Sofwan, to succeed as an entrepreneur, one must work to achieve
excellent results and not disappoint the consumers. By its motto, which is hard work and
delivering the best product, the company is trusted by several garment industries in Hong
Kong, USA, Netherlands, Japan and Malaysia.
EFFORTS TO IMPROVE ENTREPRENEURSHIP
A well-planned program will succeed if the players have the knowledge, skill and
attitude needed to achieve the goal of the program. This time, formal entrepreneurship
development has been implemented by the Government through providers of Business
Development Services comprising approximately 400 professional and commercial
companies all around Indonesia, accessible by all existing and also individual
entrepreneurs.
Entrepreneurship development has also been implemented by existing government
departments. For example, the Department of Agriculture provides help through
consultation and advisory services such as the Agriculture Guidance & Counselling Team.
The Department of Manpower and Transmigration also plays a part through the
enlargement of a productive work field project (1997), which also published an
entrepreneur module dedicated to young educated workers who chose the path of
entrepreneurship to earn their living. This effort also creates young professional
entrepreneurs. As we all know, youths who are unemployed typically lack education and
skills. Thus their job search is largely futile. The few ways for them to find work is by
starting their own business. Otherwise, they may remain unemployed
3
. On the other hand,
they also do not possess adequate entrepreneurship skills that are pre-requisites for starting
their own businesses. This is why informal training in entrepreneurship is much needed.
Several entrepreneurship modules are as follows:
• Information of business opportunities
3
It's not surprising if in ILO Recommendation Nr.189/1998 on the General condition to stimulate the creation of work
field for SMEs stated that "….SMEs are getting more responsible for the creation of majority work field in the whole
world". Beside that, SMEs give positive support in motivating the achievement of national development goal, which are
: improve sustainable economy growth and ability to react to changes by through flexibility, stimulation innovation,
entrepreneurship, technology development and research, increase the participation of the less fortunate economic
group, the marginalized group in society, among other groups.
Indonesia
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• Starting the business
• Promoting the new business
• Drawing up a balance sheet
• Choosing quality materials
• Encouraging business achievement
• Fixing prices
• Calculating the break-even point
• Managing emotion when facing consumers
• Result-oriented efforts
• Finding and exploiting opportunities
• Finding and exploiting markets
• Creativity in exploiting situations
Meanwhile, the government’s efforts for the empowerment and development of
SMEs began with the formation of the Business Development Services in 2003 with the
core services of business facilitation and consultation. It is expected to be available to
provide services in areas, including training in conducting feasibility studies, drawing up a
credit proposal, a business plan and a financial report. Before the services can be provided,
the consultants or facilitators will be selected, trained and certified after they have met all
the feasibility criteria (fit and proper test).
Generally, the consultants or facilitators giving assistance to the entrepreneurs of
SMEs are required to have an understanding and mastery of all the following:
• Knowledge of banking and credit
• Criteria of feasibility and banking ability of SMEs required by the bank, so as to
arrange the business plan, feasibility study and credit proposal
• Characteristics of SMEs and obstacles faced in bank relations
• Other aspects needed for a business feasibility study are legalities, marketing,
production, capitalization, financing, etc
• Management and business financial analysis
• Capability to find the opportunities’ potency and business risk
• Environmental matters in the relation with the business
• Knowledge and entrepreneur spirit from medium to high level
• Guiding the implementation of case studies, arrangement of credit proposal,
feasibility study and evaluating the entrepreneurs that have been trained.
• Be computer literate, at least with training in MS Word and Excel programs
Aside from the foregoing, there are several private institutions that provide
entrepreneurship courses, but most of them are more focused on salesmanship and
marketing skills. There are also writers who spread their knowledge and entrepreneurial
skills through their articles in many forms of mass media or books on entrepreneurship
road. One of them is Andrias Harefa, through his book “Starting Entrepreneur from Zero’
(2000), who put forward the following success factors of an entrepreneur:
• motivated by an idea and a dream
• largely dependent on creativity
• exhibit courage
• disbelief in luck but real effort
• view a problem as an opportunity
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• choose business according to hobby and interest
• start with existing capital
• love to try new things
• be able to rise from failure
• not depending on academic titles
CONSTRAINTS OF SMEs IN PRACTICES
In general, SMEs are still marginal in the domestic environment. Many of them
operate outside the formal legal system; contributing to widespread informality and low
productivity. They lack competence and access to financing. Thus, to discuss constraints
faced by SMEs, we also need to discuss the constraints faced by entrepreneurs in their
businesses. The constraints can be divided into two groups: internal and external
entrepreneur factors:
Internal Entrepreneur Factors:
• Financial difficulty; e.g. trapped by money lender
• Limited capital and property for investment
• Limited knowledge. It may be related to low and improper education. Being
educated does not necessarily mean receiving formal education
• No access to training and counseling
• Limited technical skill or competency in a related field
• No information or networking to get support
• Limited spirit and entrepreneurial attitude
External Entrepreneur Factors:
• Difficulty in getting raw materials
• Traditional business management
• Limited access to funding resources or other financial institutions
• Inability to fulfill the terms of credit and administration required by related
financial or government institutions
• Business costs/burdens; e.g. high interest rate, doubling tax collection
• No coordination among government institutions related to the entrepreneur and
SMEs, so an overlap in responsibilities occur. Almost every department in
Indonesia has their work unit related to SMEs
• Unsupportive business climate and environment
• Lack of strong entrepreneur association in the SME sector that can fight for their
aspirations and interests when faced with domestic issues or threats from global
competition.
CONCLUSION AND RECOMMENDATIONS
It is undeniable that given the difficult economic situation, entrepreneurs and SME
are an important contribution to the recovery of a nation’s economy. Entrepreneurs who
lead many SMEs become ‘patriots of development’ as they are job creators and
innovators. They spot and exploit new opportunities and also help the government to
handle social and economic problems caused by emerging economic crises. Unfortunately,
the entrepreneur development solution in Indonesia is not directed at the external factors.
It is admitted that access to capital, access to information, access to markets, technology
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and managerial skills are important, but the most important aspect is the entrepreneurs’
mindset. In the end, it is this mindset that will be the basis of attitude or behavior.
Several actions are suggested to speed-up the nurture of tough entrepreneurs:
• Entrepreneurs gathered in SMEs associations need to form strategic alliances
with big and successful enterprises with these enterprises playing “godfather” to
the smaller enterprises. Such a pattern can achieve a high level of cooperation,
such as business learning and training in the processes from pre-production to
post-production.
• Entrepreneurs’ development need to be managed, centralized, integrated and
comprehensively implemented in one department, not across many departments
and this involves successful entrepreneur practitioners.
• As young job seekers are the biggest group in the unemployed, entrepreneur
development needs to be focused on this group through various entrepreneur
programs conducted at education institutions and informally conducted at a
school of hard knocks or business world. Education institutions such as the
Entrepreneur University established by Purdi F. Chandra can be held up as a
model which require their students to create their own business and they
graduate only if their businesses succeeded. In addition, students are not
awarded any academic title.
To develop entrepreneurs to become renewers of the national economy, the
following suggestions are recommended:
• The government forms a National Body to integrate and comprehensively,
formulate, develop, motivate, evaluate and monitor entrepreneurial activity;
including the arrangement of in-depth research on success and failure factors of
entrepreneur and entrepreneurial best practices
4
.
• Encourage the business world including employers’ association and educational
institutions to take part in the growth and motivating the regeneration of new
entrepreneurs through various business activities, for example annual
competitions, promotion week, product marketing, etc.
• Stir civil society organizations such as farmers, fishermen and workers’ union to
be an organize community-based activity to identify potential entrepreneurs
from society. Beside that, NGOs can also participate as in identifying
entrepreneurial candidates in the business world.
• Plan cooperation with international organizations, such as UNDP, ADB, World
Bank, ILO and donor countries, bilaterally and multilaterally, through pilot
4
Great news (Kompas, 27 May 2004) reported that government through the poverty reduction committee lead by the
Coordinating Minister of Public Welfare has provided non-guarantee loan for the SME program. As the first step, the
government bank will provide loans to SMEs directly or through the SME agency/intermediary. Other banks will be
brought in as partners. This program is similar to one launched by Bank Artha Graha, a private sector bank. Its
entrepreneur credit program provides credit to the informal sector SMEs without requiring loan guarantees. The Bank
play as foster father after considering the business suitable for the loan and trust each other while not ignoring
prudent principles of bank management.
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projects or technical cooperation in entrepreneurial and SME development. For
example SEED (Small Enterprise Development) training tools include ?
Entrepreneurship of ILO which offer various programs like Start Your Business,
Improve Your Business, Expand Your Business, Know Your Business, etc.
• Pay attention to entrepreneur empowerment which not only includes knowledge
and skill, but also changes of attitude and emotional maturity that is demanded
in the entrepreneur profession. Success stories of entrepreneurs from various
levels can also be showcased as role models and examples of the influence of
entrepreneurial culture.
REFERENCES
Andrias Harefa, Starting Entrepreneur from Zero, Gramedia Group, Jakarta, 2002.
Bambang Ismawan, The Role of Civil Society Organization in Expanding Work and
Business Opportunity, Yayasan Bina Swadaya, Jakarta, 2004.
Bank Indonesia, Empowerment of Financial Consultant/Micro and SME Facilitator of
Banks Partner, Jakarta, 2003.
Bisnis Indonesia, Daily newspaper, Jakarta, 16 July 2004
Didin Abidin Masud, The Struggle of 26 Managers To Success, Gramedia Group, Jakarta,
1997.
Fransiscus Welirang, Motivate the Growth of Healthy and Competitive SME, presentation
paper for SME workshop held by APINDO, Jakarta, 2003
ILO, Decent Employment through Small Enterprises, Jakarta, 2003.
ILO, In-Focus Programme on Boosting Employment through Small Enterprise
Development: Job Creation in SME, Jakarta, 2003
ILO, Working Out of Poverty, ILO Support to the Poverty Reduction Strategy Paper for
Indonesia, Jakarta, 2004.
Japan Federation of Employers’ Association – Nikkeiren Position Paper, Promoting
Structure Reform to Overcome the Crises, 2002.
Kompas, Daily Newspaper, Jakarta, 22 October 1993.
Kompas, Daily Newspaper, Jakarta, 19 January 1995.
Kompas, Daily Newspaper, Jakarta, 10-17-21-24-27, May 2004.
Marc Cowling and William D. Bygrave, Entrepreneurship and Unemployment:
Relationships between Unemployment and Entrepreneurship in the Global
Entrepreneurship Monitor, 2002.
Ministry of SME and Cooperative of the Republic of Indonesia, Official Statistic News
Nr.21/VII/24 March 2004, www.bps.go.id.
Ministry of SME and Cooperative of the Republic of Indonesia, Presentation Paper, 2003.
United Nations Development Program, Unleashing Entrepreneurship, Making Business
Work for the Poor, Report to the Secretary-General of the United Nation, 2004.
Indonesia
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Annex1
The Employers’ Association of Indonesia established on January 31, 1952, was called the
All Indonesian Consultative Body for Businessmen’s Social and Economic Affairs
(PUSPI). Since its 2
nd
National Consultative Conference, the association in 1985 was
renamed as The Employers’ Association of Indonesia or Asosiasi Pengusaha Indonesia
(APINDO). APINDO is the only representative of Indonesian Employers, recognized by
Decree of the Manpower Minister and also mandated by the Indonesia Chamber of
Commerce & Industry – KADIN INDONESIA to handle industrial relations and
manpower matters.
At national level, APINDO is a part of the National Tripartite Cooperation
Council. This body consists of representatives of the government, the employers and the
workers union.
The vision of APINDO is to create business climate for the businesses through its
primary mission to encourage harmonious industrial relations especially at the plant level,
to represent Indonesia business in various manpower institutions, to protect, advocate, and
to empower all business players especially their members.
The activities performed by APINDO cover eight core areas:
1. Organization, regional development and public relations
2. Foreign relations and international cooperation
3. Industrial relations and advocacy
4. Wage and social security
5. Training and education
6. Productivity, OSHE and environmental protection
7. Small and Medium Enterprise
8. Women entrepreneurship, women workers, gender and social affairs
At this moment, there are about 6.000 companies throughout the country that are
registered as regular members. At international level, APINDO also develops networking
and is a member of ASEAN Confederation of Employers (ACE), Confederation Asia
Pacific of Employers (CAFÉ) and International Organization of Employers (IOE). Every
year, APINDO represents Indonesian employers at the International Labor Conference in
Geneva. APINDO also cooperates with International Confederation of Free Trade Union,
Nippon Keidanren International Cooperation Center, Korean Employers’ Federation, and
more.
The APINDO Leadership Council consists of 3 levels; namely The National
Board, The Provincial Board in 30 provinces and the District/City Board in 175 districts.
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MALAYSIA
Zainal Abidin bin Othaman
MARA Negeri Sembilan
INTRODUCTION
Entrepreneurs can be individuals who act independently or are part of an
organization. They create a new venture or developed an innovation and take the risk of
bring them to the marketplace. Identifying opportunities in a dynamic and uncertain
environment requires an entrepreneurial mindset that can take on the passionate pursuit of
opportunities. After identifying the opportunities, entrepreneurs take actions to exploit
them and establish a competitive advantage. The process of identifying and pursuing
opportunities is entrepreneurial, but this activity alone is rarely enough to create maximum
wealth or even survive over time. The action taken must be valuable, rare, difficult to
imitate and non-substitutable to create and sustain a competitive advantage.
Innovation refers to a change in technology that departs from previous ways of
doing things. The outcome of innovation is to find a better product, process or procedure
in accomplishing the task. There are two fundamental types of innovation, namely product
innovation and process innovation. Process innovations are changes that affect the
production method. Product innovations are changes in the actual outputs (products and
services) itself. Innovation teams refer to a group of persons finding solutions to come up
with a better product, process or procedure.
The above circumstances should lead the entrepreneurs to organize and create an
entrepreneurial innovative organization. The increasing rate of globalization and
increasing challenges from competitors warrant that entrepreneurs spend time to think of
new avenues for change in their existing endeavors. In order to fulfill this need it is
important for the organization to have a vision, culture and process for innovation.
This paper will present selected Malaysian entrepreneurs who have infused their
corporations with entrepreneurship and developed innovation teams. They have been
drawn from the 24,510 Bumiputra entrepreneurs registered under the MARA Information
System.
ENTREPRENEURSHIP AND INNOVATION TEAMS
In order for an entrepreneur to create an entrepreneurial innovative organization, it
is important for the entrepreneur to instill in their organization elements that can inspire
and take the organization to new heights of success. At the same time, entrepreneurs
should bear in mind that external forces also play a significant role in enhancing the
success of their undertakings.
Paint an Inspiring Vision
The entrepreneur needs to incorporate in their company a vision that is highly
desirable, challenging and believable. There are manifold benefits to be gained from this
move. First, when people share a common goal and on a journey or adventure together,
they will be more willing to accept the changes, challenges and difficulties that the journey
might entail. Secondly, more responsibility can be delegated. Staff can be empowered and
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given greater control over their work. This is because they know the goal and direction in
which they are headed and can be trusted to steer their own raft and to figure out the best
way of getting there. Thirdly, people will be more creative and contribute more ideas if
they know that there are unsolved challenges that lie ahead. They have bought into (that is,
decided to be participants) the adventure so they are more ready to find routes over and
around the obstacles on the way.
Yaakob bin Husin established YBH Food Products Sdn Bhd at No. 115, J alan
Perdana 5, Taman Perindustrian Perdana Lukut, 71010, Lukut, Port Dickson in 2001. At
that time his business was producing five types of drinks and employed 12 assistants. In
running the business, he had weekly meetings with all his assistants. He instilled “we can“
a motto in his assistants. He told them all problems can be solved with creative thinking,
action and collaboration not only among themselves but also with other people such as
suppliers, customers and government officials. He laid out his vision for the company to
export its products to the Middle East of Asia and to become the leading producer of non
flavored drinks in Malaysia. These messages were constantly reinforced in weekly
meetings.
Build a Receptive, Open and “Without Fear” Culture
People are anxious about change. Change is uncomfortable. Change implies there
will be winners and losers. It is natural that people will prefer to stay within their comfort
zones rather than risk embarrassing or costly failures. Entrepreneurs should spend time
with people encouraging them to undertake risks and reassuring them that those risks are
necessary and worth taking. Fear of failure often inhibits people from pushing themselves
to new limits. However, doing nothing has its risks too; staying in the corporate comfort
zone is a dangerous option. Entrepreneurs should reassure their employees that they will
not be punished for taking risks on worthwhile or bold initiatives that do not succeed. Of
course taking risks means taking calculated risks and not wild risks. Every employee, who
is undertaking a risky initiative, needs freedom and also mentoring and guidance. Again
communication is the key. Informed people do not fear change.
Ghazirah Hashim opened a cake house in Ampangan, Seremban in 1995. She
employs 15 workers in the business. She mixes freely with all her workers and calls them
by name. She frequently encourages her assistants to tell her any mistakes that she has
made so that she can understand and correct herself. This is a departure from the existing
Malay cultural norm to not pinpoint the boss’s or supervisor’s mistakes. She also
encouraged her workers to try new cake recipes in the market and not to be afraid to make
mistakes. She constantly tells her workers it is not wrong to make a first mistake, but it is
wrong to repeat the same mistake made without benefiting or learning from prior mistakes.
Empowering the Employee
Change cannot be delivered by one person. It should be done by the people in the
whole organization – the creativity needed for innovation is in the team within the
organization. In order to transform them into individuals possessing the entrepreneurial
spirit that searches for new opportunities, it is important to empower them. The purpose of
empowering people is to enable them to achieve the change through their own efforts.
They need clear objectives so that they know what is expected of them. They need to
develop the skills for the task. They need to work in cross-departmental teams so that they
can create and implement solutions that will work across the organization. They need
freedom to succeed. They also need to be given the freedom to fail. People want to
understand and agree with what is expected of them. The scope of their freedom and their
Creative Entrepreneurship in Asia
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responsibility must be agreed upon. They need training, reinforcement and encouragement.
They need support in acquiring creative problem-solving skills and encouragement to be
brave enough to come up with radical innovations. Above all, empowerment means
trusting people. It is by giving them trust, support and belief that people are empowered to
achieve great things.
In running the business Yaakob bin Hussin (YBH Food Sdn Bhd) faces lots of
problems especially in obtaining cash sales. He already sells his products to the
hypermarkets and supermarkets in Malaysia as well as other small retail outlets. In the
hypermarkets and supermarkets, he faces problems because when he put the products on
display, he receives payment only two months after they are sold. On top of that he has to
pay a certain amount of fees prior to receiving payment for goods sold and this creates
cashflow problems. In order to overcome this problem he empowered his employees to
discuss marketing opportunities with the Ministry of Education and respective schools in
Melaka, Negeri Sembilan and Selangor. Owing to this empowerment policy, YBH was
able to get an endorsement from the Ministry of Education allowing it to sell its products
to every school and giving a certain portion of its sales to the respective schools
concerned. In doing this, YBH was able to generate cash sales and minimize problems
incurred by cash sales.
Goal Setting and Deadlines
Goal setting is a formal process of deciding what the enterprise wants to achieve. It
provides long-term vision, short-term motivation, and helps to focus on the acquisition of
knowledge and organize the resources. By setting clearly defined goals, employees can
take pride and raise their confidence through the achievement of these.
Haji Manggar, principal owner of Heritage Drinks Industrious Sdn. Bhd. (HDI) is
projected to have sales of RM 30 million in 2004. In 2002, its sale was RM 12.3 million.
In 2004 it produced 840,000 tins of Heritage drinks per month. This is 10% of the
production capacity.
In order to increase the production, HDI must weigh numerous factors. HDI is
producing three types of drinks, Tongkat Ali Herbal Drink, Kacip Fatimah Herbal Drink
and Tongkat Ali Diet Herbal Drink. Tongkat Ali or Eurocoma Longifolio J ack is derived
from plants and is very popular due to its aphrodisiacs functions. It is often called the
Malaysian Tonic. Kacip Fatimah or Labisia Pumila Benth is also from plants and
popularly used as a traditional medicine given to women after childbirth. At the moment
HDI is selling RM 2.90 per tin.
HDI has formed a committee to find solutions to increase its productions and sales.
