Myth about 'social enterprises'

The controversies surrounding social enterprises in Hong Kong stem from three fundamental reasons.  First, the definition of a social enterprise is contextual. It is difficult to come to a universal consensus on what a social enterprise is. Creating job opportunities in rural India is certainly a social enterprise, but it may not be the case in Hong Kong. The government advisory committee for social enterprise funding discussed a definition for months, but unable to reach a consensus, decided to put it aside.

Second, the Government puts policy responsibility for social enterprises under the Home Affairs Bureau. But as rightly pointed out by Raymond Yim of the Social Enterprise Incubation Centre, social enterprises should not be the monopoly of NGOs and should definitely not be run as charities. Making profit should not be perceived as something evil. Indeed I would argue that we should encourage more for-profit companies to run social businesses. This is the only way to ensure that people with business skills can build and grow the enterprises on a sustainable basis.

Third, most people assume that enterprises can only do good by benefiting the ‘bottom of the pyramid’ - the disadvantaged, the disenfranchised and the disabled. But the reality is that challenges in health care, environment, education and many other social issues are as relevant to other segments of the society as to the underprivileged. An enterprise can still be ‘social’ if it is addressing the obesity issue of middle class kids.

The November issue of the Harvard Business Review carried a special feature on good companies that ‘create value for society, solve the world’s problems, and still make money’.  This is a new generation of companies that are doing good and doing well in a variety of ways. They improve the lives of people, provide jobs, address environmental issues, enhance employees’ job satisfaction and quality of life, develop a responsible network of suppliers and partners, and last but not the least operate on a financially viable basis to provide resources for the attraction/ retentions of talent and continuous innovation.  They can be big multinational companies as well as small and medium sized enterprises.  Whether they are social enterprises or not are irrelevant. My favourite example is Google. Is Google a social enterprise? Probably not. But has it created enormous value for the world? A resounding yes.

Policy priority (and resources) should therefore be directed at encouraging and supporting the development of ‘good companies’ that can create economic, social and/or environmental value in a profitable (and thus sustainable) manner. Government policies and regulations should encourage responsible investment taking into account Environment, Social and Corporate Governance (ESG) issues.  Government funding support should favour entrepreneurs who aspire to do good and do well.  The annual Make a Difference Award, which champions young and innovative change makers, is a case in point. We have selected 3 finalists for the 2012 Make a Difference Award, and not all of them are the classic ‘social enterprises’. But they are definitely doing good and doing well. You can check them out from www.MaD.asia and cast your vote on the Grand Award winner.

 

Why Cubans are happy?

I was in Havana last week. With the mix of European and African culture, it is a very interesting and 'colorful' city with so much to do. In fact, it doesn't feel like a 'socialist' country. Yes, most of the buildings are old and run-down. People are poor, earning from around 300 Euros (most workers) to 1000 Euros (those higher up in the Police/Military). You see entrepreneurial activities everywhere to supplement the family income, from the elderly women selling peanuts to the security guards charging an 'admission fee' for entry to museums beyond the official opening hours. But there is a lively rhythm in the air everywhere. Cubans have music and dance in their blood. They feel happy and content. Why?

First of all, very simple,  I think it is the weather. It is rather difficult to be melancholic if you have the sun shining on you. I bet there are more happy people in Cuba than in Finland for this simple reason. Second, Cubans and music (and together with it Salsa) are inseparable, and they take great pride in their cultural traditions and influence in the world. We enjoyed so much the cabaret show (the least you will expect from a 'socialist' country) and the Buena Vista Social Club. I even stumbled on the grave of the iconic Ibrahim Ferrer who died in 2005. Havana is a perfect example of how art improves the quality of life and make people truly happy. (And the cigars may also help!) The Cubans also have a good aesthetic sense. Contrary to my perceptions, there are not too many political slogans in the street. Fidel's photo is almost absent. Even if there is political propaganda, it is done in a very artistic way. The Communist Chinese certainly have a lot to learn from the Cubans. Hamel is a must go, with its street art, sculptures, murals and graffiti.  The UNESCO preserved old town along the Calle Obispo is an architecture gem. We went to an arts and craft market and happily found some nice paintings.

