Connect The Dots@Singapore

Tech Start-ups in Singapore: The Role of Venture Capital and Angel Investors

2011-12-29T11:28:00.001+08:00

High-technology entrepreneurship has been identified as an important driver of Singapore’s knowledge-based economy, and increased policy attention has been given to encouraging the formation and nurturing of high-tech start-ups, especially those with significant intellectual property (IP). To this end, in 2010 the National Research Foundation (NRF) engaged me, as director of the NUS Entrepreneurship Centre, to conduct a study of high-tech start-ups in Singapore. While the survey covers many aspects of the high tech start-up dynamics, including characteristics of the founders, their sources of technology and funding, growth strategies, performance and challenges, this blog highlights some salient findings on only one aspect of the survey: the performance of start-ups that have received funding from venture capitalists or angel investors versus those that did not.

The survey focused on young ventures that started-up or began operations no earlier than 2004 (i.e. companies that were at most five years old in 2009), and that fall within sectors classified as high-technology using a definition adopted by the United States Bureau of Labour Statistics (BLS), which includes all sectors with proportion of employment in R&D exceeding the average for all sectors. Based on this definition, nine manufacturing sectors and three service sectors categorized at the 2-digit Singapore Standard Industry Classification (SSIC) level are included as high-tech sectors in Singapore.

Based on over 300 responding firms covered by the survey, we estimated that less than 10% of high-tech start-ups in Singapore have received investment from VCs or business angel investors (VCA). The majority of high tech start-ups that did not receive VCA funding reported that they faced two hurdles when attempting to raise funding from VCA. Firstly, they reported that VCA investors tend to impose harsh terms or offer valuations that are too low. Secondly, they reported difficulties in attracting the interest of such investors.

While firms receiving VC/Angel (VCA) investment represent only a small share of tech start-ups in Singapore, the survey results show that VCA-funded firms outperform other start-ups on a number of key indicators.

a) High-tech start-ups that have received VCA investment tend to be more innovative and IP-intensive

Start-ups that have received VCA investment are more likely to conduct in-house R&D (83.3% vs 51.7% for other firms). Correspondingly, they have a higher propensity to develop their own core technologies (88.9% vs 70.5%). They are also more likely to have introduced significant product or process innovations over the preceding three years[1] (76.5% vs 62.5%) and have a greater tendency to possess Intellectual Property (IP) assets (52.9% own/have applied for IP assets vs 11.5% for other firms).

b) High-tech start-ups that have received VCA investment have higher employment growth…

Start-ups that have received VCA investment experienced much higher employment growth rates since their first year of founding (329.8% p.a.) as compared to other start-ups (175.0% p.a.).[2]

c) High-tech start-ups that have received VCA investment had greater growth ambitions

High-tech start-ups receiving VCA investment have a higher propensity to expand their operations to overseas locations (52.9% have overseas-based operations, as compared to 27% of other firms). They also have more ambitious growth targets for the future. Almost three-quarters of VCA-funded firms project growth rates in excess of 20% per annum over the next three years (versus 61.3% of other start-ups).

In summary, our survey of young high tech firms in Singapore show that while less than one in ten of them received VCA investment, those that did get funded by VCA showed higher average employment growth, greater growth ambitions, and tend to be more innovative and IP-intensive. This difference is likely to be due to a combination of the selectivity of VCA investors who chose to invest in more scalable ventures, as well as possibly the value add provided by the VCA investors to the start-ups, enabling them to invest more in technological innovation and to accelerate their path to growth.

(Note: A more detailed version of this will be published in the Annual SVCA Directory 2011/12)

2011-05-25T12:50:00.000+08:00

(Note: An extended version of this will appear as a chapter in a forthcoming book on Angel Investing in Asia, edited by John Lo)

1. Overview of Angel Investing in Singapore

As in other newly industrialized economies in Asia, business angel investing in early stage start-up companies has been relatively new in Singapore. This is due to the fact that the phenomenon of high tech start-ups is itself relatively new in Singapore, having really taken off only since the late-1990s as the Singapore economy began its shift towards a knowledge-based, innovation-driven economy (Wong and Singh, 2008). While business angel investment deals are known to have existed in the 1980s and early 1990s, they were mainly in the traditional trading and manufacturing sectors, as was found in a study of 29 angel investors by Hindle and Lee(2002).

While there are no reliable statistics on the number of business angel investors and their contribution to venture investing in Singapore, some indicative figures can be culled from the annual Global Entrepreneurship Monitor (GEM) study on Singapore that the author conducted for the period 2000-06 (Ho and Wong 2005; Wong and Ho 2007).

As can be seen in Table 1, based on the Global Entrepreneurship Monitor (GEM) study, the prevalence of informal investment[1] in Singapore appears to have increased over 2000-06, with the informal investment rate rising from 1.3% of the adult population to a high of 3.5% in 2005, before falling slightly to 3.0% the following year. Nevertheless, this was still below that of advanced economies such as USA and other Asian NIEs such as Taiwan, China and Korea (Wong and Ho 2007). Table 1 also shows that the informal investment rate is somewhat correlated with the rate of entrepreneurial activity in Singapore, as measured by the total entrepreneurial activity (TEA) rate[2].