HDI conducted a SWOT (Strength, Weaknesses, Threat and Opportunity) analysis of its
business. HDI has a big advantage because it has received International Awards namely,
the “New Millenium Award Paris 2000 France” and the “International Quality Summit
Award New York 2001”. The awards present HDI as an internationally recognized quality
product. At the time of writing, HDI is sold to 12,000 retailers in Malaysia out of 120,000
retailers. It has since realized the untapped opportunities in the market. However, HDI
experiences a lot of competition. The niche market that HDI is in the “energy and health
drinks” market segment. In Malaysia this market amounts to RM 100 million a year.
Competition comes not only from the local entrepreneurs but also from the international
companies.
In addressing these findings, HDI is developing additional products. It is now
adding canned drinks with flavors such as strawberry and orange. It now concentrates its
efforts in exporting these drinks to the Middle East. In its promotion program it replaced
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the older actor with a younger one to attract the younger age group of 18 to 30 years.
Furthermore it intends to reduce the price of each drink to RM 2.50 to boost sales.
Use Creative Techniques to Generate a Large Number of Ideas
Every one of us can be creative if we are encouraged and shown how to do it. We
were all imaginative as children but gradually most people have their creative instincts
restrained by the routine of work. With proper training, people can develop skills in asking
questioning and selecting ideas. They can be the innovative engine that the organization
needs.
The process of finding creative solutions is something that can be built into the
culture of an organization. This is done by techniques, methods, workshops and a
pervading attitude of encouraging crazy ideas.
The goal is to change the organization: to achieve a metamorphosis from a routine
group of people doing a job to a highly energized team of entrepreneurs, who are
constantly searching for new and better ways of transforming vision to reality. The aim is
use creative techniques to develop innovative solutions to achieve the goal. But merely
encouraging innovation is not enough. There is a need to initiate programs that show
people how they can use creative techniques. People need training in order to learn the
skills and to develop the confidence to try new methods.
Musa bin J eb has operated the Sembilan Resource Management Sdn. Bhd. since
1998. He rented a former resort for RM 50,000 a month and changed it into a training
center. His average expenses per month is around RM 130,000. It is very trying for him to
sustain in the business because he cannot depend on walk-in customers. He has to get the
multinational companies and the government agencies to conduct their staff training and
entrepreneurial development program at his center. He makes sure his employees address
all his customers “Sir/Madam”. He or his staff personally buys supper for all the
organizers of the programs. He encouraged his staff to attend seminars, workshops and
courses in order to broaden their knowledge. In doing so he feels his employees will be
better equip to develop skills in questioning, brainstorming, adapting, combining,
analyzing and coaxing customers. From the feedback given by his staff, he is now able to
diversify and operate a garment shop.
Involve Customers in Business Improvement
Customers play an important role in formulating and strengthening a business
organization. The goal is to identify ideas, problems and solutions for new products,
services, and processes. The customers are the users of the end-products. Their needs and
wants should be addressed. It is important to involve customers in generating ideas as well
as focusing on their needs.
Anifa Entreprise Sdn. Bhd. (Anifa) is a family business, established in 1996 and
located in J alan Bongek Tengah, 71,300, Chengkau, Rembau. It was started by Anifa and
had 6 employees in the beginning. Currently, it manufactures 5 types of bottled sauce.
ASB used to receive a large number of returned sauce bottles from its vendors. ASB
sought to understand why those sauce bottles were being returned by the customers. It
conducted a survey and found that customer tastes differed by region. Those staying in the
eastern part of Peninsular Malaysia such as Trengganu and Kelantan preferred a sweeter
sauce taste. Customers in the southern part of Peninsular Malaysia such as J ohore, Melaka
and Negeri Sembilan, preferred a hotter sauce taste. On discovering these taste preferences
as the cause of the returned bottles, Anifa changed its supply of sauce in accordance to the
preferences of each region.
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Cooperate with Suppliers
Suppliers can be key partners in the idea-creation process, but many organizations
are reluctant to share information with suppliers fearing they might be partners with their
competitors. Other obstacles to cooperation include cultural differences, lack of
cooperation, lack of resources, and lack of vision – leading to an inability to conceptualize
new opportunities.
Abu Motors Sdn. Bhd. began operations in 1996. By 2004 the company opened a
new branch at Taman Markosa, Seremban, Negeri Sembilan. It sells and repairs motor
cycles. Apart from Malay, Abu can speak fluent Chinese. In executing the business, he
receives considerable cooperation from suppliers even though they are of a different race.
These suppliers are friendly to him because he is able to relate to them in Chinese which
he acquired during his primary school education in a Chinese school. They have been
helpful in giving him many advantages such as payment through consignment,
rescheduling late payments etc. His suppliers are also ever ready to supply vehicles to him
compared to his other competitors who frequently face stock outages and irregular
delivery.
Networking through Business Associations
Entrepreneurs need information. They need to build good relations with relevant
authorities so that they can make better decisions in their business undertakings.
Yaakob bin Hussin of YBH Food Sdn. Bhd. is the Vice President of the Malay
Chamber of Commerce Association, Negeri Sembilan. In that appointment he has access
to other members of the association. Since becoming Vice President, he has attended
courses and mingled with the Malaysian Minister of Entrepreneurial Development, other
VIPs and entrepreneurs. Through the interactions at networking sessions he learnt of
another source for raw materials from India which is cheaper and of better quality than
local sources.
Support of Government
The government of Malaysia has created a government ministry specializing in
promoting and developing entrepreneurs. Funds are made available to entrepreneurs.
MARA, for example, has the objective to encourage, advise, train and help the Bumiputra
to participate actively in the activities of small and medium scale industry and commerce.
MARA implemented the Entrepreneurial Program, the Business Financing Program
and the Development of Business Infrastructure Program to help Bumiputra entrepreneurs.
The Entrepreneurial Programs implemented in 2003 are as shown in Table 1 below:
Table 1: Entrepreneurial Programs Conducted in 2003
Program No. Entrepreneurs Amount (RM)
Entrepreneurial Training 7,317 2,798,022
Consultancy Services 813 652,377
Apprentice Training 2,427 1,190,571
Marketing Promotions 131 100,390
Technical Entrepreneur 1,707 1,367,202
Furniture Technology & Resource Centre 349 252,164
Total 12,744 6,360,726
The Business Financing Program provides financing facilities to assist Bumiputra
entrepreneurs who wish to start a business venture, improve their businesses or upgrade
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their entrepreneurship level in commerce as well as in the small and medium scale
industry sector. The number of entrepreneurs who received this business financing
facilities and the amount approved is shown in Table 2 below:
Table 2: Business Financing Program in 2003
Sector No. Entrepreneurs Amount (RM)
Wholesale 1,854 103,167,700
Trading 1,581 27,734,000
Services 1,162 23,252,000
Manufacturing 208 4,705,000
Transportation 69 2,995,000
Total 4,874 161,854,538
The Development of Business Infrastructure Program aims to provide business
premises and industrial lots for lease to Bumiputra entrepreneurs in order for them to be
able to run their businesses at strategic locations. At the end of 2003, the number of
projects available for lease by Bumiputra is shown in Table 3 below:
Table 3: Facilities Provided under the Business Infrastructure Program
Types Of Projects Total Project Total Units
Arcade 80 2,050
Bazar 83 1,030
Business complex 24 997
Shophouses 76 833
Workshop 19 193
Industrial lot 14 294
Total 333 5,308
Bumiputra entrepreneurs are invited to adopt MARA as their business partner.
Commercialization of Research and Development Products
The government of Malaysia is allocating 0.4% of its GDP to Research and
Development (R&D). Under the Sixth Malaysia Plan, it is allocating RM 629 million with
the amount increasing to RM 935 million in the seventh Malaysia Plan. The Malaysia Plan
is a 5 year Plan. The Seventh Malaysia Plan is from 1996 to 2000. These R&D funds are
distributed to various Universities, Higher Public Learning Institutions and public research
institutions. The government has set a priority on R&D that can be commercialized. At
the National University of Malaysia, R & D projects with potential to be commercialized
are put on display.
Abdul Rahman from Reger Tools Sdn Bhd had approached the Research
Development Centre, National University of Malaysia and Nik Abdullah Nik Mohamed, a
researcher who had founded the product, Fire Locking System. This system is useful
usually during fires. In the panic during a fire, an occupant would have problems
remembering where the house keys are. In addition, it might take an unnecessarily long
time to unlock in the house doors which could fail with the metal components of the lock
expanding due to the increased ambient temperature. As a solution to this problem, a door
lock activated by a smart material sensor is recommended to unlock the doors when a high
Creative Entrepreneurship in Asia
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temperature is detected. Reger Tools has entered a memorandum of understanding with the
university. The company has successfully applied for a grant from the Ministry of Science,
Technology and Innovations for a sum of RM 2 million to upgrade and commercialize the
Fire Locking System.
CONCLUSION
The entrepreneurs in Malaysia include their employees, customers, suppliers, the
government and retailers as members of their innovation teams.
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PHILIPPINES
Dr. Justino R. Arboleda
Coco Technologies Corporation
The implementation of the GATT has always been regarded by many businessmen
in the Philippines with apprehension. It is a common belief that small rural based
enterprises would not survive competition from countries with more efficient and lower
production costs, and support from their governments. With good business ideas,
innovative marketing, investment in education employee, training, and constant product
development, even small rural based companies can compete in a global market.
Editorial Note:
This country paper is a first person account of creative entrepreneurship in the rural
sector. The first person voice of the author has been retained because unlike the other
papers in this volume the author is the entrepreneur.
INTRODUCTION
You are perhaps wondering why a CEO of a small company would need a doctorate
degree in anything. The truth is, I am only an accidental entrepreneur. I was in the
academe and was the Dean of the College of Agriculture and concurrently the Vice-
President for Planning, of Bicol University, a government university in the South of
Manila for ten years.
My university is located in the poorest region in the country. In spite of its
proximity to Manila, the national capital and the largest market for all goods and services
in the country, the area has remained poor. Being in the academe, I was the head of a
poverty study commissioned by the government and Asian Development Bank in 1989-
1991. Our study’s showed that ignorance on resource development, lack of farming and
entrepreneurial skills are the main causes of poverty of farmers in the region. Our
university, therefore, with me as its head, has started to develop technologies and skills
that will help the farmers develop their resources.
The paper I am presenting is a topic that I am very familiar with because it is based
on my experience: a story on how an academic who knew nothing about business, became
an entrepreneur.
RURAL DEVELOPMENT AND PRODUCTIVITY CHALLENGES IN
THE PHILIPPINES
The region I lived in is almost 70% taken up by coconutcrops. The good thing about
coconuts as a crop is that it thrives very well in our area where there is abundant rainfall
every year. No other crops would do as well in such an environment. Unfortunately, the
income from coconut is only about P1,000 (One Thousand Pesos) per hectare per month.
With almost 2.4% per annum population growth in the Philippines, the average land area
held by a farmer is down to two hectares per family. This situation leaves almost 70% of
the farming population in my area with an average monthly income, derived from
farmings of US$40. To survive, the farmer will have to take on odd jobs in town, send his
Creative Entrepreneurship in Asia
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children to be maids in Taiwan and other countries, or to take up any work they can find to
contribute to their family’s survival.
This is the main reason why the economic indicators of our region are very low.
The very low productivity of these farmers drags the indicators down. More than 30 years
ago, Philippines was ahead of many countries in terms of economic development. Yet it is
one of the least economically developed countries in the region today. As the population
grew and farms become smaller, the corresponding incomes of farmers decreased without
the development of new rural enterprises.
The challenge in developing the farmers in the countryside is they lack the basic
skills, and lack of access to opportunities and new ideas to develop their resources:
1. Lack of Formal Education
The Filipino farmers only have an average of five years of formal education.
They are literate but have no opportunity to further their education.
2. Lack of Available Technologies to Develop Their Farm
Most of the developed technologies are for rice and corn. There are none or very
little village level production technologies applicable to the coconut farming
system.
3. Lack of Land Resources and Capital
Most of the farmers do not have land or cannot avail themselves of the loans
from formal lending institutions. The requirements are not simple to comply
with, even in government banks. Most commercial banks only exist in the
countryside to collect deposits to fund lending in the industries in the cities. This
further decreases the flow of money in the rural areas.
4. Lack of Organizational, Technical and Entrepreneurial Skills
There are very few farmer cooperatives that have succeeded in the Philippines.
Many do not have the entrepreneurial and organizational skills necessary to start
a manufacturing operation or any business except farming.
Rightly or wrongly, my grandparents, and uncles who were revolutionists and
nationalists, blamed the lack of entrepreneurship and lack of organizational skills on our
colonial educational system. They said that in the installation of our educational system,
the Spanish and the Americans simply wanted literate but obedient and controlled subjects.
They never wanted to educate future business competitors.
DIFFICULTIES OF STARTING A PIONEERING RURAL ENTERPRISE
To aid the development of the coconut farming system, it has been the focus of our
university, under my leadership, to develop rural based enterprises. One such project
involved developing technologies to process waste coconut husks into coconut fiber
erosion control materials and coir dust as a soil conditioning agent. Coconut husk is one of
the biggest item of farm waste in the Philippines. About 12 billion coconut husks or about
6 billion kilograms are burned in the farm each year. Until now, I keep on wondering why
we have not done this sooner.
With the funding support of IDRC (International Development Research Center of
Canada), I was able to start a small project developing rural-based manufacturing
Philippines
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technologies to produce cocofiber products for erosion control. Unfortunately, like many
other technologies developed in the university, there were no adopters of the technology. I
was very frustrated and people were even distrustful of technologies coming from the
universities. They said that members of the academe would not even invest a single penny
of their own money in the technologies they have developed. I understood the situation,
but it made me so frustrated that I decided to quit the university and engage in the business
myself just to prove it is viable. I did not want the results of the research activity to gather
dust in our library shelves. Many other technologies developed in the university suffer this
fate for the following reasons:
1. Fear of Venturing into New Enterprises (Lack of Entrepreneurial Spirit)
Perhaps because of the lack of capital resources, people are afraid to risk their
lifesavings in an uncertain venture. The lack of tolerance for failure, which
usually devastate family resources, makes venturing into a new business,
however seemingly attractive, difficult.
2. Lack of Venture Capital or Government Assistance for New Businesses
It is difficult to start a business through borrowing without real estate collateral,
which academics like me do not have. Business is so difficult now that banks do
not even lend money on chattel mortgage of unusual machineries. Venture
capital does not exist in the Philippines and it is futile to seek financial
assistance from the government.
3. High Cost of Informal Sources of Financing
Therefore new rural entrepreneurs like me had to rely on the high cost of
borrowing from informal sources of financing, friends and relatives. Some of
the money I borrowed had interest rates of 25% per year or even higher.
I therefore had to use my wife’s life savings, which was then only about
US$2,000. But of course the cost to me is to be good and obedient to my wife
for many years. Borrowings from my brothers and sisters, also have many social
costs for me. They eventually became stockholders in our company and I have
to deal with listening to all their ideas and suggestions on how the company
should grow.
4. Lower Social Status of Small Entrepreneurs
Of course my wife was worried about our future when I left the university. On
top of that I had to borrow all her savings to venture into a business she did not
understand. What she probably found hardest to cope with was the drop in my
social status: from being the dean and vice president of a major government
university in the country, to a small businessman, just like the small shop-keeper
near our house, selling many small items.
In a country where success is equivalent to being employed in a top American
corporation or being a high level official in the government, being self employed
is only for the non-achievers who could not be employed elsewhere and have no
alternative things to do in life.
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People came to talk to my wife to dissuade me from leaving a very promising
academic career for an uncertain future in gathering farm waste. Everybody I
knew thought I hade gone crazy.
For quite a while, I really thought that I made very hasty decision quitting the
university. I had no choice but to burn my bridges so that I could really face up
to the challenge of managing a new enterprise, which proved to be exciting but
very difficult and totally different from the world I was used to.
MARKETING CHALLENGES
One of the disappointing realizations of academics or a technical person like me
who goes into business is that 90% of my time has to be devoted to a job we hate most:
selling and dealing directly with customers.
1. Seasonality of Export Market
We initially sold our fibers to small local furniture manufacturers, but the
volume was not big so we decided to look for export destinations. In one of my
trips to Europe as a consultant to GTZ, I requested the Philippine Embassy to
look for a possible user of coconut fiber in Germany. I found a small company
using jute and other plant materials for erosion control but was willing to
develop products from coconut fiber. The product development was successful
and it became easy to market the products to J apan and the United States as
well. All we had to say to the J apanese was that the Germans are using it and to
the Americans, that the Germans and the J apanese are using our products.
The difficulty with exporting our products is that they are linked to the planting
and landscaping season, usually during autumn and spring. We have limits to
our inventory, and after one export season, our factories have to slow down
production in anticipation of the next export season.
We are trying to even our inventory imbalance by exporting to Australia and
New Zealand, which has opposite seasons and by developing the local market.
2. Need for Local Market Development
Initial difficulties were encountered in the Philippines because engineers in the
country are not familiar with the method using plants to stabilize the soil.
Strategies were developed for the Philippine market. Through these strategies,
our company has grown from initial export sales of 15% in 1996 to 17% in
2003.
a. Bias Against Locally Made Products
It is harder to sell in the Philippines locally made products than exporting to
other countries. Filipino customers generally are biased against locally
made products because of quality concerns. We have overcome this by
informing customers that our products are being used in developed
countries and produced brochures showing the foreign use and applications
of our products.
Philippines
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b. Collection Difficulties
The problem with selling to local customers in the Philippines is the delay
in payments. Customers usually delay their payments until they can collect
from their construction projects. Although we can compensate this by
increasing our prices to cover our financing costs, this remains to be our
biggest problem with the local sales. Our capital is tied up with a large
collectible account from the customers.
3. Providing Quality Service
The local construction industry in the Philippines is limited to a few of
companies. Although they compete with each other, each company tries to learn
from the experience of other companies. We see to it that we provide very good
service to our customers and that it is to their satisfaction. Gradually, even
without advertising, we are becoming known in the construction industry as the
company to consult for erosion problems. In 2004, most of our jobs are repeat
orders from old customers for their new projects.
4. Creating a Marketing “Story”
In order for potential companies to remember us, we highlight the fact that we
are employing thousands of poor families who earn their living making erosion
control nets. We also add the fact that the waste coconut husks are used instead
of being burned and contributing to the pollution of the environment.
Many of our customers are big land developers who also have programs to help
the poor and reduce poverty. Using this story to touch the sensitivities of our
customers gives us an edge. All things being equal, we usually get more erosion
control projects over other construction methods on the basis of the customers’
desire to help the poor.
5. Lobbying for Government Support
As the company grew, it became confident in handling larger projects. When it
comes to construction projects, the government is the biggest customer in the
country. Convincing the government to use our materials as a means to reduce
poverty in the coconut areas took us two years. Finally in September 2003, the
government issued a Memorandum Circular to all government agencies
including the Department of Public Works and Highways to use coconut fiber
products as erosion control material in the country.
6. Personal Touch of the Chief Executive
In whatever marketing efforts, it is still the chief executive of the company who
is the top salesman. Constant contact with the customer by the chief executive
makes the customer feel important and the relationship continues with the
customer even overlooking certain mistakes made by our company because we
keep in touch. This customer relationship maintenance however, takes so much
of my time that my wife already regrets that she ever lent me the money to start
the company.
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INCREASING PRODUCTIVITY IN A RURAL SETTING
My company was established as a poverty alleviation project. As such, there was a
focus on the employment of farmers. This posed no problem at the start of the company
because I was always around to manage things. The situation has however changed when
we set up office in the capital city and I had to spend most of my time in managing the
sales and services work of the company.
Initial attempts to hire new supervisors and lower level managers from outside did
not succeed. Their knowledge of the company is limited and there was resistance from the
old employees. A lot of work had to be done to introduce management skills to existing
workers who have very low skills level. The educational profile of the workers is as
follows in Table 1 below:
Table 1: Formal Educational Attainment of Juboken Enterprises Workers
Category No. of years Factory Household
subcontract worker
Elementary Six years or less 11% 68%
High school Ten years or less 86% 30%
Collegiate Fourteen years or less 3% 2%
As can be seen on the table, the company employs the poorer sector of the society
with low formal education and low level of work skills. It is therefore a challenge to
increase their production output without close supervision.
Our company however faced two situations, which necessitated improvements in
the production of the company:
1. Higher demand for more production and lower prices;
2. More time for the management to focus on marketing; and
3. Need to develop management skills among present workers
Our company took the following steps:
1. Invest in Employee Productivity Training Programs Conducted by
Government Agencies
These training programs are usually free of charge and are good eye openers for
the employees. Not only do they get a new perspective of their work, workers,
who have undergone training, usually have higher self-confidence and self-
respect.