Third, it is the Government. Yes - I am not kidding. Most Cubans have high respect for Fidel Castro, as he has ended the inequality and corruption of the Batista regime. The Cuban government provides free and good standard education and health care to its citizens. Many university students study science and medicine. One of its major exports is medical doctors to Venezuela - in exchange for oil. Housing is on a 'communal' basis, as people live together in big families across generations. Although Cuba is very poor by Western standard, compared to most Latin American countries, Cubans think they lead a much better life. It is certainly a very different story to the one portrayed by the Americans.

Apart from Fidel, Jose Marti (like Sun Yet Sen of Republic China), Che Guevara and Camilo Cienfuegos are greatly admired. To some people, they are terrorists but to most Cubans, they are like saints. Indeed there is no absolute truth in history. And Fidel is a great orator. He is known for his long speeches but they are so emotionally uplifting for the Cubans. For example, when the Batista Government was overthrown, he said 'for the first time in history, the government will side not with the rich but the very poor.' I still don't have the answer whether bloodshed is essential in a revolution.  Similarly when one introduce change in a corporate setting, sacrifice for the greater good is probably inevitable. (To share with you a little secret, the name InnoFoco is inspired by Che's foco theory - fast moving guerillas attacking the establishment from the fringes.)

I love Havana and would like to go back again.

Let us give innovation a new meaning

The recent report by the Chinese Academy of Social Sciences has raised an alarm bell on Hong Kong’s losing competitiveness and its sliding ‘happiness’ index. There was a timely article in the Financial Times last week written by Richard Florida (an expert in the creative economy) on how America can fix its broken jobs machine. Florida’s piece may be able to shed some light on Hong Kong’s current predicament.

Florida posited that neither job creation, nor educating more people for higher paying jobs will solve the problem of “the bifurcation of the job market and an increasingly unequal and polarized society,” an unsettling phenomenon that we are all very familiar with in Hong Kong. A successful job strategy must focus on upgrading the entire low wage service job category through service innovation.

Using the example of Zappos (a successful online retailer), Florida showed how companies should value their employees, view them as a source of innovation, help them move through an internal career ladder and most importantly, build a culture and community that delivers better services (aka happiness) to customers.

Florida’s piece is a potent reminder that innovation is not just about product and technology.  It is equally, if not more important, to create value through service innovation. Companies and organisations need a more creative and holistic approach to differentiate themselves and enhance productivity. Service innovation entails customer experience innovation (e.g. Starbucks), business model innovation (e.g. IKEA), process innovation (e.g. Li & Fung’s supply chain management) and/or management innovation as in the case of Zappos.  It also includes social service innovation as the public /NGO sector is arguably the largest employer. The ‘application’ of technology is crucial in service innovation, but not necessarily the need for technological ‘innovation’ as such.

Florida pointed out the need for a national initiative to promote and nurture ‘service innovators’. And because many service companies are ‘small’, the government can take the lead to foster partnership with universities, professional and industry associations.

The introduction of the minimum wage marks a new chapter in Hong Kong’s job market. However, it is questionable whether ‘money’ alone can solve the problem. According to the 2010 Towers Watson Global Workforce Study, Hong Kong’s employee engagement level is substantially lower than the global and even regional levels. Equally important is the need for employers to come up with innovative approaches to enhance productivity gains to offset the higher operating costs on all fronts.

The Chinese Academy of Social Sciences argued that Hong Kong was under threat because of the city's under investment in high-tech research and development and the creation of new industries. These are probably true, but more importantly; I think Hong Kong has misunderstood what ‘innovation’ should really mean for this city.  If we continue to think ‘innovation’ as an industry, a product or a technology, as implied in the Government’s six new pillars of industry, there is no way that Hong Kong can reap the real benefits of innovation across all sectors of the economy and the society.