Table 1 Rate of Informal Investing in Singapore 2000-06

Year	Informal Investment Rate (% of Adult Population)	Total Entrepreneurial Activity (TEA) Rate (% of Adult Population)
2000	1.3	4.2
2001	2.0	6.6
2002	3.6	5.9
2003	1.6	5.0
2004	2.7	5.7
2005	3.5	7.2
2006	3.0	4.9

Source: Wong et. al., GEM Singapore Reports, 2000-06

Several studies of advanced economies (see e.g. Wetzel 1983; Bygrave et al 2002) have estimated that the total amount of informal investment is several times the size of the formal venture capital (VC) industry. Based on GEM estimates, Singapore is no exception. The relative size of the informal investment market in Singapore is estimated to be several times larger than the market for formal VC investments. Although informal investment as a proportion of GDP has fallen over time, from 2% of GDP in 2000 to just over 1% in 2006, it nevertheless far outweighs the amount of venture capital (VC) investment, which has generally been less than 0.2% of GDP from 1999 to 2005.

The GEM data suggest that the majority of informal investments in Singapore were based on social ties. About 42% of informal investors in Singapore were related to the investees, with another 52% being social acquaintances (work colleagues, friends or neighbours), leaving only 6% to be socially unrelated (strangers or others). If we regard this last category to be true business angel investors, then the incidence of such business angel investors is probably in the range of 1 in 1000.

2. Development of the Business Angel Investment Community: From Individuals to Groups and Networks

2.1 The Early Growth of Business Angel Investment

While there are no reliable data on the emergence and growth of business angel investors in Singapore, anecdotal evidence suggests that the first major wave of angel investment in technology companies emerged in the mid-1990s, after a number of indigenous technology/manufacturing companies successfully went IPO. Some of these successful entrepreneurs subsequently became business angel investors, funding the next wave of technology-based start-ups that emerged in Singapore as part of the global dot.com boom. For example, the three co-founders of Creative Technology, arguably the first successful home-grown high tech firm in Singapore (having pioneered PC soundcard and became the global market leader), had all engaged in angel investment activities after the company went IPO in 1994, with one of them (Chay Kwong Soon) establishing a formal investment fund (Enspire Capital) to do so. Other examples of successful technology entrepreneurs-turned angel investors in the late 1990s include Gay Chee Cheong and Tommy Goh. After leading a contract manufacturing firm, JIT Electronics, to successful IPO and subsequent acquisition by Flextronics in the late 1990s, they co-founded a venture investment fund, 2G Capital, to invest in technology start-ups and growth companies.

Besides entrepreneurs-turned-angel investors, a number of prominent angel investors in this first wave included senior executives of global MNC subsidiaries in Singapore or government-linked corporations (GLCs). For example, Mr. Koh Boon Hwee, an ex-Hewlett Package senior executive and later chairman of a number of GLCs such as Singapore Telecom and Singapore Airlines, had been known to play the role of “Arch-angel”, syndicating deals that were co-invested by other senior executives who had worked with him. Another example is Ng Hock Ching, a senior vice-president of another GLC, Natsteel Electronics, who became an angel investor in several technology-based companies after Natsteel Electronics went IPO in 1998.

As a result of the dot.com crash in early 2000, the number of high profile angel investment deals appeared to have dwindled. In their place, a number of new business angel investors emerged, doing smaller-sized deals and focusing on early stage high tech start-ups, including spin-offs from local universities and public research institutes. As we will detail below, there was a trend towards the formation of angel groups and networks

2.2 Formation of Business Angel Network (Southeast Asia) (BANSEA)

The Business Angel Network (Southeast Asia) (BANSEA) was established in Singapore in 2001 by a group of Singapore-based angel investors, with loose network connections to investor groups in Thailand, Malaysia, Vietnam and Indonesia. Inspired by the professionalism of angel groups like the Band of Angels in Silicon Valley and the Tech Coast Angels in Southern California, BANSEA’s vision is to foster the development of a vibrant, professional angel investment community in Singapore by providing a platform for knowledge-sharing and deal-syndication among investors as well as a platform for matching start-up deals with investors. Recognizing the nascent stage of angel investing in Singapore, the founding group of angel investors decided to organize BANSEA in the form of a Public Company limited by guarantee, with membership open to all bona-fide angel investors upon recommendation by an existing member. A board of directors is elected annually from among the members to govern the operation of the non-profit company.

The core activities of BANSEA consist of monthly/bi-monthly networking lunches, where 3-4 start-ups are pre-selected to pitch to members of BANSEA, who could also invite other investment professionals as guest to join the lunch and networking. BANSEA focuses on early-stage companies seeking investment ranging from $100,000 to $1 million. Interested start-up entrepreneurs can apply to pitch to the network by either submitting their business plan executive summaries to the BANSEA website, or through the introduction of an existing member. Applicants who are not selected to make a business plan pitch may still opt to have their plans circulated to members online.