2. Conduct of Field Trips to Other Companies
Field trips permit the employees relax and also provide an opportunity to
compare the advantages and disadvantages of the company.
3. Provision of Skills Training to Enable the Employees to do Multiple Tasks
This provides employees with other skills e.g. electrician, welder ettc. Their
salaries increase if they are multi-skilled, and the company benefits by saving on
the costs of hiring another worker.
Philippines
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4. Improved the Production Recording System to Identify Group Outputs
This system identifies the output of each group and comparative analysis can be
done on the performance of each group.
5. Set Production Targets
As demand for our products increases, delivery deadlines and production targets
have to be met. Increased production is achieved as much as possible without
increase in number of employees or resources. The management and workers
both agree on this target.
6. Established Incentive Systems for Production
If production targets are met, group incentives such as additional one-month
salary are provided for. Last year, our workers received additional two months
salary for meeting their production targets.
7. Conduct Weekend Meetings to Check Performance, Discuss and Solve
Problems
These meetings have become very important in monitoring the performance of
the workers, and jointly solving problems and issues arising from the efforts to
meet production targets.
To free ourselves from spending too much time in production activities and to
concentrate on marketing, we had to do the following:
1. Give our employees our full trust and confidence
2. Give our employees authority to make production decisions
3. Give our employees high tolerance to mistakes and praises for a job well done
4. Give our employees the necessary moral support and the budget they need
As a result of what we have done, we have almost doubled our production and sales
in the past three years without a corresponding increase in labor and production costs.
We have also experienced the following benefits:
1. Less direct supervision and more senior management time to sales activities
2. Less conflicts in the production floor
3. Higher compensation to employees
4. Larger employee contribution to the company activities
KEEPING AHEAD
Although a pioneer in the coco fiber erosion control business in the Philippines, we
still have to keep ahead of our competitors by doing the following:
1. Providing Specialized Services for Customers
Using coconut fiber erosion control materials in combination with plants to
protect construction areas from soil erosion is a technology new to many
companies and government agencies. Our company assists customers in the
design and installation of these products. Other companies are not capable of
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providing these services. We therefore have a very great edge and dominate the
erosion control market in the Philippines.
2. Forming the Best Sales and Services Team
If in the factory we have to contend with employees who had low skills level,
our sales and engineering services office in Manila have to have the best people
we can afford. With the economic crisis in the country, it was not very difficult
to hire top graduates.
3. Investment in Product Development
Constantly studying the customer’s needs through consultation is necessary to
develop new products.
4. Quality Assurance and Guarantees to Customers
Our company assures the customers the best quality goods and services. To
prove this, we provide one-year warranty for our work. No other company in the
Philippines does this. Through this move, we gained and enjoy the trust of the
clients.
CONCLUSION
With the implementation of the GATT, many in the Philippines fear that small
enterprises in our country would be wiped out of the competition due to the lower labor
and production costs in other countries.
Our experience in our company shows that with a good business idea, investment in
product development, innovative marketing, and investment in training of employees, even
rural-based companies in the Philippines can compete in a global market.
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SINGAPORE (1)
Dr. Aloysius Tay Ban Hock
Formerly Association of Small and Medium Enterprises
“The creation of something new is not accomplished by the intellect but by the play
instinct acting from inner necessity. The creative mind plays with the objects it loves.“
On this note, I thank you for being a wonderful audience and hope you will be able
to take away with you some key insights on creative entrepreneurship.
INTRODUCTION
The rapid spread of general-purpose technology, particularly information and
communication technology (ICT), is changing work organization practices, production
processes and the relationships between consumers and producers.
Singapore was ranked the sixth most technologically sophisticated country in the
world and ranked fifth in the world for “firm-level technology absorption” by the Growth
Competitiveness Report (World Economic Forum, 2004). This indicates that Singapore
firms are aggressively absorbing new technologies to enhance business growth and
competitiveness, and are employing increasingly sophisticated technologies in the
industries. Singapore also showed significant increase in its ranking on the Technology
Index of the Growth Competitiveness report between 2002 and 2003.
By adopting new technologies or changing current technologies and processes, it is
a strategic and deliberate attempt by businesses to propel themselves to new levels on the
economic playing field. To rise above the competition, companies in Singapore will not
only need to compete within the country but also with regional and international players.
In this paper, four local companies are highlighted for their adoption of technology
to stay above the competition. It should be noted that three cases discussed here are
companies who have adopted process innovation and not product innovation. All firms are
significant players in their respective fields in the Singapore SME sector. The case
examples are followed by a section or the Singapore government’s initiatives to support
enterprise innovation.
Table 1: Global Competitiveness Report 2003-2004:
Singapore’s Performance on Technology Index
(Source: http://www.spring.gov.sg/portal/stats/productivity/ssect1_112.html)
Top Country
& Score
Singapore
(Ranking) & Score
Indices
2003 2003
2002
(original)
TECHNOLOGY INDEX
Measures the elements of innovation linked
to economic growth, diffusion of
technology, and information and
communications technology (ICT).
United States
6.3
(12)
5.09
(17)
4.89
Creative Entrepreneurship in Asia
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Table 1 (Cont’d)
Innovation sub-index
United States
6.44
(15)
4.04
(20)
3.76
Technological sophistication
Country’s position in technology among
those of the world leaders
Finland
6.6
(6)
5.8
(9)
5.6
Firm-level technology absorption
Companies in one's country are aggressive
in absorbing new technology
Finland
6.4
(5)
6.1
-
Company spending on research &
development
Companies in one's country spend heavily
on R&D relative to international peers
United States
5.9
(10)
4.8
(16)
4.6
University/industry research
collaboration
Business collaboration with local
universities in its R&D activity is intensive
and ongoing
Finland
5.9
(3)
5.3
(9)
5.0
Utility patents
US patents for invention granted per million
population, 2002
United States
301.48
(10)
97.62
(14)
72.12
Information and communication
technology (ICT) sub-index
Iceland
6.32
(6)
6.14
(5)
6.02
SCIENCE ARTS CO. PTE LTD -TRADITIONAL CHINESE MEDICINE
Science Arts Co. Pte. Ltd. (“Science Arts”), a traditional Chinese medicine
company stepped out of its comfort zone to embrace technology in order to stay ahead of
its competition. The small, but fast-growing company has successfully merged a
traditional business with an untraditional way of doing business.
This importer and processor of Chinese traditional herbal medicines in Singapore
and Southeast Asia has a widespread network of retailers. The operation is no small
undertaking. Science Arts carries a catalogue of more than 2,000 different products, and
annual sales of more than US$6 million.
The Science Arts sales force had been facing dissatisfied clients when it came to
taking orders. It would normally require 48 hours from time of order to delivery.
Occasionally, a wrong order may turn up due to misinterpretation of the sales order
because of the sales representative bad handwriting. Hence, with the feedback from the
sales force and clients, the management and staff of Science Arts brainstormed to resolve
the problem. With the assistance of a IT solutions provider, Silk Technology, Science Arts
decided to equip all of its Singapore sales representatives with the HP Jornada 568s, a
pocket PC, which allows the company to track customers and record product orders.
Linked to mobile phones, the device taps into a backend system that features an HP LC
2000 server networked to five HP Vectra model desktop computers for processing
transactions and two other HP PCs used to ring retail sales record .
Singapore
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The Pocket PCs have proven to be a boon to their business where the sales
representatives can transmit orders back to the home office anytime, anywhere, greatly
shortening the sales cycle. This allows them to spend more time selling new products to
their customers. The pocket PC is equipped with smart features which has the ability to
predict and understand the customer’s preference. As a result, Science Arts enhances
customer loyalty by providing the right products in the right place, at the right time to the
right customers. Science Arts earns itself a favorable reputation amongst its customers for
efficient and punctual inventory replenishment.
Science Arts’ Managing Director, Mr. Tan Lee Huak estimated that he has achieved
a 30% increase in new businesses. The sales representatives can now call on 13 customers
instead of 10 each day as they are more efficient now. Mr. Tan noted the integration of
external sales to back-end accounting and distribution operations eliminates human error,
especially in data entry. The new mobile sales force solution also reduces the inevitable
conflicts between the field staff and the back-office logistics staff.
As a result of harnessing technology, the company has been able to trim overheads
by reducing paperwork, human capital and unnecessary trips to client’s retail outlets
arising from wrong orders. The results have been satisfactory to the company such that it
now plans to expand its business by examining the possibility of pursuing new overseas
markets.
Five years ago, the company was anxious to reduce costs and increase productivity
after fighting against a severe slowdown in the regional economy. Managers struggled to
keep inventory in line with declining sales – a difficult task to accomplish without
computerization and management’s swift adoption of creativity and innovation.
COLOURS BY THE BAY TRENDS ? FOOD & BEVERAGE
Food & beverage (F&B) operators are rapidly integrating new technologies into
their businesses and reaping the resultant benefits of higher productivity. Nooch, a “noodle
bar”, is one of the first restaurants in Singapore to embrace information technology. The
management and staff deliberated on a solution that will improve the overall customer dining
experience. The central objective was to capture customer loyalty and increase market share
through overall customer satisfaction. Hence, the Personal Digital Assistant (PDA) was
employed to do the job. The waiter keys in the order into the PDA and this information
automatically registers on a computer located in the kitchen. This system allows staff to devote
more attention to serving diners. Food usually arrives 10 minutes after the order is taken.
Billing is made more efficient too. Any changes made to the order is reflected instantly at the
cashier, hence eliminating billing errors. Furthermore, with the assistance of intelligent
backend material management systems restaurant owners will have better control over stock
reordering. On top of that, greater financial security is guaranteed, as unreported sales will be a
thing of the past.
“Colours By The Bay”, a restaurant group comprising seven different outlets, is one
F&B operator who has taken the concept to a higher level. By adopting a cluster approach,
seven F&B operators are banded and set up their outlets at a common location; offering
different dining concepts in a common location, sharing resources such as advertising and
promotions, and leveraging on a common technology infrastructure - Wireless Point-Of-
Sale – to minimize cost and improve productivity and efficiency.
This initiative has also proved to be a success - increasing workers' efficiencies and
boosting sales They provided an excellent example of how SMEs can work together to
enjoy economies of scale. “Colours By The Bay” introduced a wireless cross-ordering
Creative Entrepreneurship in Asia
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system. For the first time, diners have the choice of ordering from any of seven eateries,
regardless of where they are seated. The orders will be sent directly to the respective
restaurants' F&B counters, kitchens and point-of-sale systems. This cross ordering is made
possible through the use of wireless networking and handheld PDA technologies that span
floor area of 2,415 square metres.
On top of this, the system can cross-bill the restaurants and a customer can ask for
his bill to show which outlet he has ordered from. “Colours of the Bay” has taken an
innovative approach of combining interesting F&B concepts with wireless technologies, to
enhance customer service and operational efficiency.
THE CRESCENDAS GROUP ? CRESCENDAS MEDICAL PTE LTD
MEDICAL SECTOR
The Crescendas Group is a dynamic and diversified group of businesses with
operations and facilities in Singapore, Malaysia, China, Myanmar and Laos. With a track
record of more than 20 years and staff strength of more than 1,000 employees, the
Crescendas Group's business portfolio can be grouped into the following business
divisions:
• Property;
• Building;
• Leisure;
• Electronics;
• Distribution;
• Medical.
The group started their business in 1982 in the transport and distribution business.
Today, Mr. Lawrence Leow, Executive Chairman of the Group, has not only established
the abovementioned businesses, he was also added a medical portfolio. Crescendas
Medical will soon launch their first dialysis machine on the market. This will be the first
of such machines that are manufactured by a company in Southeast Asian region. Mr.
Leow explained that he has assembled a good R&D team and by learning from the
Germans, his team managed to adopt the German’s technology and assemble a locally-
made dialysis machine.
With the willingness to adopt technologies and the commitment of the teams at The
Crescendas Group, the company is able to stay ahead of the competition. As this product
has not been launched, specific details cannot be provided.
NATURAL COOL AIR-CONDITIONING AND ENGINEERING PTE LTD –
RETAIL IN AIR-CONDITIONING, MOBILE AIR-CONDITIONERS
SHOWROOM
Buying an air-conditioner is now more convenient than ever. Natural Cool - one of
Singapore’s leading company in air-conditioners retail sales and servicing, introduced its
unique Cool Mobile showroom, that brings its air-conditioners right to work/renovation
sites and residential properties. This innovative idea has made the purchase of air-
conditioners more convenient as potential buyers can view different models of the product
and receive professional advice about it at their doorstep. A wide range of well-known
Singapore
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brands which buyers can choose from are available on-site. Customers simply call a
hotline and Natural Cool will send its mobile air-conditioner showroom to any place in
Singapore.
This idea was conceptualized in the boardroom when the company responded to
salesmen’s feedback on customers’ complaints about the opening hours of its retail outlets
– the customers said that the stores were opening late and for too short a period. The board
then decided to bring the showroom to the customers at a time as requested by them
instead. The company acted to meet the needs of people of who often complain of their
lack of time.
The investment made to implement this creative sales idea is minimal. The only
new requirement was a van that was modified to showcase the various models of air-
conditioners. A licence was obtained from the Land Transport Authority of Singapore
(LTA) to convert ordinary vans into the required mobile showrooms. Training was
conducted for sales personnel who were stationed at the retail stores. Thus these sales
personnel are equipped to perform a cross-section of duties, such as being the driver, the
salesperson, as well as the site surveyor. The same person would recommend,
demonstrate, sell, conduct site viewing and take the necessary measurements.
In conducting a cost and benefit analysis of this innovative idea, the incremental
cost is minimal, but the result is an overwhelmingly high rate of sales closure – 90%.
Savings are accrued from the reductions in overheads associated with a showroom set-up.
Natural Cool obviously benefited from the exposure that this creative idea brought
them. In this instance, the company did not harness new technology to increase
productivity, but embraced old technology instead ? by using an automobile to improve
business.
WHAT THE SINGAPORE GOVERNMENT HAS DONE
It is well recognized that technological innovation lies at the heart of a nation’s
ability to sustain high rate of economic growth and productivity and to maintain
competitiveness in the increasingly knowledge-based global economy.
Government agencies like Standards, Productivity and Innovation Board
(SPRING), InfoComm Development Authority (IDA), Economic Development Board
(EDB) and International Enterprise Singapore (IES) are working hand in hand with the
industry to help SMEs to innovate and adopt technology to remain competitive. It should
also be noted that there are numerous other schemes that Multi-national Corporations can
tap on. The focus here is on the SME sector where government assistance is greatly
needed.
SME21
Small and medium-sized enterprises play a critical role in Singapore’s economic
development. SPRING is the lead agency for upgrading SMEs and transforming the
domestic sector for higher productivity. A major initiative in the SME21 strategic plan is
to provide assistance to accelerate the development of growing companies. The target is to
have 6,000 SMEs achieve annual sales of $10 million by 2008. This means that one in 15
SMEs would have the potential to become a large company. To date, 3,630 SMEs have
successfully grown to this level.
GET-UP Scheme
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To boost the global competitiveness of technology-intensive enterprises, the
Growing Enterprises with Technology Upgrading (GET-UP) program was launched in
February 2003. A multi-agency initiative of the Economic Development Board, SPRING,
IE Singapore and A*STAR, GET-UP facilitated the placement of research scientists and
engineers from A*STAR’s research institutes in local enterprises.
PATH Scheme
Administered by IDA, Pilot and Trial Hotspots or PATH, first introduced in May
2001, is an industry development initiative that accelerates the development of innovative
infocomm infrastructure, applications and products. It does this by supporting the trial and
pilot of emerging infocomm technologies and best-of-breed services. To be entitled to
PATH, the company must be able to display the following:
• Involve the innovative use of wireless technologies in one or more of these
areas: mobile commerce, location-based services, wireless multimedia and
messaging, wireless enterprise and machine-to-machine communications;
• Be conducted in Singapore, unless otherwise justified; and
• Demonstrate significant levels of contribution to new capabilities within the
company and/or industry.
LEFS and LETAS Schemes
SPRING administers two government schemes to help SMEs upgrade, modernize
and expand their operations. They are the Local Enterprise Finance Scheme (LEFS) and
Local Enterprise Technical Assistance Scheme (LETAS).
LEFS offers fixed interest rate loans through 18 financial institutions. This
arrangement allows the government to tap the participating financial institutions' (PFIs)
specialized banking and credit evaluation expertise in assessing loans, ensuring that LEFS
loans undergo similar rigours of credit evaluation. At the same time, with the government
sharing the risk, these PFIs are more prepared to lend to SMEs.
Under LETAS, assistance is given to enable SMEs to defray the cost of engaging
external expertise for operational upgrading and strengthening in-house capabilities to
improve productivity. The number of applications and value of assistance approved in
FY2002 totalled 4,889 and amounted to $83 million respectively. This was a 24% increase
in the number of applications and a 15% rise in the value, compared with FY2001.
The government extended the enhancements to LEFS and LETAS to 30 June 2003.
The enhancements were first announced as part of a package of off-budget measures in
July and October 2001 to help local enterprises cope with the difficult economic
conditions. Larger local enterprises, with a fixed asset investment not exceeding $50
million and with employment size not exceeding 300 employees. If they are in the service
sectors, continued to have access to short-term working capital financing.
In January 2003, LEFS and LETAS support was extended to publicly-listed SMEs,
which are at least 30% locally-owned, with group fixed asset investment of not more than
$15 million and group employment size of not more than 200 workers for service
companies. The government recognized that these companies may still need help as they
often lack the expertise to boost their capabilities in order to be better positioned to expand
and venture into foreign markets.
The Singapore Government has done all they can to encourage local enterprises to
adopt technology to enhance their businesses and to remain competitive. It has introduced
numerous financial and R&D assistance to enable many companies to benefit from these
Singapore
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schemes. However, one major factor that can still be improved is the ease and accessibility
of such schemes by smaller players in the market. These companies still do not know
about such schemes that are available for their growth. This can be attributed to lack of
knowledge or lack of know-how to tap on these resources. Thus, a more aggressive drive
should be launched to reach out and educate the uninitiated.
CONCLUSION
From the above case-studies, we can see that although these organizations differ in
business types, they have the following characteristics in common:
• Strong and clearly expressed shared values
• The companies adopt innovative processes by managing its people, capabilities
and product portfolio.
• An appreciation of/for the whole individual and everything s/he can bring to the
organization
• Cultures that encourage openness and playfulness
• Celebrate successes, constantly
• A strong, clearly communicated sense of history
• Intense customer focus
• Clear focus on trends
• Cross-functional teams
The role of government support for innovation has been considerable.
To conclude, Singapore’s adoption rate for new technology is high and is on the
rise. In some case, the adoption of older technology can assist and propel business growth.
Hence, it may not necessarily be the adoption of new technology that can enhance growth,
but the utilization of the right technology and the creativity of all players in the team, with
the openness of management to adopt new and creative ideas that will be the key to
business success and thus be on the surf of competition. The ability to tap on government’s
assistance will greatly enhance the adoption of new and costlier technologies to enhance
business growth.
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SINGAPORE (2)
Adrian Lim Meng Yan
The Young Entrepreneur Mastery Limited
INTRODUCTION
The word “entrepreneur”, derived from 17th-century French “entreprendre”, refers
to individuals who were “undertakers”, meaning those who “undertook” the risk of new
enterprise for profit or loss. The entrepreneur seeks, in Joseph Schumpeter’s (an Austrian
economist) word, to reform or revolutionize the pattern of production by exploiting an
invention or, more generally, an untried technological possibility to produce a new
commodity or produce an old one in a new way, by opening up a new source of supply of
materials or a new outlet for products. Entrepreneurship, as defined, essentially consists of
doing things that are not generally done in the ordinary course of business routine.
The concept of entrepreneurship can be regarded as a path of creation. An ongoing
process with ideas, actions, creations and interactions which culminate as outcomes, e.g.
an enterprise, a product, or a piece of art. Entrepreneurs pursue ideas through a creative
process whereby imaginative people germinate ideas, nurture them, and develop them
successfully.
To put it simply, creative entrepreneurship is therefore a process where the
entrepreneur undertakes the risk of a new venture by pursuing new ideas to bring
something new into existence, to set up an enterprise or to find a better way to develop a
project.
Internationalization, as the term denotes, is to develop and expand the local
enterprise beyond its domestic shores. With the explosion of the technology and
information that is readily available through the Internet, the international market is an
inevitable progress that a creative enterprise must undertake, particularly in the context of
Singapore which is constrained by a small domestic market.