Meaning of the Arts and Arts Education: Need for an Ecosystem Approach

Arts education is a rather nebulous concept in Hong Kong. Some see it as an entrance ticket to a good school. Many posit that Hong Kong should do more arts education because we need more arts talents and a bigger audience for the West Kowloon Cultural District.

The arts should bring about personal, economic and social benefits, in addition to the obvious cultural values. Quality arts education is conducive to the nurturing of creative and critical thinking, and communication skills. There is thus a strong linkage between arts education and the development of a knowledge economy that thrives on creativity and innovation. The arts also serve a tremendous social value, building social cohesion and identity. They are also powerful social inclusion tools, through empowering deprived communities. Policy makers should take an eco-system approach to arts education and audience development. 

By international standards, Hong Kong has one of the highest percentages of children learning arts. However, Hong Kong has yet to reap the multiple benefits of the arts because there is limited understanding in different quarters of the society about the real value of the arts and what constitutes a ‘quality’ arts education. Despite the huge number of children doing arts classes, not all of them become ‘consumers’ of the arts. 

Arts education is like foreign language learning.  It does not necessarily take place in a classroom setting. If Hong Kong aspires to build a more arts literate society, we need to make the arts part of the everyday life of the populace. We are not only talking about out door or community arts but also our living environment – from the design of our city and buildings to the posters that adorn our streets and the media we consume every day.

In addition to a more arts rich environment, the arts groups also have a role to play in arts education - so long as they receive public funding.  Indeed audience development should not be just about promotion. We need a holistic and integrated approach to reduce the entry barriers to the arts - from programming, pricing, venue to the audience experience. We should develop peoples’ interest in different arts forms – from the more popular arts to the classical arts. Policy makers and arts providers have to take a more audience-centric approach – to understand what make or break an enjoyable audience/visitor experience.

The West Kowloon Cultural District is not just an iconic landmark.  It will serve as a powerful catalyst in propelling Hong Kong to become a creative metropolis. It will bring a better quality of life to Hong Kong people. The hardware aside, we should take a critical look into how arts education and audience development should be done in Hong Kong. It is not so much about the number of people taking arts classes or the number of arts and cultural performances. What is more important is the quality of our arts education and offerings. We also need a sustained communications campaign to promote the values of the arts and the real meaning of arts education, without which arts will continue to be perceived as something marginal.

Is user-centric innovation dead?

User-centric innovation has attracted a fair share of cynicisms and criticisms lately. Quoting the examples of Apple and IKEA, this recent piece argued that companies should lead their users, not the other way round. (http://www.fastcodesign.com/1663220/why-user-led-design-is-a-failure?partner=homepage_newsletter)

I recall we had a similar debate at a marketing class back in the b-school days. As what we have learnt from our business education, the short answer is really 'it depends'. Which side you take hinges on how one defines user-centric innovation. If we simply see this as asking people whether they like a certain new product concept, then user-centric innovation probably has limited value. But if we take a broader view of what user-centric innovation should be, I think there is still considerable value in listening to your customers.

I have just come across a good example today. Ashley Madison is a dating website for aspiring adulterers. The founder obviously did not ask people whether they fancied such a website. He realised that 30% of users of Internet dating services were pretending to be single when they weren't. So he discovered that there should be a market for a website for cheaters.

This is precisely user-centric innovation. Observing and listening to customers will not tell you what kind of products they need, but it will give you insights on their latent needs and wants, values and aspirations. This is by no means a straight forward process, but is definitely necessary.

By the way, if Apple would listen to me, I will tell them that they need to design a new Mac book with a screen that can be adjusted to the eye level of the user. It's a pain in the neck, spending too much time looking down on the laptop.

We need more high impact entrepreneurs

There has been so much talk about the narrow economic base in Hong Kong. Economic studies have pointed out the strong link between entrepreneurship on the one hand, and innovation, job creation and long term GDP growth on the other.  As this city is soul searching into its future competitiveness, we need to take a fresh look into what entrepreneurship should mean for 21^st century Hong Kong.