Singapore’s then-Prime Minister Goh Chok Tong recognized the need for
Singapore business to venture abroad as up to now Singapore’s growth has primarily been
investment driven. There are a host of reasons for internationalization given Singapore’s
limited size and resources, which have led to an increasingly high cost structure and a
small domestic market. At the same time, expanding abroad would mean an opportunity to
tap into much larger markets, the promise of finding new markets for existing products
and generating new demand that was previously unavailable. For manufacturers, it might
also be an opportunity to find new sources of supply and labor that will enhance their
competitiveness.
In line with the government’s call for Singapore businesses to extend their fields
beyond the domestic shore, many businesses have taken the initiative to venture abroad.
Examples of such business ventures include Osim, BreadTalk and Qian Hu. A brief
synopsis of the successes of these companies is provided under Part III of this paper.
ROLE OF PUBLIC POLICY IN INTERNATIONALISATION
Government Initiatives to Build a World-Class Company
The Singapore government recognizes that world-class multi-national corporations
will continue to be key driver of Singapore’s economic growth and the necessity of
Singapore
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building our own world-class economies to complement our economic growth. Local
enterprises should pool resources to achieve synergy and economies of scale, leverage on
external expertise to raise professional standards, develop their own brands and products
through innovation and technology, and re-engineer their business processes. This is done
through the implementation of plans such as Trade 21, Industry 21, Franchise 21 and SME
21. (refer to Annex 1).
Incentives and Assistance Schemes
In Singapore, the government agencies are providing incentives and assistance
schemes to local enterprises that have the potential to venture abroad into new markets.
Below is a summary of the main government agencies that promote such an endeavor.
LETAS (Local Enterprise Technical Assistance Scheme) from SPRING Singapore
assists Singapore Enterprises in improving their productivity. This is a generic scheme
under which SMEs can obtain relevant technical assistance offered by management
consultants. The SMEs may be reimbursed for up to 50 percent of their costs for engaging
management or technical consultants on projects approved by relevant government
agencies. SMEs which have projects that meet SPRING’s criteria may obtain
reimbursement for up to 50 percent for assistance received.
The Economic Development Board (EDB) has an Innovation Development Scheme
to encourage and assist Singapore Enterprises in the innovation of products, processes and
applications. This will equip the local SMEs and or Large Local Corporations (LLCs) with
good support for the innovation of products, processes and applications (refer to Annex 2).
International Enterprise (IE) Singapore's primary focus is to help growth enterprises
secure overseas markets, create greater demand for their products and services. IE
Singapore has a good number of assistance programs such as International Partners
Program, Double Tax Deduction (DTD) for Market Development Scheme, Overseas
Manpower Program, Growing Enterprises with Technology Upgrade (GET-Up) and other
assistance for enterprises venturing overseas (refer to Annex 3).
To help Singapore infocomm companies tap opportunities in foreign markets, the
Infocomm Development Authority of Singapore (IDA) and Singapore infocomm
Technology Federation (SiTF) have jointly set up the Singapore Solutions Centre (SSC) in
Shanghai. The SSC will serve as a one-stop centre for China companies and agencies that
wish to find out more about the technologies, products and services which Singapore
infocomm companies can offer. It will also help to identify partnership opportunities for
the companies of both countries to work together in deploying innovative IT solutions to
meet the growing needs of the China market.
IDA has a few assistance programs such as the Overseas Development Program
(ODP), which is a key platform in forging win-win partnerships between Singapore-based
infocomm Local Enterprises (iLEs) and leading Singapore Companies/Infocomm Multi-
National Corporations (MNCs) (refer to Annex 4).
A*STAR (Agency for Science, Technology and Research), through the T-Up
Program, will share talent and help transfer technology to the industry.
Each agency offers assistance to address specific industry needs within the agency's
charter. The result is an integrated and coordinated approach to harness all the capabilities
of the various schemes and incentives which will help Singapore enterprises grow to be
global enterprises by overcoming their financial, human resource and technology
constraints.
With the above mentioned agencies, there is a common thread - no agency works
independently. The agencies work to synergize their strengths and overcome Singapore’s
Creative Entrepreneurship in Asia
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economic constraints. For instance, the GET-Up (Growing Enterprises with Technology
Upgrade) Team comprising of senior staff from A*STAR, EDB, IE Singapore and
SPRING Singapore was formed to pro-actively aim to visit 500 selected Singapore
Enterprises with growth potential. The GET-Up Team will help to identify and ascertain
these Enterprises’ difficulties in finance, human resource as well as technology, and utilize
various tools from the different agencies to resolve these problems.
The last agency to be mentioned is the Ministry of Trade and Industry (MTI). Its
vision is to transform Singapore into a globalized, entrepreneurial and diversified
economy, a leading global city for talent, enterprise and innovation. It envisions to achieve
by 2018:
• a globalized economy where Singapore is the key node in the global network,
linked to all the major economies;
• a creative and entrepreneurial nation willing to take risks to create fresh
businesses and blaze new paths to success; and
• a diversified economy powered by the twin engines of manufacturing and
services, where vibrant Singapore companies complement MNCs, and new
startups co-exist with traditional businesses to exploit new and innovative
ideas.
Singapore is a highly trade-dependent economy, with the highest trade to GDP ratio
in the world. Not only is the economy heavily reliant on imports as its only source of food,
energy and industrial raw materials, its small domestic market also means that its
industries must rely on overseas export markets to absorb its outputs. Furthermore, trade
activities have historically been and continue to be an important source of economic
wealth for the country.
Singapore is therefore a free trader, implementing practically no barriers to the free
flow of goods in and out of the country, and a vocal champion of global free trade. The
primary objective of its trade policy is to guard its trading interests by ensuring a free and
open international trading environment.
This is why Singapore places the highest priority on the multilateral trading system
embodied by the World Trade Organization (WTO). Singapore has initiated FTA
discussions with a number of our strategic trading partners. The progress of Singapore’s
FTA efforts as at May 2003 is summarized below.
Concluded
New Zealand Japan
European Free Trade Association Australia
United States
Ongoing
ASEAN & the People's Republic of China Bahrain
Canada Egypt
Hashemite Kingdom of Jordan India
Republic of Korea Mexico
Pacific Three (New Zealand, Chile, Singapore) Panama
Sri Lanka
Singapore
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BRIEF SYNOPSIS OF INTERNATIONALISED SINGAPORE ENTERPRISES
OSIM International Ltd.
OSIM was established in 1980 and has grown to become a global leader in healthy
lifestyle products.
Over the years, Mr. Ron Sim, founder and CEO of OSIM, has learnt to be more
creative and innovative in his company’s approach to product enhancements, designs,
intellectual property (IP), technologies and concepts. For example, their massage chair has
grown from using roller mechanisms to pneumatic ones to the present iSymphonic AV.
This new OSIM chair synchronizes audio and visuals with massage.
From its humble beginning in Singapore, OSIM today has over 500 OSIM outlets
in 79 cities in 21 countries. OSIM’s success-conscious mindset is due to its relentless
pursuit to be creative and innovative, and a forerunner in the healthy lifestyle segment.
They have identified their core business in 4 main areas:
Table 1: Global network of OSIM outlets
31 March 2004 31 March 2003
Hong Kong 72 67
Taiwan 60 45
China 136 93
Singapore 72 79
Malaysia 71 58
Global franchise markets 99 61
Total 510 403
Source: From www.listedcompany .com
Table 2: Turnover by geographical operations
March 2004 March 2003 Countries
S$m % S$m %
%
Change
Hong Kong 23.3 34% 19.7 37% +18%
Taiwan 15.0 22% 9.9 19% +52%
China 10.6 15% 6.3 12% +68%
Singapore 8.7 13% 8.2 16% +6%
Malaysia 6.3 9% 5.9 11% +7%
Global franchise markets 4.8 7% 2.5 5% +92%
Total $68.7m 100% $52.5m 100% +31%
Source: From www.listedcompany .com
• Health Focus - managing your healthy lifestyle
• Hygiene Focus - clean environment for your home and office
• Nutrition Focus - supplementing your daily nutritional needs for a balanced diet
• Fitness Focus - bringing the convenience of fitness to the comfort of your home
OSIM is constantly developing new products to drive sales and also has a strong
focus on global expansion. The company aims to add 100 outlets and 2 to 3 new countries
to the OSIM empire by end 2004.
Creative Entrepreneurship in Asia
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Qian Hu Corporation Ltd.
Qian Hu Corporation Ltd. is a leading exporter of ornamental fish. The Singapore
homegrown company has played a significant role in helping the country achieve the
prestigious status as the world's leading exporter of ornamental fish in the past decade and
recognition as the ornamental fish capital of the world. Today, Singapore supplies more
than 30% of the world's aquarium fish.
Once a humble pig farming business, Qian Hu has undergone massive
transformation to become one of the most diversified local companies – dealing in the
business of import and export, farming, breeding, quarantine, wholesale, and distribution
of ornamental fish. Qian Hu is uniquely positioned as an integrated ornamental fish
service provider, providing a one-stop service point for domestic and international
wholesalers, retailers and consumers.
Qian Hu is not just a breeder, distributor or manufacturer. Their business model
hinges on 4 core activities:
• Ornamental Fish
• Aquarium & pet accessories
• Export
• Domestic distribution
Qian Hu’s successful business model is exportable, expandable and scalable. These
are the essential qualities that differentiate them from the rest of the competition in terms
of its integrated services, brand, distribution network, manufacturing capabilities, and
most importantly, its quality, innovation and service culture throughout the Group.
In his recent company announcement, Mr. Kenny Yap, Managing Director of Qian
Hu mentioned that “There is reason to celebrate. Despite the double whammy impact of
the "perfect storm", our Group turnover grew 8.0% to $67.7 million, while net profit
attributable to shareholders rose 7.2% to $7.0 million.”
Over the years, the "never say die" and "can-do" attitude has seen Qian Hu grown
by leaps and bounds and has become one of our key business strengths. “Creativity sparks
the way we run our often-perceived-as-a-traditional, low-technology business - after all,
much can still be done to ensure that we safely deliver our ornamental fish all over the
world and in the fastest possible way,” Kenny Yap, the CEO noted.
Since 2002, Qian Hu has initiated a long-term strategy to build a technology-driven
organization that maximizes its business efficiencies across the board, aptly code-named
FISH which is an acronym for:
Fish - Fast response in an ever-changing business environment
Intelligent - An innovative, smart organization
Strong - Unity amongst key stakeholders
Harmonious - Deriving synergies
Qian Hu recognizes that knowledge is at the core of enterprise value-creation. In the
formation of a knowledge company, they have identified the organizational, cultural and
technological strands of its knowledge-based business processes and embarked on
collaborative practical research that aims to improve enterprise decision-making and
maximize value creation. Such collaborative efforts span across and beyond corporate
boundaries, and open new avenues for innovation.
Singapore
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In 2004, Qian Hu will pursue an aggressive expansion of a new chain store concept,
“Qian Hu ? The Pet Family”, in Jakarta, Bangkok, Shanghai, Tianjin, Beijing, Penang and
Johor Bahru. It plans to expand to more than 100 stores within the next 5 years.
BreadTalk Group Ltd.
BreadTalk was established in 2000 in Singapore and has become one of the top
brands in the food and beverage industry. The success of BreadTalk is in the way it
radically changed the mindset of people to bring joy and fun in eating bread.
The founder and Group Managing Director, Mr. George Quek has brilliantly
revolutionized the culture of bread consumption with its visually appealing, aromatic and
unique-tasting products. Furthermore, all its bread have an identity and creative names
such as, Crouching Tiger, Hidden Bacon inspired by the Hollywood blockbuster; Mount
Fuji inspired by its Japanese master chef; and HotChic, its spicy, sambal-flavoured
Chicken Floss bun.
In BreadTalk’s website, it mentioned that its international expansion plans are:
China
It currently owns and operates two BreadTalk outlets in Shanghai which are well-
received by consumers there. They are targeting to open six more outlets in Shanghai this
year, and their first outlet in Beijing by third quarter of 2004.
Indonesia
Sales from the three Jakarta outlets opened in 2003, as well as the fourth outlet
opened recently in January 2004, have been strong. The franchisee plans to open 10 more
outlets in fiscal year FY2004, including one outlet in Surabaya
Gulf Cooperation Council
The company’s franchisee in the GCC, Al-Mejhem Global Group, W.L.L., plans to
open its first outlet in Kuwait in the first half of this year. The target is to eventually open
up to 30 outlets in the GCC.
Philippines
Their Philippines franchisee plans to open the first BreadTalk outlet in Manila by
April 2004, with nine more outlets in the country within the first three years.
Malaysia
ML Breadworks Sdn. Bhd., their franchisee in Malaysia, is also targeting to open
10 outlets in three years, starting in the Klang Valley area, mainly Kuala Lumpur and
Selangor areas, followed by the rest of West Malaysia. The first outlet will open in the
first half of 2004.
For FY2004, the Group aims to open 10 to 15 outlets in the Philippines, Malaysia,
and the GCC. They are also targeting to seal new franchise agreements for three to four
more countries, such as Hong Kong SAR, Taiwan, Thailand and Australia.
CONCLUSION
In Singapore, the government plays an active role in supporting and encouraging
SMEs and LLCs to venture beyond their comfort zone. The various government agencies
are synergies which effectively ensure that the potential of a growing company or
Creative Entrepreneurship in Asia
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organization to venture abroad is given a chance through the myriad of assistance
programs.
As for the SMEs and LLCs, their desire to further expand their business horizon
gives them an added challenge. Their innate entrepreneurial trait does not permit them to
be satisfied with their present status. Their constant and insatiable desire to move from
glory to glory will not only motivate them, but to many others who are modeling their
success.
Hence, the government and entrepreneurs in Singapore are constantly challenged to
be an alchemist, bringing about a major transformation and ensuring sustainable success
for the future.
Singapore
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Annex 1
ASSISTANCE PROGRAMS
The following information is found on
http://www.mti.gov.sg/public/ECD/frm_ECD_Default.asp?sid=25&cid=93
Trade 21
The vision of Trade21 is to make Singapore the Global City of International Trade.
It is a masterplan that sets out the challenges, objectives and strategies for Singapore's
trade development in the next five years. It presents the key strategies and targets of
International Enterprise (IE) Singapore to:
• Internationalize Singapore Enterprises
• Make Singapore the Centre for Global Trade Hub Services
• Secure Global Market Access for Singapore and
• Develop a World Class Trade Facilitation System
Industry 21
The Economic Development Board’s Industry 21(I21) blueprint was launched in
June 1998. Comprising a set of 6 programs, I21 was designed to promote Singapore's
economic growth into the next millennium. It aims to develop Singapore into a leading
competence centre for knowledge-driven activities and a hub for the headquarters and
product charters of multi-national corporations. The I21 programs include:
(a) Cluster Development
Promote greater diversification among and within the key industry clusters,
and also promote knowledge-driven activities across the value-chain of these
industries
(b) Promising Local Enterprises/World-Class Companies
Build up local world-class companies, and root foreign world-class companies
in Singapore
(c) Innovation
Promote innovation within companies and encourage them to develop new
knowledge-driven capabilities and activities
(d) International Business
Tap into global and regional hubs for capital, new technology, ideas, resources
and markets
(e) Headquarters
Attract foreign companies to set up their global headquarters in Singapore
(f) Resource Development
Develop a local workforce and attract foreign talent with critical skills
necessary to support industry needs into the next millennium
It is envisioned that in the next 10 years, knowledge-driven industries under I21
would contribute 40% of Singapore's annual GDP, and generate employment of 20,000 to
25,000 annually. Two out of three jobs in manufacturing would be for skilled and
Creative Entrepreneurship in Asia
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knowledge workers, while in the services sector, three jobs out of four would be for skilled
and knowledge workers.
Franchise 21
Franchise 21 aims to position Singapore as an International Franchise Capital and
promote franchising and economic groupings as strategic tools to help domestic businesses
become regional and global players in the new economy. 3 broad strategies and 17
programs will be implemented to expedite the formation of franchises and alliances:
• Branding Singapore as a franchise capital by developing a franchise mark to
accredit local franchisors and master franchisees and as a hub for franchises to
network and interact
• Developing strong franchisors and master franchisees through appropriate
programs and incentives
• Increasing the number of franchisees and alliance members in the SME sectors
through facilitation, development of training programs and provision of
incentives
SME 21
SME21 is a 10 year strategic plan spearheaded by SPRING Singapore to create
vibrant and resilient small and medium enterprises (SMEs) that enhance Singapore's
competitiveness and economic growth. It has 3 strategic goals:
• groom innovative high-growth SMEs to ensure a steady stream of SMEs to
reach world-class status
• develop productive SME sectors to enhance productivity by restructuring,
revitalizing and upgrading the sectors
• creating a knowledge-based, pro-enterprise environment to inculcate the
appropriate mindset for business and entrepreneurship
Singapore
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Annex 2
ECONOMIC DEVELOPMENT BOARD’S (EDB) – ASSISTANCE PROGRAMS
The following assistance program from EDB can be found at
http://www.sedb.com/edbcorp/sg/en_uk/index/investors/assistance_schemes/for_equipme
nt_infrastructure_dvpt.html.
Approved Foreign Loan Incentive (AFL)
Suitable
for
What the
scheme does
Eligibility Benefits Type of
assistance
Investors Tax incentive:
grants full or
partial exemption
on withholding
tax on interest
payments to non-
residents
Interest payments
must be made on
loans taken to
purchase
productive
equipment only
Minimum loan
amount is
S$200,000
Improves the
company’s ability to
access offshore
financing for
investments in
productive equipment
as non-resident
recipient would not be
paying higher taxes in
the home country
Equipment
investment
Development & Expansion Incentive (DEI)
Investors Tax incentive:
provides
preferential
corporate tax rates
on all qualifying
profits above a
pre-determined
base, for a set
period
Project must
generate
significant
economic spin offs
for Singapore
Reduces tax liability.
Assists the company to
move into higher
value-added business
activities
Business
development
Expansion Incentive for Partnerships (EIP)
Investors Tax incentive:
Provides tax
exemption on
50% of the
qualifying
overseas income
above a pre-
determined base
Open to
audit/accounting
and law firms
legally constituted
as partnerships
At least 50% of
the equity stake of
the applicant firm
must be held by
Singapore tax
residents
Activities must
lead to the
establishment of a
regional centre of
competence
Reduces tax liability.
Assists the firm to
establish centres of
competence and
conduct substantial
level of regional
activities
Business
development/
regionalization
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Integrated Industrial Capital allowance (IICA)
Suitable
for
What the
scheme does
Eligibility Benefits Type of
assistance
Investors Tax incentive:
allows companies
to claim capital
allowances for
approved
expenditure on
plant and
equipment used in
an overseas
subsidiary
Plant or equipment
must be owned
from Singapore
Reduces tax liability Regionalization
Regionalization Finance Scheme (Indonesia) (RFS-I)
Investors Loan: provides
fixed rate loans
for investment in
Indonesia
manufacturing
operations
Assists local
companies to set
up and/or expand
their operations in
Indonesia
Open to all
Singapore
companies
Investment must
lead to active
operation or
increase in
production
capacity in the
Indonesian
company
Loans may be
extended for
factory, or
machinery and
equipment
investment
Provides an alternative
source of financing
Loans are at fixed
interest rate
Expansion/
regionalization
The Singapore-Riau Advantage
The Riau Islands of Bintan and Batam are just a stone's throw from Singapore.
Located to the south of the city-state, Bintan is 45 km or an hour away by ferry, while
Batam is 20 km or a 45-minute ferry ride. Together, these two islands offer abundant labor
and facilities.
The competitive business environment of Bintan and Batam has entrenched global
players from industries as diverse as precision engineering, plastic moulding, chemicals
and garment fabrication.
Companies benefiting from the Singapore-Riau Combination include Philips,
Thomson, Siemens, Seagate, Nidec and Venture, to name a few. They also include
business giants from the US, Japan and Germany, amongst others.
Investment Guarantee Agreements
Singapore has signed investment guarantee agreements with 31 countries and
regional groupings, with a further 10 in the pipeline.
Singapore
- 97 -
These pacts help to protect foreign investments made by Singapore-based
companies. The governments of the host countries are obliged to:
• Accord fair and high-level treatment to investments by Singapore-based
companies
• Allow repatriation of income and capital earned in the country
• Ensure compensation in the event of expropriation or nationalization
• Provide an objective dispute settlement mechanism
The 31 agreements are with:
ASEAN Mongolia
Bahrain Netherlands
Belgo-Luxembourg Economic Union Pakistan
Belarus Poland
Bulgaria Peru
Cambodia Republic of Mauritius
Canada Riau Archipelago
China Slovenia
Czech Republic Sri Lanka
Egypt Switzerland
France United Kingdom
Germany United States of America
Hungary Uzbekistan
Laos Vietnam
Latvia Zimbabwe
Creative Entrepreneurship in Asia
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Annex 3
IE SINGAPORE ASSISTANCE PROGRAMS
International Partners Program
International Partners Program (iPartners) is an IE Singapore initiative that aims to
increase Overseas Sales and Access of Singapore based companies through synergistic
partnerships with industry leaders that could provide additional marketing channels.
Brief Description of an International Partners Program Project
An iPartners Project consists of one Anchor Company and several Alliance
Partners. The companies have come together with the specific purpose of
internationalization, spearheaded by an Anchor Company through an iPartners Business
Development Manager. Below is a graphical representation of an iPartners Project:
Role of Anchor Company
The Anchor Company, which is an industry or market leader, will spearhead the
project by providing one or more of the following value-add to the Alliance Partners:
a. Greater access to the overseas market or a different segment of the overseas
market through its value proposition including brand recognition, track record,
etc;
b. Adapt new or existing products or services for overseas markets; and
c. Develop capabilities to penetrate the overseas market including the upgrading of
existing technology/technological capabilities.
Role of Alliance Partner
The Alliance Partner must be able to complement the Anchor Company in this
project and provide value proposition to the project. The Alliance Partner must sell its
products or services in the overseas market(s) targeted by this project.
Increase in Overseas Sales
Increased Direct Overseas Access all in the Alliance
Improve Capabilities
Aggregate Existing Products and Services
Introduce New Products and Services
Increase
Overseas
Access
Spin-
offs
Role of
Anchor
Company
in helping
Alliance
Content
#1
Content
#0
Technology
#1
Technology
#0
Role of
Alliance
Partners
Singapore
- 99 -
Role of iPartners Business Development Manager
iPartners Business Development Manager's responsibilities include:
a. To co-ordinate the project so as to ensure that its targets and objectives are met;
b. To identify resources to pursue overseas business opportunities for the project;
and
c. To report the progress of the project.
Double Tax Deduction Online System
What is Double Tax Deduction for Market Development Scheme?
The Double Tax Deduction Scheme for Market Development aims to encourage
Singapore companies to expand their overseas markets. It allows for approved companies
to deduct the eligible expenses incurred for approved projects twice against their taxable
income.
Who can apply for this scheme?
To qualify for support, the company must meet the following criteria:
1. Be a resident company or have a permanent establishment in Singapore, and
2. Be an active operating/trading company with the primary purpose of promoting
the trading of goods or provision of services.
DTD support is not be available for companies that are already enjoying other
forms of tax incentives/concessions from the government (e.g. incentives under the
Economic Expansion Incentive Act and the Income Tax Act).
What activities are supported?
The following projects are supported under Section 14B of Income Tax Act:
• Participation in approved trade fairs
• Participation in overseas trade missions/ market development trips
• Setting up of overseas marketing offices
• Master licensing and franchising
• Advertising in approved local trade publications
• Printing of corporate brochures/catalogues for distribution in overseas markets
• Engaging in other overseas market development activities, e.g. market surveys,
feasibility studies, advertising and promotional campaigns in overseas markets,
design packaging, product / service certification for export
What can I do with DTD online System?
• Through DTD online, you can
• Find out more about the DTD scheme
• Submit applications online
• Track the status of all your company's DTD applications
• Submit evaluations forms online
Creative Entrepreneurship in Asia
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Annex 4
IDA AND SiTF SET UP SINGAPORE SOLUTIONS CENTRE IN SHANGHAI
To help Singapore infocomm companies tap opportunities in the China market, the
Infocomm Development Authority of Singapore (IDA) and Singapore infocomm
Technology Federation (SiTF) have jointly set up the Singapore Solutions Centre (SSC) in
Shanghai. The SSC will serve as a one-stop centre for China companies and agencies that
wish to find out more about the technologies, products and services that Singapore
Infocomm companies can offer. It will also help to identify partnership opportunities for
the companies of both countries to work together to deploy innovative IT solutions to meet
the growing needs of the China market.
As part of IDA's clustering strategy for helping Infocomm companies overseas, the
SSC would showcase companies who are behind successful IT projects in sectors such as
Transport, Logistics, Financial Services and Healthcare. These are also the four key
growth sectors in China today. The SSC will feature a cluster of companies in each sector
that can offer a complete suite of vertical solutions for potential customers. Each cluster
will be led by a company with an established track record of doing business in China and
this cluster leader will help its members to work in the China market. For a start, 19
companies have signed up as members of SSC, and the cluster leaders include Singapore
Computer Systems, NCS Yu Bo, IPACS and Stratech Systems (See Annex A for list of
SSC members.)
The SSC is off to a good start with the Healthcare cluster leader, Singapore
Computer Systems, and its cluster member, EGIS Healthcare Technologies, clinching a
contract worth more than S$2 million with Beijing Tongren Hospital. Singapore Computer
Systems will help Tongren deploy a fully integrated hospital information and management
system for its new hospital wing. Over the next three years, SSC also hopes to achieve
S$37 million export revenue.
To allow China companies and agencies to experience Singapore technologies and
solutions first hand, the SSC will house a permanent "Solutions Showcase". This is an
interactive showcase of IT solutions in the four clusters as well as other innovative
Singapore's technologies. Among the first to be featured are technologies from Creative
Technology, AXS Infocomm and ST LogiTrack.
"The Singapore Solutions Centre represents a major milestone in SiTF's efforts to
help our home-grown infocomm companies regionalize," said SiTF Chairman Saw Ken
Wye. "In addition to SITF's efforts in bringing business missions to China and the rest of
the region, the SSC forms a strategic beachhead through which SiTF member companies
can more effectively source opportunities and establish a local presence in China. The
SSC also plays a strategic role in building the 'Made-in-Singapore' branding of our local
infocomm solutions in the international market," he added.
The SSC will be managed by a full-time director in Shanghai and its operations co-
funded by IDA and SiTF. Each cluster of companies within the SSC will also have a full
time Business Development Manager to help the companies in identifying business
opportunities within these four specific sectors.
In addition to the SSC, companies can also tap on IDA China office
1
for assistance
within the China market. Established since 2002, the IDA China office has been helping to
facilitate infocomm collaborations between Singaporean and Chinese companies, and
establishing the role of a government-to-government interface in the Infocomm arena.
Through its Overseas Development Programme
2
and funding schemes such as Market
Singapore
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Development
3
, IDA will also provide assistance to the SSC cluster members to support
their activities in China. Besides this, IE Singapore is supportive of this initiative and is
funding two of the clusters through the iPartners Program. SSC cluster members can also
tap on the IE Singapore's network of overseas offices in China.
Singapore Solutions Centre Clusters
Financial Services
1) NCB Yu Bo (Leader)
2) Automatic Identification Technology Pte Ltd
3) FairEx International Financial Systems
4) FOCUs5.NET Pte Ltd
5) NextVIEW Pte Ltd
6) System Access Pte Ltd
Healthcare
1) Singapore Computer Systems Limited (Leader)
2) EGIS Healthcare Technologies Pte Ltd
3) Medimedia Asia Pte Ltd
4) Sentient Health Pte Ltd
5) SQL View Pte Ltd
Logistic
1) IPACS e-Solutions (S) Pte Ltd (Leader)
2) Boon Software Consulting Pte Ltd
3) Logipolis Pte Ltd
4) Silk Technologies Pte Ltd
Transport
1) Stratech Systems Limited (Leader)
2) Ademco (Far East) Pte Ltd
3) Ufinity Pte Ltd
4) Vislog Technology Pte Ltd
OVERSEAS DEVELOPMENT PROGRAM (ODP)
Objectives
The Overseas Development Program (ODP) is a key platform to forge win-win
partnerships between Singapore-based Infocomm Local Enterprises (iLEs) and leading
Singapore Companies/Infocomm Multi-National Corporations (MNCs), at the
Headquarters level, to:
• Prepare iLEs to be globally competitive, and to compete globally
• Boost iLEs' capabilities to increase their presence in growing markets outside
Singapore
• Further enhance iLEs' overseas market position through direct access to leading
MNCs/Singapore Companies' R&D resources, and global business opportunities
and networks in their own countries
Creative Entrepreneurship in Asia
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Why Overseas Development Program?
New impetus to leapfrog local partners' "go-to-market" capabilities. Many
Infocomm Local Enterprises have matured over the years and have successfully developed
software products and services for the market within and beyond Singapore. The ODP will
be the impetus to "rapidly push" the iLEs towards globalization.
Capability Enhancement. Emphasizing on building capabilities, the ODP is a
partnership-driven program that will leverage on the strengths, business connections and
technology edge of MNCs/Singapore Companies' HQ to help iLEs gain a head start in new
markets overseas.
ODP Partnership Models
Technology Partnership. Focus on product development, commercialization, and
overseas market access.
Services Partnership. Focus on overseas solutions deployment, and overseas market
access.
REFERENCES
The above information is an extraction and compilation from the following
websites of:
Economic Development Board (http://www.sedb.com/edbcorp/sg/en_uk/index.html).
Spring Singapore (http://www.spring.gov.sg/portal/main.html).
International Enterprise Singapore (http://www.iesingapore.gov.sg).
Ministry of Trade and Industry,
(http://www.mti.gov.sg/public/Home/frm_MTI_default.asp).
Infocomm Development Authority of Singapore,
(http://www.ida.gov.sg/idaweb/marketing/index.jsp).
The Listed Company.com (http://www.listedcompany.com/).
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SRI LANKA
Samantha Sathischandra Wanniarachchi Kumarasinghe
Multichemi Group of Companies
CREATIVE ENTREPRENEURSHIP IN THE FACE OF UNCERTAINTY
Prior to 1977, Sri Lanka had a closed economy and was mainly exporting its
agricultural produce - tea, rubber and coconut without adding any value. After the open
economy policy was introduced in 1977, the private sector got active and a new breed of
creative entrepreneurs emerged. The companies that rode on the open economy wave at
the very beginning enjoyed the best advantages over the late entrants.
In 1983, terrorist activities in the North and the East of the country started and the
local market available for Sri Lankan entrepreneurs slowly began to shrink. Therefore,
they had to be more innovative to survive in a fiercely competitive market that was
shrinking in size due to the North-East war.
In this chapter, a few examples of Sri Lankan entrepreneurs who have been very
successful due to their creativity and innovativeness are mentioned. Interviews were
conducted with the entrepreneurs where possible or otherwise relied on a secondary
source.
CREATIVE ENTREPRENEURSHIP IN THE TRADING INDUSTRY
Harry Stassen J ayawardhane (“Harry J ayawardhane”), a former tea taster, founded
Stassen Exports Limited in 1977, as a bulk tea exporting company. At the very outset,
their mission was to fight the bulk tea-exporting giants which were mainly British-owned
companies. The dynamic and dedicated Harry J ayawardhane successfully fulfilled his
mission by becoming the fifth largest bulk tea exporter in the country by the year 1982. In
1987, Stassen Exports became the proud owner of world’s first certified organic tea garden
and also expanded his bulk tea exports to become the leading tea exporter in the country
by 1988. He also went into exports of desiccated coconut and spices. He has won
presidential export awards for five consecutive years. By this time, he had amassed great
wealth, as all his export profits were tax-free since 1977.
The government offered capital gains tax concessions for trading profits in the share
market in late eighties. Harry J ayawardhane moved into the share market and started
buying shares of publicly quoted companies.
Since then he has taken maximum advantage of the open economy and the
privatization of government corporations. His main strategy has been acquisition of
publicly listed companies and developing them successfully. His vision in business
acquisitions and restructuring has made him the largest businessman in Sri Lanka today.
At present, he is into many manufacturing industries but bulk tea continues to be his
number one export.
His current investments with controlling shares include the following:
• Largest alcohol distribution network with numerous distilleries
Creative Entrepreneurship in Asia
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• Second largest private bank in the country
• Largest milk powder packing plant in the country
• Largest insurance company in the country
• Processed food distribution company with the best brands in the world
• Largest hotel and hotel management company with hotels in Maldives as well
• One of the largest and oldest engineering companies in the country
• Large tea plantations
• Unknown number of foreign investments
He has a new vision of becoming one of the leading businessmen in Asia by the
year 2010.
He is known as a man with strict and strong administration coupled with hands-on
type management. Creative and capable employees are well looked after by him. His
companies are known for paying the highest annual bonuses. Currently, he is also the
advisor to the President of Sri Lanka on Foreign Trade and Investments. He will continue
to be entrepreneurial to achieve his vision of being a leading businessman in Asia.
CREATIVE ENTREPRENEURSHIP IN THE FINANCIAL INDUSTRY
Lalith Kothalawala’s father, J ustin Kothalawala, hailed from a rich family. When
J ustin Kothalawala formed Ceylon Insurance Company in 1938, it was the first Ceylonese
owned company in Ceylon (now Sri Lanka). When Lalith Kothalawala completed his
education in England and returned to Ceylon in 1964, his father’s business comprised of
three companies - Ceylon Insurance Company, Middleway Printers and the Finance
Company. His father also owned the tallest building in the country at that time, called
Ceylinco House. Lalith Kothalawala joined his father’s business at the age of 23 as a
trainee.
After the death of his father in 1973 he became the chairman of the companies at
the age of 32. Since then, Lalith had added more colour and variety to his father’s business
and formed Ceylinco Group diversifying into every conceivable field. They too have
enjoyed the benefits of the open economy after 1977. His vision was to enter into joint
venture investments with the regional giants of the many fields of business, mainly from
India. He has a clear strategy of training and empowering employees and invests in
information technology. He has also established e-commerce businesses in regional
countries such as Malaysia.
Today Ceylinco Group has over 100 private and public companies and over 22,000
employees. Lalith Kothalawala has 15 deputy chairmen under him managing the group’s
business, dividing it into 15 main segments. He allows his companies to be run by these
chairmen and the directors of respective units without much intervention. He has not gone
into major acquisitions unlike some other entrepreneurs.
His major investments are in the following areas.
• Finance companies
• Banks
• Insurance companies
• Credit card business
• E-commerce
Sri Lanka
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• Land and property development with innovative concepts
• Condominium projects
• Large scale housing projects with about 1,000 houses per project
• Diamond cutting projects
• Rural banking operations
• Health care and fitness projects
• Insurance companies in foreign countries such as Nepal and Bangladesh
His senior directors and managers respect him very much as an honest and kind
entrepreneur. His success is in his vision and the way he has harnessed the talents and
creativity of his senior staff. A man with no children, he has set up a trust to manage his
businesses after him. The senior directors too will have some ownership in the respective
groups.
His insurance company, Ceylinco Insurance recently won an international award for
creativity on its “On the Spot Cash” motor insurance policy.
In 2004, he is about 62 years old and will continue to be a creative entrepreneur and
expand his business empire with the aim to be the biggest group of companies in Sri
Lanka.
CREATIVE ENTREPRENEURSHIP IN TRADITIONAL TEA
Merrill J . Fernando joined a British-owned bulk tea exporting company as a tea
taster in 1950, and was later promoted to the post of CEO. During his time with this
company, he has visited England and saw how various tea grades were mixed to produce
value-added tea before it reach the consumer. There, he got the idea of supplying fresh
Ceylon tea direct to the consumer right from its origins, Ceylon. This idea later transpired
to be the vision for his own business.
In 1960, he left his job and started his own bulk tea trading company under the
name Merrill J . Fernando & Co. Ltd. By 1970, he had become one of the 10 leading bulk
tea suppliers to world’s leading tea brands and also had his own tea plantations in Sri
Lanka.
He faced unexpected problems when the socialist government came to power in
1970 and took over his tea plantations. Disappointed by this turn of events, he sold his
company and made plans to leave the country. However, persuaded by his business
colleagues, he formed a new company under the name MJ F Exports (Private) Limited in
1974. Since then he has achieved great success and by 1979, became a leading bulk tea
exporter in the country.
Keeping to his vision, he imported the first tea-bagging machine to Sri Lanka in
1980, without any orders in hand for tea bags. With a lot of hard work, he established a
printing company to make tea bags, that was also carried out with no orders in hand.
Thereafter, he visited leading supermarket chains in Australia, with ready-to-use samples
to canvass orders for tea bags under their private labels. After two years of persuasion, in
1983 he won his first contract for tea bags from the Australian supermarket giant, Coles
Myer Ltd.. His price to them was 40% lower than the multinational suppliers, but his
goods were of very high quality. Soon, other supermarkets came to him and he had to fly
in two new bagging machines to meet the demand.
Creative Entrepreneurship in Asia
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Merrill Fernando, with a vision of “Supplying the end user the taste of original
freshness of finest Ceylon tea direct from Sri Lanka”; established his own brand
“Dilmah” in 1980. (Dilmah comes from the names of his two sons Dilhan and Malik) To
ensure the highest quality of his product, he established all tea bagging operations in the
same compound under his control. He instilled his vision at all levels of his workforce and
trained them well.
Figure 1: Merrill J. Fernando
His strong will and creativity paid dividends in 1988 with the launch of his brand
“Dilmah” in Australia. It was promoted through the same supermarket chains that
supported him with their private labels. Dilmah became an immediate success in Australia.
Soon, the company entered the New Zealand market and the business met with success
too.
Sticking to the vision of “supplying the consumers direct from origin, the quality
and freshness of Pure Ceylon Tea”, Dilmah has been on the fast track of success since
1988. By the year 2000, they were very strong in Australia, New Zealand, Eastern Europe
and some Middle-Eastern countries.
In the year 2000, they took another giant step forward by taking on the sponsorship
of the Sri Lankan cricket team in a bid to enter the markets of all cricket playing countries.
This enabled them to further enhance their global sales in Europe and Asia. Dilmah was
introduced to the Sri Lankan market only after it was done so through cricket in the
country.
Dilmah also got into McDonald’s restaurants in 26 countries including J apan.
By the end of 2003 Dilmah had reached over 90 countries. Dilmah has a market
share of 13% in Australasian region, slightly behind Twinings and Lipton which have a
17% and 19% share respectively (based on value). In New Zealand, they have market
leadership at 26%, marginally higher than the number-two brand Bell which has 25%.
Sri Lanka is the world’s largest tea exporter, but only 12 million kg out of a total
export volume of 288 million kg is in the form of consumer packs such as Dilmah. MJ F
Exports (Private) Limited is the largest packed tea exporter in Sri Lanka and Dilmah is the
only global brand of tea from a tea producing country.
Dilmah “genuine Sri Lankan Tea” may soon become the best selling brand of tea in
the world, with the commitment and vision of this bold entrepreneur and his two sons.
Sri Lanka
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CREATIVE ENTREPRENEURSHIP IN THE CHEMICAL INDUSTRY
After graduating in Science in 1982, Samantha Kumarasinghe started his career as a
sales executive at a leading chemical company in Sri Lanka. With regular promotions, he
became Marketing Manager of the company by 1990. In 1992, a new group bought
ownership of the company and many senior managers left.
Samantha Kumarasinghe left the company in March 1993 and established
Multichemi International Limited in July 1993 with a total work force of 12 people.
Samantha had a small capital which he had saved with the profits earned from trading in
the share market from 1989 to 1992. He also obtained a SME sector bank loan of about
USD 35,000 to buy land and put up a small building for the factory.
By 1993, Sri Lankan entrepreneurs who benefited from the 1977 open economy
policy were well established in the country’s market and newcomers had very little
opportunity to break in. Therefore, Samantha Kumarasinghe had to select an area that
required very little capital but also had enough room to grow, as he had a vision of
establishing an international business.
Samantha Kumarasinghe chose to produce liquid detergents that needed little
capital and at the same time only had a few competitors. His company (Mulitchemi)
created a good trade name for their detergents “Dash”, and presented it with the new
theme, “Bio Degradable & Environment Friendly Detergents.” “Dash” was also positioned
as a ‘user-safe’ detergent. Thus, “Dash” opened a new page in the liquid detergent market
in Sri Lanka. At the time of Multichemi’s entry into the market, there were other liquid
detergent brands such as “Teepol”, “Britol”, “Eazy” and “Care”. However, “Dash” stood
out against the other products as it was positioned as above them.
Multichemi’s strategy was an instant success and “Dash” became a popular name
especially in the car care segment of detergents. He was bold enough to use the tagline
“Dash - Clearly the best!” in the product’s advertisements.