Many people observe that the entrepreneurial spirit, which makes what Hong Kong is today, seems to be dissipating amongst the young generations. Conventional wisdoms have it that Hong Kong’s small domestic market and high rent spell the death of entrepreneurs. In a globalised economy, the boundaries of a market should be marked not by geography but by mentality. No doubt the high rent in Hong Kong is squeezing many small shops out of the market.  But entrepreneurship is not just about retailing.  

If Hong Kong has to revive its entrepreneurial spirit, we need to look into more fundamental issues.

We should look into the competitive advantage of Hong Kong as a service economy. Instead of product and technology innovation, Hong Kong’s entrepreneurs may stand a better chance in creating new businesses through service, process, management and business model innovations.  We should stop emulating the Silicon Valley.

In Hong Kong and as in many other economies, business has increasingly been seen as a major cause of social and environmental ills. Hong Kong needs to nurture a new generation of ‘capitalists’ that do good and do well – sustainable enterprises that generate not just economic value, but also social and/or environmental values.

A new Make a Difference (MaD) Award has recently been launched to celebrate innovative and socially responsible entrepreneurs. The Grand Award Winner is Laputa - a Hong Kong company doing eco-construction materials business. International studies have shown that by celebrating the success of entrepreneurs, we will create new aspirations for the young. It is possible to alter societal values in less than a generation.

Apart from celebrating successful entrepreneurs, I as the convenor of the MaD Award have identified 8 essential conditions for Hong Kong to accelerate the development of entrepreneurship:

1)    Identify and support innovative and high potential entrepreneurs

2)    Encourage more early-stage angel investment in Hong Kong

3)    Closer coordination and collaboration amongst education institutes, business professionals, investors and philanthropists

4)    Enhanced entrepreneurial learning for senior secondary and tertiary school students

5)    Encourage and facilitate more inter-disciplinary collaboration, from business to arts, sciences and technology

6)    Strengthen information dissemination about governmental and non-governmental support available to aspiring entrepreneurs

7)    Encourage the development of entrepreneurial mindsets through the education system e.g. creativity, confidence, self-motivation, risk taking and accepting failure

8)    Attract more entrepreneurs to start-up their ventures in Hong Kong

We need concerted efforts from the Government, businesses, educators, philanthropists, the media and last but not least, the support of parents to revive Hong Kong’s entrepreneurial spirit. 

(Published in SCMP on 10.2.2011)

Design is not Pretty Stuff

·     Design turns creative ideas to become practical and attractive propositions.  It is a way of creative thinking, and a structured creative process with a set of skills, tools and methods.    

  · Good design channels creativity into innovation. It ‘matches people’s needs with what is technologically feasible and what a viable business strategy can convert into customer value and market opportunity’[1].

·     

    Design is not art and craft. It creates value for businesses and goes much beyond aesthetic appeal. It can change the value of outputs, costs of inputs, and the efficiency with which inputs are turned into outputs. Design also improves quality of life by providing products and services more attuned to people’s needs and minimising the impact on the environment.

       

·   Design can be used to:

o Differentiate products and services through a range of non-price characteristics from colour, style, ergonomics to performance and user experience

o  Enhance product and service quality

o  Improve efficiency in production or consumption of service

o  Lower production/delivery costs and maintenance costs

o  Manage risk by prototyping new ideas

o  Enhance image of a product, a service and/or an organization

o  Reduce the environmental footprint by reducing resources, waste and carbon emissions        

Design has increasingly evolved to become a strategic tool and process, through which businesses use to identify and develop new market opportunities. The more design is embedded at the strategic level, the greater its impact is on the sustainable growth and development of an organisation. Similarly, design capability has to be developed across the economy and the society.

             

·   Design is as relevant to public as to commercial organisations. Today’s public services must respond to new challenges such as an ageing population, social disparity, rising public demand, and the need for sustainable development. Efficiency alone cannot address these pressures.