With the expanding garment industry in Sri Lanka, the garment-washing industry in
the country was growing too. In 1994, Multichemi started formulating chemicals for the
garment washing industry. In the same year, Multichemi signed a formulation agreement
with the world leader of industrial enzymes – Novo Nordisk (now Novozymes) of
Denmark – to formulate their textile processing enzymes in Sri Lanka.
In 1995, Multichemi expanded its horizons by exporting textile chemicals to
Bangladesh. In 1996, the company opened its liaison office in Dhaka, Bangladesh to
extend its business operations to the country. Multichemi capitalized on the popularity of
Sri Lankan cricket in Bangladesh after Sri Lanka won the World Cup in 1996. In 1997,
Multichemi established a 100% export-oriented, Sri Lanka Board of Investment-approved
factory in Sri Lanka for exporting textile chemicals.
Creative Entrepreneurship in Asia
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Figure 2: Dash – Clearly the best!
Other achievements of the business are listed as below:
1999 – Established Multichemi Bangladesh, a Bangladesh Board of Investment-
approved factory in Dhaka, Bangladesh, to produce liquid detergents.
2000 – Introduced direct marketing of “Dash” range of consumer detergents in Sri
Lanka.
Put up a new factory in Sri Lanka to expand exports of textile chemicals.
Obtained ISO 9002 certification.
2002 – Introduced a new range of genuine nature-based personal care products,
“Nature’s Secrets” with the main emphasis on skin care, in Sri Lanka.
Figure 3. “Nature’s Secrets”
2003 – Established MCI Promotions (Pvt) Limited to handle their product
advertising and conduct promotions.
Conducted a beauty pageant “Chavi Kalyani” (Miss Beautiful Skin), the
first of its kind in Sri Lanka. This was done to position “Nature’s Secrets”
as the leading skin care range in Sri Lanka. The pageant was a great
success and will be conducted annually for at least a few more years.
Sri Lanka
- 109 -
“Nature’s Secrets” has so far become the most successful product range for
his business.
Figure 4: “Chavi Kalyani“(Miss Beautiful Skin)
2004 – Established a show room for “Nature’s Secrets” in Chennai, India to reap
the benefits of Indo-Lanka FTA (February).
Established a trading office in Dubai to promote exports of textile
chemicals in the Middle East (March).
Completed a new factory to increase production of “Nature’s Secrets”
personal care products (April).
Creativity and Innovativeness of “Nature’s Secrets” Launch
Today “Nature’s Secrets” has become one of the most talked about personal care
product range in the country. This range includes moisturizing creams, vitamin creams,
fairness creams, sun screen lotions, deep cleansing milk, toner, scrub, facial wash, hand
wash, shower gel, shampoo and conditioners. All these products are genuinely nature-
based as every product contains a natural ingredient.
The creation such an image for “Nature’s Secrets” within a period of one and half
years in a market dominated by giants like Unilever, Proctor & Gamble, J ohnson &
J ohnson and many local brands that are many years old, shows Multichemi’s
innovativeness.
How did “Nature’s Secrets” achieve it?
The following steps were taken at its launch:
1. Grabbing the opportunity of the “Natural Craze” in personal care market.
2. Creating the right trade name “Nature’s Secrets” that goes with natural
products.
3. Introducing very high quality products, using the best raw materials in the
world.
4. Using genuine natural ingredients in all products, amounting to about 25.
Creative Entrepreneurship in Asia
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5. Aiming at the middle class market at the beginning and later targeting the
upper end of the market.
6. Avoiding head-on competition with the multinationals at the start.
7. Looking at low cost promotions which are more effective.
8. Deviating from traditional mass media advertising and selecting a weekly
morning quarter-hour programme on National TV, mainly watched by
housewives. Here, a more educational type of programme was conducted on
beauty care using beauticians of repute.
9. Creating a new market in skin care with events like “Ms Beautiful Skin” and
other programmes. This was the first time a beauty pageant was held in Sri
Lanka to select the lady with most beautiful skin. Both married and unmarried
women between the age of 17 and 27 years were invited to participate.
For this pageant, “Nature’s Secrets” managed to get the number one national
TV channel as the electronic media sponsor, the national carrier as the air
ticket sponsor and a national newspaper as the print media sponsor to build
the credibility of the event.
Swim suit competitions were avoided to respect cultural restrictions and to
allow more people to participate.
Preliminary rounds of the pageant were ran for a longer period of the year to
gather better publicity and more participation.
10. By above, “Nature’s Secrets” was positioned as the leading brand of skin care
range in the country, without much agitation that is found in the hair care
market, where the competiting giants with huge advertising budgets fight.
11. With an established name in the skin care sector, “Nature’s Secrets” hair care
products were able to sell without any special promotions.
Today, “Nature’s Secrets” has the best selling face-wash in the country that
competes directly with Unilever soaps and Johnson & J ohnson face-wash. It is in the
process of further strengthening its product range and image by employing a leading
cosmetic laboratory in the USA and inviting Western experts in the field to work with the
company to further develop its formulations and develop new products.
Sri Lanka
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Figure 5: “Ms Beautiful Skin”
Obstacles for Sri Lankan Entrepreneurs
The following factors hamper development of entrepreneurs and emergence of new
entrepreneurs in Sri Lanka:
• High bank interests rates
• High cost of land for expansion projects
• Environmental restrictions
• Poor infrastructure outside of Colombo
• Poor political stability and swinging government policies
• Raw materials are unavailable in the local market
Role of Government and NPO in Promoting Entrepreneurship
The government in Sri Lanka has been saddled with a terrorist problem since 1983,
and has never been able to extend support needed by entrepreneurs for development.
Especially in the last ten years, Sri Lanka has had coalition governments who were more
concerned with retaining power than looking at development of entrepreneurs.
Under these circumstances the following observations were given on the topic:
• The government has no effective policy to help local entrepreneurs.
• The government is bound by the terms of the World Bank and Asian
Development Bank to award large contracts to donor countries, thus depriving
local entrepreneurs.
• There are no NPO to help the industry, but many NGO’s funded by the West
are operating with various hyperactive sections of the society which hampers
economic growth.
Even the National Productivity Centre is not financially sound to act
significantly for entrepreneurship development.
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THAILAND (1)
Waleeporn Thanathikom
Thailand Productivity Institute (FTPI)
ENTREPRENEURSHIP
The word “entrepreneur” is derived from French “entreprendre”, refers to
individuals who undertake the risk of new enterprise with accompanying risks of profit or
loss. Carl Menger (1871) defined entrepreneurs are “change agents” who transform
resources into useful goods and services, often creating the circumstances that lead to
industrial growth. Adam Smith (1776) at an even earlier date called an enterpriser an
individual who undertook the formation of an organization for commercial purposes.
Entrepreneurs react to economic change, thereby becoming the economic agents who
transform demand into supply.
In more recent times, Landstrom and Johannisson (2001) defined entrepreneurship
as the exploitation of perceived opportunities through organizing resources and
collaborators in new patterns.
As can be seen, the concept of entrepreneurship has been around for a very long
time. In this new reality, the role of entrepreneurs is as practical visionaries who imagine
new enterprises and bring them to successful fruition. In the last ten years there has been
an explosion of interest in entrepreneurship. Today, entrepreneurship is attracting a lot of
attention around the world. Many countries view entrepreneurship development as a
means to economic power and open up new opportunities for innovation.
Holt (1992) notes that entrepreneurship is one of the four mainstream economic
factors: land, labour, capital, and entrepreneurship.
ENTREPRENEURS IN THAILAND
Learning from the success stories in other countries, the government of Thailand
foresees entrepreneurship as the country’s economic power, economic recovery
mechanism, and foundation of the economic system. Entrepreneurs are a key part of the
strategy to generate new growth businesses and contribute to employment.
The Thai government has launched various programs to create and develop new
entrepreneurs, incubation programs, as well as training courses on knowledge and skills
for doing business (such as marketing, finance, applicable laws and regulations).
One of the mega projects is the One Tambon One Product (one village one
product), or else called OTOP. The main purpose is to encourage every Tambon (village)
to create value from local raw materials and local wisdom a product characteristic of that
area. Main OTOP products are agricultural products, food, weaving products, handicraft,
pottery, etc.
Most Thai entrepreneurs appear to have entrepreneurial social backgrounds; more
often their parents are entrepreneurs. Some of them have adopted the idea of becoming
entrepreneurs while they were studying as they wanted to prove themselves; some during
their employment in a firm as they do not like to be employed for thier whole life.
Some become entrepreneurs to survive when they were unemployed. This group
may be called “necessity entrepreneurs”. Previously, necessity entrepreneurs were people
Thailand
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moving out of the rural area into towns and cities. They were desperate for any work or
jobs that would enable themselves and their families to survive.
This type of entrepreneur has been multiplying after the recent regional economic
crisis in 1997. As a result of that catastrophe, many firms became bankrupt and laid off
employees. A lot of the unemployed became necessity entrepreneurs and one of the more
easy businesses to start up is the food business, which can be in various styles, such as
moving pushcarts, shacks along the roadside or small food shops.
WHY ENTREPRENEURS?
People start to be entrepreneurs when they foresee many benefits in doing so. They
seek wealth: one receives a fix amount of salary when working for a firm, while a
successful entrepreneur can earn a far higher income. Independenceis another benefit in
entrepreneurship: working for a firm requires at least 8 working hours a day with a line of
command to follow in reporting to bosses and superiors, while entrepreneurs can enjoy
independence and freedom. Entrepreneurs find fulfillment: the excitement and challenge
of owning an enterprise makes life stimulating.
However as entrepreneurs, people will not only face advantages, challenges also
await them. They face insecurity: fixed working hours, steady income, fringe benefits,
bonus, retirement earnings, etc. are not guaranteed for entrepreneurs. Risk has to be
undertaken by any entrepreneur: high returns come from high risks, especially for financial
risk. Entrepreneurs face uncertainty in the environment: the environment impacts
businesses especially the small ones with few products or services; these businesses have
difficulty in adapting to change and technology. Initiating, developing and growing an
enterprise is time consuming: entrepreneurs are responsible for their success or failure, and
have less time for their family and relaxation.
In the first three years, start-ups usually struggle with loss or only manage to break-
even. Returns will normally flow in around the third year. Unfortunately many of them
cannot overcome the continuing challenges and fail.
The future entrepreneurs must be well aware of the unforeseen problems,
challenges, business uncertainties, and financial risks, which may bring them financial
loss.
The major weakness to the growth of entrepreneurs in Thailand is the
entrepreneur’s inability to develop a business plan. Many start-ups have great dreams but
can not transform these ideas into a sound business plan and marketable product. Some
entrepreneurs may have gained business knowledge and experience, but lack the specific
business skills in areas such as marketing and finance.
CHARACTERISTICS OF SUCCESSFUL ENTREPRENEURSHIP
From successful cases of entrepreneurship, the following characteristics of
successful entrepreneurship can be identified:
• High level of creativity is at the heart of entrepreneurship to enable new ways
of thinking and working.
• Risk taking is an essential characteristic, as entrepreneurs have to break rules,
cut across accepted boundaries, and go against the status quo – since high
returns come from high risk.
Creative Entrepreneurship in Asia
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• Ability to see, evaluate, and seize opportunities – large or small – that no one
else has noticed, distinguish the successful entrepreneurs from normal ones.
• Besides, entrepreneurs must be capable of transforming their vision or
perceived opportunities into successful enterprises.
• Since the success or failure of their enterprise depends on themselves,
ambition, motivation, determination, and strong will are required as
entrepreneurs continuously face obstacles.
• They must be energetic, diligent, disciplined, and able to work under pressure
and at the same time be optimistic and flexible to respond positively to any
challenges.
• Able to marshal the resources needed to effectively achieve their goals.
Entrepreneurs need to focus on creating value by doing things better, faster
and at lower cost.
• Furthermore, entrepreneurs must have the eagerness and ability to learn the
essential knowledge and skills such as market knowledge, management and
technical skills. Most importantly, they must learn from their own set-backs
and the failures of others.
• Social skills, persuasiveness, and ability to build and manage their social
networks are unavoidable.
• Finally, entrepreneurs must be aware of when and prepare how to harvest, or
exit gracefully when it becomes obvious that the new enterprise is not
working.
CREATIVE ENTREPRENEURSHIP
Creative entrepreneurship refers to the entrepreneurs with the ability to bring
something new into existence.
Nowadays, young and energetic people dream of freedom and independence. To
become a creative entrepreneur one first needs to be creative. Second, the desire to start
something, and third, the want or need to break one’s boring routine working hours, and
change their life pattern. They may only have a minimal start-up budget, plus their
expertise or personal preferences.
Creative entrepreneurs in Thailand generally start out with a part-time home
business, or turn their hobbies into a money-making business. They may start from doing
something of their choice, and develop it into full-time ventures later on.
EXAMPLES OF CREATIVE ENTREPRENEURSHIP: BANGKOK PUPPET
The “One Tambon One Product” (OTOP) project, as stated before, is supported by
the government of Thailand. The government planned for OTOP to strengthen the
domestic economy which would further drive the economy’s circulation and growth. The
regional crisis in 1997 destroyed the value of properties of many employees but at the
same time created opportunity and wealth for many new entrepreneurs. Pirun Aemsrisa-ad
was one of them.
Pirun Aemsrisa-ad had been laid off from his career as an architect from which he
earned a sizeable salary of Baht 60,000 per month. During his unemployment, he was not
daunted, and sought to find new channels of income. With his personal liking for clay
Thailand
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molding, puppet, and Thai art, Pirun spent his time learning about the puppet production at
the Royal Art Center.
Making a real size puppet consumed many months of his time and Pirun saw the
opportunity of his new business. He condensed the size of his puppet to 15 centimeters
while other functions such as the details and the moving parts remained. His small-sized
puppet was first presented at a fair under the brand of “Bangkok Puppet”, and received
good response from customers. From then on, his small puppets were found on shelves in
Bangkok’s shops and department stores.
However, Pirun was still not satisfied with his small puppets. He refined the
puppet’s face, costumes, and packaging. From that improvement, the price of his small
puppet was marked up from Baht 800 to Baht 2,000. Moreover, he created a new
production lineof dolls in traditional Thai costumes which generated value, allowing him
to price them for Baht 4,000-5,000.
The reason his puppet is able to command premium prices is because the small
puppet is neatly handmade at every step. Every small puppet is subjected to quality
control by Pirun himself.
Today, small puppets and dolls in traditional Thai costumes are popular souvenirs
among Thais and foreigners, and in export markets, namely J apan and USA. Bangkok
Puppet has been selected as the 5-star OTOP of the district in 2003.
Pirun used his savings to invest in future projects such as building his own
showroom for his small puppets and dolls. Also, he plans to expand his market to the
European and English puppet and miniature collectors.
More often, OTOP entrepreneurs can run their business smoothly on a smaller
scale. Some have successfully expanded their business to a larger scale, but many of them
fail as their management skills are not as good as their expertise.
INNOVATIVE ENTREPRENEURSHIP
Innovative entrepreneurship refers to the entrepreneurs that transform creative ideas
into useful applications in new or unusual ways to provide value to society with improved
products, technology, or services.
Innovation is the act of creating something new and worthwhile. Innovative
entrepreneurship is the act of bringing an innovation to the market and commercialising it.
Entrepreneurial skills are about identifying and using innovation in a way that is
commercially sensible.
Successful entrepreneurs which produce and market an innovative product or
service that never exist before often start their business with clear vision and concrete
business plan. More often, they have higher education with knowledge of information and
financial sources to support their business.
Examples of Innovative Entrepreneurship: Banrai Coffee
Saichon Payaonoi was working as geological architect in the real estate company,
“Land and House”. During his vacation, he loved to drive his own car while traveling. On
his trips, Saichon observed that travelers favored coffee as they stopped by gas stations to
get some refreshments and relax. At that time, only canned coffee was available at gas
stations.
One day, Saichon saw local people served fresh traditional Thai coffee along the
road side. He felt that the brewing method was very enchanting and thus ignited the idea
Creative Entrepreneurship in Asia
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of combining the enchanting coffee brewing process with an accessible, clean, and nicely
decorated serving place.
While on vacation during the period of 1995 – 1997, Saichon stopped by every gas
station to talk to mini-mart cashiers and collect information on the sales volumes of coffee.
He named his approach “Rustic Marketing”. At first, Saichon planned for his coffee
project as an additional income apart from his normal salary. The start-up budget of Baht
150,000 was not the problem; the real problem was the location.
With his expertise as a geological architect, Saichon designed his coffee outlet in
the Thai traditional style. His clear vision was transformed into a “wooden cabin for
coffee lover and traveling caravan” at a PTT gas station in the suburb of Bangkok in 1997.
His first outlet was served by three staff: his brother, his nephew and, himself. It started
up nicely with a forecasted net income Baht 10,000 per month. But 13 days after the
inauguration, a car accidentally crashed into his cabin, and that was the tragic end of his
first project as an entrepreneur.
However, Saichon persevered and presented his idea to many gas stations. Finally,
the J ET gas station company was satisfied with Saichon’s concept as it aligned with their
differentiation strategy. “Banrai Coffee” – “Coffee Garden” was then reborn at the J ET
gas station, Rangsit branch in April 1998. It succeeded with incredible sales volume, and
six more Banrai Coffee outlets followed.
In 1999, Saichon quitted his job and became a full-time entrepreneur. Banrai
Coffee uses native product and services, such as coffee planted by The Royal Project,
coffee roasted by a factory in Saichon’s home-province, Saraburi, and served in handmade
baked clay cups from the same province.
The distinguishing characteristics of an optimistic and diligent learner inspired
Saichon’s systematic thinking and clear vision. 4 years later, at 35 years of age, Saichon
operates a total of 100 branches of Banrai Coffee in almost every region of Thailand, with
monthly sales volume of some Baht 100 million. Saichon sets his goal to expand his
outlets to neighboring countries in the near future.
SERIAL ENTREPRENEURSHIP
The traditional entrepreneur is the owner-manager who usually runs one business at
a time. Though found in several locations, the business is still run by one company.
However, some entrepreneurs have a different approach; they start several businesses at
the same time or one after another.
As a general rule, entrepreneurs are not risk-averse people – and for serial
entrepreneurs, this characteristic is even more pronounced. Starting the first firm is only
another step toward their ultimate success. They might make the first business a success,
sell it and go on to start another. Others start several separate firms to test the market and
diversify risk with an acceptance that some of them might fail. Other serial entrepreneurs
have strategies in their mind, they start several firms but all are in related in some way.
Examples of Serial Entrepreneurship: Oishi Group
Oishi in J apanese means delicious, but for Tan Pasakornnathi, it means success.
Everything he grasped becomes value-added business. Tan said that the phenomenon is
not because he was smarter than others, but because he saw the opportunities before the
others.
Before Oishi Group, Tan started and failed several scattered businesses: bookshop,
coffee shop, food shop, land and property, etc. Those failures turned out to be his lessons.
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He then sought his success by venturing into a wedding studio business. With the
lessons learnt from his earlier business failures, he then, introduced the concept of
networking in his new enterprise. Today, his wedding studio is a part of 19 brands and a
19-company wedding studio chain. All studios have different shareholders. Tan, as the
central shareholder, coordinates all the studios for the purpose of managing cost, namely
advertising budget, sharing resources, or even borrowing resources.
On 9 September 1999, he started Oishi Group, another related line of business with
‘spider marketing’ – a new concept of marketing he developed from previous business
experience - creating valued-added original products or services with co-marketing or co-
raw material utilization. Tan started Oishi as a J apanese restaurant business, but
differentiated it by serving in buffet style, which was first launched in Thailand. From that
point on, he started several food businesses, employing his effective cost management
objective, to make bulk purchases, share resources (such as cooks, machines, logistics) and
utilize resources. The leftover raw material from one dish can be a valuable component of
the other dishes, for example fish bones from Oishi Buffet fish menu can be very good
stock for Oishi Ramen (J apanese noodles).
Today, there are 6 Oishi J apanese Buffet restaurants, 7 Oishi Ramen restaurants, 2
Oishi Sushi Bars, 8 Shabushi Buffet branches, 1 Grill N’ More Steak Cabin, with Oishi
Inter and Oishi Trading as the central kitchen serving others in the chain. Last but not
least, In&Out Bakery was started when he recognized the opportunities that were present
as his food business chain were using baking services of over Baht 1 million per month.
The Oishi brand is very well known and widely accepted by consumers. Oishi
utilizes their food shop branches as distribution channels for new products, such as moon
cakes during the Chinese moon festival (the mid-Autumn festival).
Tan’s latest move was shook up the beverage market in Thailand. In his Oishi
J apanese Buffet restaurants, green tea coolers are provided for diners. Enjoying its taste,
some customers wanted to buy green tea home. Oishi then responded by filling green tea
in ordinary plastic bottles for take away. With good response and increasing demand from
consumers, Oishi green tea is presented in attractive packaging, both in bottle and tetra
pack boxes, and distributed through various channels, including supermarkets and
convenient stores.
Today, green tea has become the most popular beverage for the younger generation
in Thailand. In 2003, the green tea beverage market is valued at over Baht 1,000 million.
Moreover, the green tea fad has spread to other products, anything with magic word
“Green Tea” interests consumers; green tea milk, green tea yogurt, green tea bread, green
tea soap, green tea shampoo, green tea lotion, green tea tooth-paste, and even to green tea
sanitary napkins!
The success of Tan Pasakornnathi came from continuous business development,
and the courage in handling risks or obstacles placed in his way. He revealed that doing
business is not just starting a business, but also designing the business. Tan’s main
strategy is cost effective management and resources utilization. Tan is preparing to bring
his group of food companies for listing on the Stock Exchange Market of Thailand and to
further expand his J apanese restaurants through franchising.
SOURCES OF INFORMATION
Department of Industrial Promotion (DIP), Ministry of Industry.
The Office of Small and Medium Enterprises Promotion (OSMEP).
Institute for Small and Medium Enterprises Development (ISMED).
Creative Entrepreneurship in Asia
- 118 -
National Science and Technology Development Agency (NSTDA).
Entrepreneurship and Innovation in the Knowledge-based Economy: Challenges and
Strategies ?APO 2003, ISBN: 92-833-7023-6.
Good Practices of SMEs, Thailand Productivity Institute, 2004.
Holt, David H., Entrepreneurship: New Venture Creation, Prentice Hall: 1992.
Menger, Carl Menger Principles of Economics, 1871.
Smith, Adam, Wealth of Nations, 1776.
“Soo Laew Ruay”, Kantana Publishing, 2001.
http://www.manager.co.th
http://www.businessthai.co.th
http://www.ce-cioceoforum.com
http://www.bangkokpuppet.com
http://www.banriecoffee.com
http://www.oishirestaurant.com
http://biz-methods.com
http://www.celcee.edu
http://www.wsis-online.net
http://www.acca.co.uk
http://www.derbymanagement.com
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THAILAND (2)
Wiwat Chutiwanichayakul
Kenan Institute Asia
INNOVATION NETWORKS AND SUCCESSFUL CREATIVE
ENTREPRENEURSHIP IN THAILAND
Since the 1980s, the concept of the National Innovation System (NIS) has been
gaining popularity as a core conceptual framework for analyzing technological change.
Technological change is considered to be an indispensable foundation of Thailand’s long-
term economic development.
The NIS concept rests on the premise that understanding the linkages among the
institutions – especially how these institutions relate to each other as elements of a
collective system of knowledge creation, diffusion and application - is a crucial instrument
for improving Thailand’s innovative performance. These institutions include both “things
that pattern behavior” like norms, rule and laws (e.g. patent systems and technical
standards) and “formal structure with an explicit purpose” such as firms, industrial
research and development (R&D) laboratories, universities, and public R&D institutes.
The key components of the Thai NIS are major industrial clusters which are
networks of firms, knowledge producing agents, bridging institutions and customers linked
with each other through shared information needs, related value chains and via significant
levels of interaction and interdependence.
As the Thai economy has lost its competency to compete in the late 1990s and is no
longer able to sustain development. Innovation is a significant factor in re-structuring,
especially in the technology sector and could create a quantum leap in the nation's
competitiveness. Therefore, upon recognizing the critical importance of innovation in
enhancing the value of the Thai economy, the 9th National Economic and Social
Development Plan (2002-2006) has identified the development of innovation as an
important mechanism for improving the country’s level of competitiveness. Apart from
that, innovation is one of the ways to improve science and technology strengths by
emphasizing the implementation of science and technology in manufacturing and local
innovation development, thus reducing reliance on imports.
By 2004, innovation was accepted as a very significant public policy issue in
Thailand. Policy makers have begun to recognize the importance of innovation to
Thailand’s competitiveness. The government has played an important role in the invention
and the transfer of technology by providing financial support, technical support, and legal
patent protection. The organizations that provide SME support include the National
Science and Technology Development Agency (NSTDA), Thailand Institute of Scientific
and Technological Research (TISTR), Thailand Research Fund (TRF), Innovation
Development Fund (IDF) and Department of Intellectual Property.
To encourage 'Practical Innovation' among Thai organizations and Thai innovators,
many organizations including the government, academic institutions and the private sector
have organized many innovation-related awards – for example, the “Thailand's BEST
Innovation Award 2003” organized by Accenture (Thailand) and The Nation newspaper.
The program aims to encourage Thai organizations and the Thai people to generate,
develop and create new theories, new work processes and new innovations, all of which
Creative Entrepreneurship in Asia
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must be practical and bring crucial benefits to the country. Most importantly, they must
enhance work processes and create a better quality of living.
SUPPORT AND SERVICE MECHANISMS FOR SMES AND
ENTREPRENEURSHIP IN THAILAND
In Thailand, small and medium-sized enterprises (SMEs) constitute some 99
percent of manufacturing businesses in the country, representing 50 percent of the GDP.
SMEs also employ more than 60 percent of the country’s workforce.
Major SME promotion and development agencies in Thailand include:
• the Department of Industrial Promotion (DIP) under the Ministry of Industry
• The Office of Small and Medium Enterprises Promotion (OSMEP), established
in 2001
• Institute for Small and Medium Enterprises Development (ISMED), established
in 1999
The Department of Industrial Promotion (DIP) under the Ministry of Industry acts
as the lead agency of the government to promote and develop SMEs as well as to develop
entrepreneurs in Thailand.
At present, the Thai government has a clear policy to create and develop new
entrepreneurs. The New Entrepreneurs Creation (NEC) program was developed in 1999
under the industrial restructuring budget. However, there was no budget for the year 2000-
2001. In 2002, the NEC program became active again. The DIP received a regular budget
of Baht 7.5 million and an economic stimulus budget of Baht 174.5 million for the New
Entrepreneurs Creation (NEC) project. The cabinet recently approved a plan called the
“National New Entrepreneurs Creation” in May 2003.
The NEC program aims to develop 50,000 new entrepreneurs throughout the
country by 2004. This plan also includes an effort to elevate the number of entrepreneurs
from the current 1 in a population of 130 to 1 in a population of a hundred. As of 2003 the
program is partnered with 15 academic institutions throughout the country, 3 financial
institutions and 8 independent organizations. All of which are listed below:
Academic Institutions
1. Chulalongkorn University
2. Thammasat University
3. Kasetsart University
4. Prince of Songkla University
5. Khonkaen University
6. Chiangmai University
7. Srinakharinwirot University
8. Bangkok University
9. University of Thai Chamber of Commerce
10. National Institute of Development Administration
11. King Mongkut University, Northern Campus
12. Rajmongkol Technology Institute
13. Suranari Technology University
14. Burapa University
15. Mahasarakam University
Thailand
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Financial Institutions
1. SME Development Bank
2. Industrial Finance Corporation of Thailand
3. Siam City Bank Public Co., Ltd.
Independent Agencies
1. National Science and Technology Development Agency ( NSTDA),
2. The Institute for Promotion of Teaching Science and Technology
3. National Electronics and Computer Technology Center
4. Entrepreneurial Competency Development Association (ECDA)
5. Quality Development Association of Thailand
6. Association for the Promotion of Thai Small and Medium Enterprises
7. Ingka Company
8. Than Sertakit Newspaper
These organizations organize workshops, seminars and training for
entrepreneurship development, business formulation, business management, as well as
provide consulting services, business incubation, finance and investment, and market
development. As of February 2003, the NEC program has created 902 new investment
projects, 5,664 new jobs and overall investment of Baht 3,259 Million.
The NEC program includes the following activities:
1. Short Course Training (9 Days Period)
The courses are set up for entrepreneurs who already have some business
knowledge and experience, and need to develop specific business skills in certain
areas such as marketing and finance. The courses that have been arranged, for
example, are business succession, entrepreneurship in franchising, web page design
development and preparation for SME businesses.
2. Long Courses Training (18 Days Training, 9 Days Workshop)
The courses are organized for entrepreneurs with little prior business knowledge or
experience. They are intended to train entrepreneurship skills by focusing on
business preparation, knowledge of business formulation, and applicable laws and
regulations. The courses that have been arranged include new entrepreneurs
development, entrepreneurs development for new technologies businesses, and new
entrepreneurs development for sustainable careers.
3. Market for finance and investment of SMEs
The market acts as a meeting point for SME entrepreneurs whose business plans
have been formulated, and providers of SME financing such as financial institutions
and venture capitalists.
4. Business Incubation
Setting up incubation centers at the premises belonging to the DIP and/or partnering
organizations.
C
r
e
a
t
i
v
e
E
n
t
r
e
p
r
e
n
e
u
r
s
h
i
p
i
n
A
s
i
a
-
1
2
2
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
Persons
1999
2002
2003
2000-2001
Investment Baht 4,162
Million
Investors 1,079 persons
Employments 7,184
persons
7,499 persons
1,079 persons
( 14.38%)
4,141 persons
46 persons
(1.11%)
NoBudget
“NEC”
Economy Stimulating Budget of Baht
174.5 Million
Regular Budget of Baht 7.4 Million
“NEC”
Regular Budget of
Baht 123.2 Million
As of J uly 2003
Figure 1: Results of New Entrepreneurs Creation, by the DIP, from 1999-2003
“NEC”
Industrial Restructuring Budget
of Baht 7.4 Million
Thailand
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BUSINESS INCUBATION IN THAILAND
Thailand has been involved with SME incubation projects since the birth of
Thailand’s National Development Plans in 1970s. However, a clear focus of the issues,
and consequently active policy implementation for smaller-scale businesses did not come
into the spotlight until after the recent regional economic crisis in 1997.
The Thai government now has five broad policies addressing business incubation,
namely: capital and finance, official SME institutions, SME laws and legal procedures,
land and space supports, and taxation. Having identified these five policy areas, the Thai
government is now putting these policies into action at great speed. For financial matters,
the Thai Ministry of Finance is now in charge of providing support and suggestions to
SME investors. The SMEs official institution (ISMED) has been set up since 1999 as a
core technological center that serves as an interface between SME owners and the
government. SME laws covering various aspects, ranging from basic legal rights to
business protection also came into effect. The Thai National Housing Authority, under the
supervision of the Ministry of Defense, is responsible for land use matters, especially
emphasizing land taxation and property transfers. Last but not least, the Thai Ministry of
Commerce is taking care of general SME taxation by providing favorable tax schemes to
all SME investors.
ORIGIN AND DEVELOPMENT OF BUSINESS INCUBATORS IN THAILAND
Thai business incubator development and adoption is primarily within the purview
of academic institutions and the government, not the private sector. While statistics and
literature on Thai business incubators are sparse, the more notable examples include the
joint government and industrial park projects such as software parks, science parks, and
incubator units of academic institutions.
On the government side, the Department of Industrial Promotion (DIP), Ministry
of Industry, takes the lead role in business incubation programs. The DIP began to
acquire knowledge of business incubation in 1984 when the German government assisted
Thailand in developing industrial projects. Experts from the Industrial Development
Authority of Ireland (IDA) were invited to Thailand to share knowledge of SME
development among the government officers. The experts advised on many programs in
industrial development including the setting up of Business Opportunity Centers (BOC),
industrial clinic activities etc. The DIP’s officers also had an opportunity to visit Ireland
to gain first-hand experience in SME development including the business incubation
center. However, a lack of budget and resources froze the project before it could be
implemented.
The first government incubation program was created under the Thai national
master plan for the development of SMEs in Southern Thailand. The objective was to
contribute to the economic development of Southern Thailand through increased SME
activities. With funding and technical support from the European Union (EU), the first
incubation center was established in 1999 by the DIP, and the Institute of Small and
Medium Enterprise Development (ISMED). The pilot center was set up on the grounds of
the regional Industrial Promotion Center (region 11) in Hat Yai, Songkhla. The
infrastructure occupied an area of 650 square meters, offering both in-wall and out-wall
facilities and the capacity to incubate 7 industry units. The incubation center at DIP
region 11 is considered to be the pilot incubation center and is still operating as of today.
Creative Entrepreneurship in Asia
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A significant business incubator emerged in Thailand in 2002 using a new budget
for stimulating the economy from the government. The project “New Entrepreneurs
Creation” (NEC) was re-launched with an aim to promote entrepreneurship development
throughout Thailand. The business incubation center was one of the major activities
under the NEC program. At present, there are many business incubation centers operating
in Thailand using the models as listed below:
Models of incubators
There are different models of business incubators in Thailand.
If classified by space utilization we can group them into two groups:
• In–wall: An incubator in-wall refers to an actual physical infrastructure that
houses the start-up businesses. While service offerings vary among incubator
units, a full-service center provides everything a venture will need, including
office space and infrastructure, access to networks of contacts, technology
resources, human resources, operational expertise, and legal and accounting
support. The infrastructure usually covers an area of 1,200–1,600 sq.m.
• Out-wall/Out-reach: An incubator out-wall does not provide office
infrastructure. These centers accelerate the process of starting a venture, which
may already have their own office and equipment, by offering expertise and
services only. This may include consulting services to bolster the business plan,
repositioning the firm, validating the business model, or bringing products to
market.
If classified by incubation functions, there are four groups:
• Incubator in Specific Industry: this type of incubator is established for the
purpose of incubating new start-ups in a specific industry such as the
agricultural transformation industry, software industry, and ceramic industry.
• Hiding Incubator: these small incubators usually operate under some
organizations for specific business purposes.
• High-tech: incubators have experts or expertise in particular fields such as bio-
technology, life sciences etc. and use their knowledge to support incubatees.
• Information Technology (IT): incubator provide IT infrastructure and provide
consulting for IT and IT related issues.
Table 1: Result s of SMEs Business Incubation under the NEC Program
Incubators Incubatees Business
created
Employments Note
Economic Stimulus Budget 2002
1. King Mongkut
University, Northern
Campus (In-wall)
- Mechanical
&Automotive field 3
- Plastic field 3
- Furniture & wooden
products 5
- Electronic field 4
15
4
58
-
Thailand
- 125 -
2. Rajmongkol Technology
Institute (In-wall)
- Leather products 3
- Ceramic products 4
- Bakery products 11
- Apparels products 3
21
13
110
-
3. Software Park (In-wall) 20 5 131 -
4. Engineering faculty,
Prince Songkla University
-In-wall 16
-Out-wall 7
22
7
102
-
5. Industrial Promotion
Center, region 9
- General industries 11
- Food & Agricultural
transformation and
Packaging 10
21
7
93
-
Regular budget
6. Excellent Business
Management Co., Ltd.
23 16 64
Total 122 52 558
Table 2: Performance Results of Business Incubation Activities on 2003
Organization Target Participant
1. Industrial Promotion Center, region 1 In-wall : 3 In-wall : 3
Out-wall : 2
2. Industrial Promotion Center, region 3 In-wall : 3 2
3. Industrial Promotion Center, region 4 Out-wall : 3 3
4. Industrial Promotion Center, region 5 In-wall : 2 2
5. Industrial Promotion Center, region 7 Out-wall : 5 5
6. Industrial Promotion Center, region 8 Out-wall : 2 2
7. Industrial Promotion Center, region 9 In-wall : 10
Out-wall : 10
30
8. Industrial Promotion Center, region 10 In-wall : 1
Out-wall : 14
In-wall : 1
Out-wall : 14
9. Industrial Promotion Center, region 11 Out-wall : 17 17
10. Bureau of Industrial Enterprises and
Entrepreneurs Development
In-wall : 10
Out-wall : 10
In-wall :10
Out-wall : 10
Srinakharinwirot University In-wall : 10
Out-wall : 10
In-wall : 10
Out-wall : 10
Software Park In-wall : 8 8
NUMBER OF INCUBATORS IN THAILAND
There are two kinds of incubators in Thailand, government-own organizations and
privately-owned organizations. Currently, there are 19 incubators in Thailand belonging to
Creative Entrepreneurship in Asia
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both the government and private sectors, 18 are government organizations and only one is
a private incubator as shown in the Table 1.
According to information from Department of Industrial Promotion (DIP), Ministry
of Industry of Thailand: from year 2003, the number of organizations involved in the new
New Entrepreneurs Creation (NEC) project will increase. An additional 11 government-
owned universities and 8 independent organizations will participate in the NEC project.
It is expected that the number of incubators will increase accordingly with new
startups being created.
Types of Incubators
Almost all of the government-owned incubators are industry specific except for the
two incubators, Software Park and Science Park which are Information Technology (IT)
and high-tech incubators, respectively.
The industry specific incubators usually offer space for business operations, provide
consulting services in business management and administration but are not deeply
involved in the terms of production technology. Incubatees set their own direction in the
industry that they have selected.
Software Park and Thailand Science Park play different roles. They provide space
for business operations, consulting in business management, administration and IT
infrastructure, and deploy expert IT consultants or particular technology experts to their
incubatee.
Thai Incubator Dot Com Co. Ltd. is a private incubator that is classified as the IT
type. The Thai Incubator provides the same functions as mentioned in government
organizations plus financial support. Table 3 shows the types of incubators in Thailand
and their characteristics.
Table 3: Incubators in Thailand and their characteristics
No. of incubatees
2002 2003
No. Incubator Sector Type of
Incubator
Main function of
Incubator
Total
no.
Business
Established
Total
no.
4 I. National University Gov.
1.1 King Mongkut
Institute of Technology
Gov. Industry
specific
15 4 0
1.2 Rajamongkol Institute
of Technology
Gov. Industry
specific
21 13 0
1.3 Songkhla Nakarin
University
Gov. Industry
specific
22 7 0
1.4 Srinakarinwirote
University
Gov. Industry
specific
i. Office space with
equipment furnished
ii. Technical and
technology support
from experts
iii. Management and
administration
consultant
0 0 20
11 II. Industry Promotion
Center (area 1-11) : 11
places
Gov. Industry
specific
i. Office space with
equipment furnished
ii. Management and
administration
consultant
21 7 81
Thailand
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1 III. Bureau of Industrial
Enterprises and
Entrepreneurs
Development
Gov. Industry
specific
i. Office space with
equipment furnished
ii. Management and
administration
consultant
0 0 20
2 IV. Independent
Organizations
Established by
Government :
Gov. Information
Technology
(IT) and
Innovation &
High tech
4.1 Software Park Gov. Information
Technology
(IT)
i. Office space with
equipment furnished
ii. Management and
administration
consultant
20 5 8
4.2 Thailand Science Park Gov. High-Tech i. Office space with
equipment furnished
ii. Technical and
technology support
from experts
iii. Management and
administration
consultant
4 0 20
1 Thai Incubator Dot
Com Co., Ltd.
Private
sector
Information
Technology
(IT)
i. Office space with
equipment furnished
ii. Technical and
technology support
from experts: IT
iii. Management and
administration
consultant
iv. Financing Support
10 0 6
19 113 36 155
OPPORTUNITIES FOR BUSINESS INNOVATION AND
INCUBATION IN THAILAND
Currently, growth rate of small-scale business is still small. In 2001 the growth rate
of small-scale business was 3.6% whereas medium scale business showed growth of 9.8%
(in terms of number of business). Some sources of information (magazine) claim that the
number of successful SMEs is still small because after several years of operation at the
commercial level, they face many problems and finally shut down. Therefore the level of
competition among established SMEs is not high. There is a room for new players under
incubation to grow in each business or industry in Thailand.
Resources: Thailand has human and natural resources. At present, the Thai
Government has set out a special budget for training new graduates to be entrepreneurs
and has created many related and continuous learning programs to guide them to establish
their own businesses (NEC projects). After completing the programs they can be one of
the incubatees in any incubation center.
Creative Entrepreneurship in Asia
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As Thailand is located in the tropical region with a sizeable agriculture sector it has
the potential to develop new technology in agriculture-related areas such as biotechnology
and agricultural technology.
Thailand started the idea of business incubation several years ago (Year 1999). The
country is in the start-up stage of business incubation. It is looking for the opportunity to
improve its incubation activities as well as opportunities to develop the know-how of
incubation from advanced countries such as Taiwan, US etc., which have moved on from
the start-up stage to record achievements in business incubation.
BARRIERS TO “BUSINESS INNOVATION AND INCUBATION”
IN THAILAND
No precise budget from Thai Government has been assigned to incubators or
business incubation organizations in both the Government sector and in the private sector.