·       

  Traditionally, design has been classified into different disciplines such as graphic, product, industrial, interior and fashion design; and more recently digital[2] and interaction design[3]. Some design disciplines such as industrial design are closer to sciences while others such as fashion design are arguably closer to the arts.

·        

   Service design is an emerging discipline focusing on the design of strategies, systems, processes and touch points. It aims at providing a unique and desirable experience to the user. It is a cross-disciplinary practice combining skills in various design disciplines, business, technology and the social sciences (anthropology, psychology and sociology).

·        

  Increasingly design can no longer be seen as discrete disciplines, but rather an array of interacting disciplines offering a strategic and total solution at the firm or society level. More and more leading education institutes in the world are offering inter-disciplinary design learning.

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[1] Tim Brown, Design Thinking, Harvard Business Review, June 2008

[2] Digital design focuses on the communication of messages and experiences that take place on computers, the internet, mobile phones, film, video and other digital technology devices.

[3] Interaction design shapes the experiences of people as they interact with products, services, people, environments across a variety of contexts.

Creativity ≠ Innovation

‘Creativity, design and innovation’ are vital to the sustainable development of every society. Yet they often mean different things to different people. This is an attempt to take a more holistic and integrated look at these concepts. We hope this and the next piece can stimulate more discussions on what creativity, design and innovation mean for businesses, educators, the public and the third sectors; and what the development priorities should be for your city.

   1.  Creativity ≠ Innovation

• Creativity is the ability to generate new ideas.  It is the first step to innovation.
• All people can be creative provided the conditions are right and they have the relevant knowledge and skills.
• The potential for creativity is not limited to any particular role or process within a firm. Successful companies promote creativity in all parts of the organisation.
•  Factors that influence creativity include management beliefs, systems, practices and incentives.
• Creativity is vital for each and every facet of the economy and the society. It is not just the creative industries. All industries have to be creative.
•  Factors that influence creativity in a society include culture, education, government regulations and competition.

      2.   Innovation is > new product or technology

• Creativity is about coming up with ideas while innovation is about bringing ideas to life
•  Innovation can be big or small, radical or incremental.
•  Most people associate innovation with product and technology. There are other types of innovation and they are not necessarily mutual exclusive:

o  Service innovation is the introduction of new or improved service offerings and user experience. It is relevant to both commercial (e.g. financial services) and public organisations (e.g. education and health care), service and manufacturing industries[1] alike (e.g. iPhone and Apps).

o  Business model innovation involves changes in the WHAT (the value proposition of an offering), WHO (customers, collaborators or competitors and/or HOW a firm aligns its resources, processes and profit formula. IKEA, for example, brings together low cost and stylish design.

o  Process innovation results in a change in the way a product or service is created, delivered, sold or consumed (e.g. supply chain management)

o  Management innovation is the introduction of a new management practice, process, structure, or technique to further organizational goals (e.g. flexi hours)

o  Social innovation refers to new ideas that resolve existing social, cultural, economic and environmental challenges. It can take place in the for-profit, nonprofit and public sectors and increasingly in the spaces between these three sectors (e.g. urban farming).

• More and more developed economies have adopted services and non-technological innovation as a strategic development priority[2]. Leading companies and education institutes are shifting their focus from product to service innovation as ‘the next hot area’[3]. Innovation in services often involves complementary changes to technologies and non-technological factors (such as skills and organisational culture and structure) and hence the importance of multi-disciplinary collaboration.
• There has also been a significant shift from a producer and technology-centric approach to user-centric innovation, whereby innovation is inspired or even driven by users in a more and democratic manner[4].

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[1] Successful manufacturing firms often provide both a physical product and an accompanying service.

[2] Council of the European Union, Council Conclusions on a Broad-based Innovation Strategy, Dec 2006

[3] ‘Service Innovation: The Next Big Thing’, Business Week, 29 March 2007

[4] Richard Seymour (a renowned designer) said at the sixth annual meeting of the International Advisory Panel of the  Design Singapore Council that Singapore ‘needs to place anthropology before technology.’ (Oct 2010)