The budget for incubation activities has been grouped together with other budgets to
develop and support industrial sectors.
The Thai culture and perceptions contradict the idea of incubation. Thais have
highly individualist attitudes and are very independent. Therefore, sometimes some
entrepreneurs choose not to use the incubation space provided by government
organizations or “in-wall” incubation but set up their own “out-wall” offices which lead to
higher cost and expenses. At the same time, they feel awkward consulting government
appointed consultants because of the close scrutiny that will be placed on all their
transactions.
Apparently, the measurement of achievement from government agencies and
private sector is different. The government measures the achievement of incubation
projects using employment capability of each project while the private sector measures the
achievement of incubated projects using the “Break Even Point” which means self-
financing. There is no commonly used benchmark to determine the success of incubation
at the moment.
THE DEVELOPMENT OF A CLOSE TIE IN INCUBATORS AMONG
DIFFERENT COUNTRIES
Thailand is a small country and is in the stage of developing its economic, industry
and social sectors. Therefore, the support and collaboration from the advanced countries is
necessary. An international seminar can bring about closer relations and build a network
which can support collaboration between Thai and international incubators.
Possible ways for collaboration on business incubation include:
1. Exchanging experiences and knowledge in incubation from international
incubators in both the private and government sectors regularly, eg. semi-
annually. This could be achieved through an international seminar.
2. Staff exchanges between incubators in Thailand and countries that already
have successful track records in business incubation such as Taiwan and US.
The purpose of these interactions is to share and exchange incubation
problems between incubators and incubatee in depth, general problems, and
work at the coordinating level to solve the problems.
Thailand
- 129 -
3. Set up a special program to educate SME entrepreneurs in Thailand. The
program topics may cover success stories of incubation in various countries
and various incubation types, and provide opportunities for them to observe
business incubation in foreign countries.
4. Regular seminars among incubatees and incubators to be held in each
country. The purpose of these seminars is to gather information for the
development of business incubation, for incubators to learn about the
efficiency and problems of incubation occurring between incubators and
incubatees.
5. Create a means such as a web site for incubators and SME entrepreneurs to
discuss and exchange information widely as well as receive different point of
views. In addition, the website could be a central information center on
incubation, act as a reference point for incubators and SME entrepreneurs
and use in the incubation development strategy.
CONCLUSION
Thailand’s NIS is still at an early stage of development. The initial signs are
encouraging. However, only time will reveal the success of various programs. It is clear
that more needs to be learned from the success of incubators in other countries. With
patience and perseverance, it is hoped that Thailand’s SMEs will grow and flourish with a
number of them making their names on the global stage.
SOURCES OF INFORMATION
Department of Industrial Promotion (DIP), Ministry if Industry
The Office of Small and Medium Enterprises Promotion (OSMEP)
Institute for Small and Medium Enterprises Development (ISMED)
National Science and Technology Development Agency (NSTDA)
http://www.derbymanagement.com
- 130 -
VIETNAM
Pham Gia Minh
Trung Minh Company Ltd.
“CREATIVE ENTREPRENEUSHIP” FOR BUSINESS GROWTH
Successful growth within any business is the product of a complex mix of variables
that are both internal and external to the firm. Such variables are frequently called
“enterprise resources” which include all assets, skills, capabilities, organizational
processes, attributes, information or knowledge under the enterprise’s control, that can
used to develop competitive positional strategies.
Not all enterprise resources will be valuable in the development of competitive
advantage. Those resources that do offer competitive advantage are critical to creative
entrepreneurship in firms. Our empirical examinations show that the source of critical
resources for creative Entrepreneurship is in the internal rather than external environment,
and it is derived from the way an enterprise uses its resources creatively relative to its
competition.
Successful growth within a small business is dependent upon the capacity of the
owner to manage the expansion within the limits of his/her resources. The creative
entrepreneurship resources found within the firm includes the financial, physical and
human resources as well as the experience, leadership, ideas and control base of the
entrepreneur. Key resource issues facing the growing small firm are the lack of technical
and managerial skills, inadequate organizational adaptability, and the ability to acquire or
use technology.
As the business grows owners must learn to transfer their own expertise and
knowledge to their staff in order to free themselves for further developmental work on
their business rather than in it. This requires the small business to shift from having an
organization culture-based around the personality of the owner, to a “systems-based”
structure that can successfully reproduce and maintain itself without the presence of the
original owner.
MODEL OF SUCCESSFUL SMALL BUSINESS GROWTH
Drawing on our empirical studies of a group of 36 small firms (see table 1 on the
demographics of the sample) over four year period in Vietnam (20 in the South and 16 in
the North, 30% of them manufacturing and 70% service companies) we found a strong
relationship between high growth and the group of four significant factors derived from
the questionnaire survey.
Key Data Awareness
This factor consists of two variables. The first relates to the owner having clearly
identified the critical information needed by them in order that they continually exceed
their customers’ expectations. The second concern whether or not the owner has examined
how he or she gets business and identify what information they require.
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Not Price Driven
It comprises of two variables. The first relates to whether or not an increase in the
firm’s prices will affect demand for its products. The second is whether price is considered
to be a real factor in determining customer-buying decisions.
Table 1: The Demographics of the 36 Firms
No. Title
Number
of firms
Average
age of
business
Product
service
Average
No. of
employees
Average age
of
entrepreneurs
I
Manufacturing firms in the North Vietnam
1 Food processing 3 7
Vegetable and
food export
150 36
2
Detergent and
cleaning liquid
1 12
Bio-detergent
powder and
liquid
70 42
3 Mining 1 9 CaCo3 powder 200 45
II Service firms in the North
1 Hotel 2 8 Hotel service 350 41
2 Travel agency 2 12 Tourism 56 32
3 Trading 2 10 Trading service 130 37
4
Multimedia
service
1 9 Multimedia 25 32
5 Consulting 2 11 Law service 15 38
6 Bank 2 15 Bank service 300 45
III Manufacturing firms in South Vietnam
1
Portery & ceramic
export company
1 12
Garden &
interior portery
150 32
2
Furniture
companies
1 8
Furniture
outdoor
500 38
3 Seafood export 2 9 Catfish 800 42
4
Building
component &
material
1 12
Construction
structures
300 40
5 Garment 1 10 J eans 2000 47
6
Agriculture
production
1 10 Grape fruit 50 36
IV Service firms in the South
1 Hotel 4 13 Hotel service 500 46
2
Architecture
design
1 8
Construction
service
15 31
3 Computer service 3 5 Maintenance 45 32
4 Trading 3 7 Trading service 200 43
5 Education 2 9
Vocational
training service
55 47
Creative Entrepreneurship in Asia
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Business Generating System
This consists of four variables. The first is concerned with the owner’s focus on
growing their business by selling proven products or service to more customers. The
second relates to the firm’ capacity to plan for and allocate sufficient resources to the
development of new markets. The third involves the owner’ view that long-term prospects
in their primary markets are excellent. Finally the last variable is whether or not the firm
has effective business-generating system in the place to create new customers.
Use Experts and Family
It consists of two variables. The first is related to the owner’s awareness of and
ability to access grants and expertise available to assist their business. The second is a
more personal one and concerns the owner’s ability to make time for family and friends.
CASE STUDIES
In order to investigate this model of business performance, a series of case studies
were developed with members selected from the original panel of 36 respondents. The
purpose of these cases was to examine first hand, the relationship that appeared to be
found in the data analysis. The application of each business was examined and the sample
was divided into the high and low performing firms. In the following sub-sections two
case studies are provided. These examples illustrate the relationship between the four key
success factors and market performance.
Case Study 1 – Small Manufacturer
This small manufacturer has experienced substantial growth over the previous three
years, expanding its employment base from six to 120 employees (including casual
labour). The firm has also started a nation-wide expansion moving its operations interstate
from South to North. Its product - an industrial building component – was sold to a small
number of large customers usually involving three-year contracts.
In terms of ‘key data awareness’ the firm’s owner made it clear that his company
spent a substantial amount of time monitoring the activities of both his customers and
competitors. His main competitor was a large international company with lower cost
structures. Faced with such competition, the owner targeted six potential new customers.
He spent time finding out what their requirements were and narrowed his field down to
three who seemed to be favor his products over his competitors. By focusing on the needs
of these three rather than all the six, he was able to secure three good contracts and left the
rest of the field to the competitors. Constant environmental scanning by the owner was
deemed crucial to avoid being ‘wrong footed’ by the larger competitors.
In terms of pricing, the firm had commended a premium price approximately 5
percent above the industry average. The owner did not consider that his company made
‘super profits’ but he did not compete on price for contracts and sought to make a better
than average profit margins within his prices and is of the view that there is room to charge
more.
The owner identified customer service as an important aspect of his ‘business
generating system.’ He described customer service as ‘one of the key planks in the
company.’ The owner indicated that he was still responsible for most of selling. He
stressed the role of innovation in winning new business. He sought to provide his
customers value-added by carefully monitoring customer needs. According the owner he
Vietnam
- 133 -
attempt to place himself in the customer’s situation and think of what he can offer that is
new or innovative. By doing this he was able to approach them and offer a solution to a
problem. This had led to substantial dividends as he explained:
“We had a case recently where one of our competitors offered our biggest
client much better price than ours. The customer told me this in his office. He
had a big desk and he said all the paper on his desk represented problems that
he was trying to solve, but not one of these problems related to my company
so there wasn’t any need to change. So that is the kind of thing that happens
when you’re willing to work hard on customer service.”
In addition to servicing the needs of its exiting customers the company also devoted
resources to the development of new products and new markets. The owner explained how
he was seeking to empower his employees to assume greater levels of responsibility so he
could be occupied with more strategic concerns. The interstate move was absorbing more
of his time and he needed to establish entirely new business operations in these cities. He
had to plan for this carefully to ensure that his existing operations did not falter. Team
building within his company has become a key focus.
The company also demonstrated its willingness to use experts and family members
to assist the business. According to the owner his wife was a major participant in the
business. She joins him in sorting out various problems and he relies on her help. Equally
important was the relationship he had developed with his bank. He describes spending two
years developing a close working relationship with his banker. This was critical to his
operations as the business had cyclical cash flows with higher sales during the summer
months; four times larger than at other times of year. However, the company had to gear
up borrow during the winter to fill its inventory so as to meet the summer orders. The bank
had greatly expanded his overdraft facility enabling the company to meet its short-term
debts and wages bills during the winter. This partnership with the bank is now a key
element in the firm’s success.
Case Study 2 – Small Service Firm
This small firm was engaged in high quality post-production work for television
commercials, documentaries and film work. In recent years it has begun expansion into
multimedia and website design. The company had grown strongly in recent years
commencing with three staff and currently employing 13. The employment comprises of
audio and video editors, and graphics specialists. Its customer base was small but consisted
of about 100 to 200 key clients. Over the previous three years the company made
substantial investments in new equipment and production facilities.
According to the owner, it was difficult to monitor key indicators as the
environment – both internal and external – changed so rapidly. He expressed concern over
the need to remain aware of such information and described how the company had
originally performed around 90 percent of its work for the corporate sector and had now
reduce this to 15 percent. The firm sought to monitor its customer satisfaction levels and
had a well-defined customer service policy. These customer service levels had not been
formally addressed within the company in its early years and the owner was since seeking
to do so. He has introduced a formal system of monitoring customer satisfaction and held
‘mini-seminars’ for his staff using graphs to illustrate customer service performance.
In addition to monitoring the existing customers, the owner described how he was
now monitoring the external environmental changes which are taking place within his
Creative Entrepreneurship in Asia
- 134 -
industry. It was noted that some of his customers were beginning to establish ‘in-house’
facilities to do the work he had performed. Some of these customers are likely to become
competitors over time. Therefore he is looking for new markets to generate new business.
The company began to look overseas for opportunities and had set a 12-month horizon to
achieve certain goals.
The company did attempt to “delight its customers” although this was not easy
within their industry as “advertising people are quite fickle.” As the owner explained:
“We try to handle their wants, like “I want” as opposed to “I need”. We give
better customer service than the average, like a car yard or whatever. We
hope to constantly please customers but customers are always quick to find
fault.”
The owner was monitoring his financial information on the weekly basis and
monitored his break-even points against it. In terms of prices competition, it is difficult
within his industry to charge a premium price on all jobs. However, the owner indicated
that his main aim was to work smarter not harder and this meant seeking those jobs that
offered the better margins. His only suppliers were videotape manufacturers and therefore
it was staff time that the company was essentially selling.
The owner also indicated that he was willing to use experts, family and friends to
assist his business. He had a strong personal relationship with his accountant and worked
with a business mentor to assist in business development. In addition to professional
advice, the owner drew support from his circle of business friends and colleagues to
discuss business related issues.
MANAGERIAL AND RESEARCH IMPLICATIONS
These two case studies are typical of several similar cases that demonstrate a link
between the four-factor model shown in Figure 1 and business growth.
The four significant factors associated with the growth index measure used in the
study highlight additional issues that the small business owner-manager needs to address.
They suggest that the small business owner-manager seeking growth will need to gather
“key data” on how they attract their customers and seek to monitor the level of satisfaction
they deliver to these customers. The development of a “business generating system” will
be important. This will require a focus on identifying long-term market opportunities and
selling proven products or services into these markets. Attention will also need to be given
to planning for new market developments that will require allocation of resources to
achieve this.
To develop successfully in any market the small business owner–manager should
avoid competition based purely on price. Avoiding being “price driven” will require
adding value to products or services to enable customers to buy for reasons other than
price and justify any premium prices charged.
Finally, the findings suggest that success growth can be assisted by use of experts
and family. The owner–manager who can access expertise and other forms of support– e.g.
grants–will widen their base of skills, ideas or resources. This is a partnering focus that
should contribute to the small business growth process. Incorporated into this appears to
be the need for the owner to consider holistic life planning, whereby they include time for
family and friends in their activities. Given the important association that often exists
Vietnam
- 135 -
between family and business life for many small business owners, this would seem a
logical consideration.
Key data Awareness
Possess key data on customer to
ensure customer delight
Knowing how business is won
and knowing what information to
get
Business Generating System
Selling proven products to
established markets
Planning for new products &
markets
Outlook for current markets
Possession of new business
generating system
Not Price Driven
Price increase will not affect
demand for products
Price is not the key buying
criteria for customers
Use of Experts & Family
Owner’s use of experts for
assistance
Owner’s ability to make time for
family and friends
Figure 1: Four – Factor Model of Small Business Growth
The sample size and the use of sales growth as a dependent variable limit this study.
A more robust measure of growth is required to fully examine the causal relationship
between growth and the four factors. Future research into this model is planned using a
larger sample. If the results can be replicated it can provide a useful framework for guiding
small business growth.
Business Growth
- 139 -
List of Participants
India Mr. Kamal Dev
Deputy General Manager
National Thermal Power Corporation (NTPC)
Ministry of Power
EOC Sector 24, Noida
New Delhi
Indonesia Mr. Susanto Joseph
Vice Secretary General
Employers Association of Indonesia (APINDO)
Plaza Great River 15 F
J l. HR. Rasuna Said X-2 Kav. 1
J akarta-12950
Islamic Republic of Iran Dr. Mahmoud Ahmadpour Daryani
Chairman of Entrepreneurship Center
University of Amirkabir
No. 37, beside Art University
Shahid Balavar Alley
opposite Daneshjoo Park
Enghelab Street, Tehran
Republic of Korea Mr. Lee Yong Geun
President
J oin Electrical Construction Co., Ltd.
8F, Hwaryun Bldg.
753-5, Bangbae Dong
Seocho Gu, Seoul 137-060
Mr. Myung Kwan Kim
Assistant Manager
Small Business Corporation
23-4, Yeouido-dong
Yeongdeungpo-gu
Seoul 150-718
- 140 -
Malaysia Mr. Zainal Abidin bin Othaman
Head
Business Training, Advisory and Promotion Unit
MARA Negeri Sembilan
Majlis Amanah Rakyat
6F, Yayasan Negeri Building
J alan Yam Tuan
70990 Seremban
Mongolia Mr. Dashdorj Banzragch
Chief Officer for International Settlement
Credit Bank of Mongolia
Sukhbaatar Square
Ulaanbaatar
Nepal Mr. Sukunta Lal Hirachan
President
Federation of Contractor Associations of Nepal
Anamnagar, Kathmandu
Philippines Dr. J ustino R. Arboleda
Chief Executive Officer
Coco Technologies Corporation
4 F, R&G Tirol Bldg.
831 EDSA Cor. Eugenio Lopei Street
South Triangle, Quezon City
Singapore Mr. Adrian Lim Meng Yan
Managing Director
The Young Entrepreneur Mastery Limited
35 J alan Pemimpin
Wedge Mount Industry Bldg.
#05-02
Singapore 577176
Tel: 65-63231833
Fax: 65-63231838
e-mail: [email protected]
Dr. Aloysius Tay Ban Hock
Executive Director
Association of Small and Medium Enterprises
199B Thomson Road
Goldhill Centre
Singapore 307636
- 141 -
Sri Lanka Mr. Samantha Sathischandra Wanniarachchi
Kumarasinghe
Chairman and Managing Director
Multichemi Group of Companies
23B, Pagoda Road
Nugegoda
Thailand Mr. Wiwat Chutiwanichayakul
Senior Business Consultant
Business Advisory Center
Kenan Institute Asia
Queen Sirikit National Convention Center
2F, Zone D, Room 201/6
60 New Ratchadapisek Road
Klongtoey, Bangkok 10110
Ms. Waleeporn Thanathikom
Management Consultant
Thailand Productivity Institute (FTPI)
12-15 F, Yakult Bldg.
1025 Phahonyothin Road
Phyathai, Bangkok 10400
Vietnam Mr. Do Chi Thien
Trading Manager
Phu Lam Footwear Company
71C Ly Chieu Hoang Street
6th District, Ho Chi Minh City
Mr. Pham Gia Minh
Director
Trung Minh Company Ltd.
Room 301, No. 32 Batrieu Street
Hanoi
- 142 -
List of Resource Persons
Malaysia Dato’ Mustafa bin Mansur
President
Federation of Malaysian Manufacturers
and
Group Chairman
Manentech-Bele Sdn.Bhd.
Wisma Belle
No. 18 & 20, J alan Wanasa
Taman Wanasa Permai
52200 Kuala Lumpur
Republic of Korea Dr. Moon-Kyum Kim
Professor of Entrepreneurial Finance
Soongsil University School of
Entrepreneurship and SME Management
1-1, Sangdo-Dong, Dongjak-ku
Seoul
Singapore
(Chief facilitator-cum-resource person)
Prof. Tan Wee Liang
Professor
Singapore Management University
Tanglin Post Office
P.O. Box 257, Singapore 912409
Republic of China Prof. Kuang-Chao Fan
Professor
Department of Mechanical Engineering
Director
NTU Incubation Center
National Taiwan University
Taipei 10617
Dr Chao-Tung Wen
Professor
Graduate Institute of Technology and
Innovation Management
National Chengchi University
64, Zhi-nan road
Sec. 2, Wenshan, Taipei 11623
Mr J ackson Chang
Chairman
Inventec Appliances Corp.
37, Wugung 5
th
Rd.,Wuzu Shiang
Taipei 248
- 143 -
Program and Schedule
Study Meeting on Creative Entrepreneurship
[18–21 May 2004, Taipei, Republic of China]
Day 1 – Tuesday, 18 May 2004
Forenoon Opening Ceremony
Presentation by Prof. Tan Wee Liang
“Implementing Creative Entrepreneurship in Corporations”
Afternoon Presentation by Mr. J ackson Chang
“Product Innovation and Business Model: the Case of OKWAP Phone”
Country paper presentations (I)
Group discussion
Day 2 – Wednesday, 19 May 2004
Forenoon Presentation by Dr. Chao-Tung Wen
“Can Entrepreneurship be Taught? The Experience of Taiwan”
Presentation by Dr. K.C. Fan
“The Strategy to Create an Entrepreneurial Incubator: the NTU Case”
Afternoon Visit National Taiwan University Innovation Incubation Center
Day 3 – Thursday, 20 May 2004
Forenoon Presentation by Dato’ Mustafa bin Mansur
“An Interface between Entrepreneurship, Creativity and Innovation: The
Malaysian Experience”
Country paper presentations (II)
Afternoon Presentation by Dr. Moon-Kyum Kim
“Creative Entrepreneurship and Innovation: The Korean Experience”
Country paper presentations (III)
Group discussion
Day 4 – Friday, 21 May 2004
Forenoon Syndicate discussion/
Outcome presentation by groups/summing up and closing
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