In the early years, BANSEA took a more inclusive approach, and allowed not just bona-fide angel investors with investment track records to become members, but also rookies interested in learning to do their first deal, as well as some investment professionals such as investment brokers, consultants and deal lawyers. This led to an increase in membership to more than a hundred. In more recent years, BANSEA shifted towards greater professionalism, and instituted a two-tier membership (chartered members and ordinary members), with more stringency in membership qualification criteria and an increase in membership fees. This resulted in a reduction in membership to around 50+ who are more serious investors.

In recognition of its growing professionalism and catalytic role in the venture ecosystem of Singapore, the Singapore government agency in charge of promotion of start-ups (SPRING Singapore) offered public funding support to BANSEA since 2007. Under a scheme called the Incubator Development Program (IDP), SPRING provided funding for up to 70% of the qualifying cost of BANSEA operations. This public funding support enabled the organization to employ a full-time executive director who could organize activities professionally and provide services to members to generate income.

As part of the professional upgrading, BANSEA introduced a Start-up Mentorship Program, whereby a pool of BANSEA chartered members offer to provide face-to-face mentoring service to start-up entrepreneurs in return for an honorarium. In addition, BANSEA also organizes training workshops for entrepreneurs and angel investment forums for members. BANSEA also participates in various activities fostering the development of the entrepreneurial ecosystem in Singapore, with members serving as judges in various business plan competitions and providing inputs to government policy making. BANSEA also successfully organized the Inaugural Asian Business Angel Forum (ABAF) in Singapore in March 2010, attracting more than 200 participants.

As part of the move towards professionalization, BANSEA also began compiling investment data among members since 2007. While admittedly incomplete, the data collected by BANSEA shows that a total of 53 investment deals in the period 2007 to first half of 2010, with a total investment of S$14.5 million (BANSEA website). The majority of the funded deals appeared to be in internet technologies, interactive digital media, info-communication technologies (ICT) and biomedical devices.

2.3 Formation of Other Angel Groups and Networks

Besides BANSEA, a number of loose angel networks has also emerged in Singapore in recent years. This includes an angel investment club established by the Hewlett Packard Alumni Society, and another angel network for Alumni of the Nanyang Technological University (NTU). Unlike BANSEA, however, these loose networks tend to have less regular activities, and no statistics are available on the volume of deal flow generated through them.

More significant is the emergence of a number of angel groups that were facilitated by various government support schemes, including the angel groups funded by BAS and TIS. We will discuss these in the next section.

3. Government Support Schemes for Angel Investing in Singapore

Recognizing that the venture financing system in Singapore – especially early-stage financing – has been relatively weak compared to more advanced high tech economies like Silicon Valley and Israel, the Singapore government has introduced a number of support programs in recent years to address these weaknesses. With regards to angel investment, these programs can be classified into two groups: those that directly promote angel investment; and those that more indirectly encourage angel investment through the provision of early-stage venture capital

3.1 Government schemes that directly promote angel investment

The most established of these programs directly promotes angel investing through a co-investment scheme to leverage private angel investors who are taking the risk themselves. The Startup Enterprise Development Scheme (SEEDS) was introduced in 2000 by the Economic Development Board (EDB), but the administration of the program was subsequently transferred to SPRING. SPRING co-invests with third-party investors who are not related to the start-ups, with a minimum investment of S$75,000 required of the private investor. Initially providing a 1:1 co-investment between S$75K to S$300K; the co-investment was increased over 2009-10 to 1.5:1 and S$750K (cumulative) in response to the financial crisis. In the initial years, the scheme provided an upside incentive to the third party investors when there was a positive exit: After recovering its initial investment plus accrued interest, the Scheme offered one-third of any remaining surplus gains to be given to the third-party investors. In more recent years, this upside incentive has been withdrawn. As of the end of 2010, over 150 start-ups have been funded under SEEDS (SPRING Singapore, 2010).

A related government scheme seeks to promote the formation of business angel groups. The Business Angel Scheme (BAS), also administered by SPRING, was introduced in 2005 and co-funds investment by pre-approved Business Angel groups. Under BAS, SPRING would co-invest S$10 million with at least three experienced angel investors who collectively commit to invest at least S$10 million over five years. The scheme provides for a 1:1 co-investment of S$1 million per deal, with an option for investors to buy out SPRING’s investment within five years at 1.25 times the original investment value. As with SEEDS, the co-investment terms were improved over 2009-10, to 1.5:1 up to a maximum of S$1.5 million per deal. Three angel groups have been co-funded under the BAS program so far: Sirius Capital; BAF Spectrum; and AccelX. The BAS and SEEDS complement each other, so that start-ups that have already received funding under SEEDS can still apply under BAF for follow-on investment up to a maximum of $1.5 million (SPRING Singapore 2010). As of the end of 2010, close to 20 ventures have been funded by the three angel groups supported by the BAS.

It should be noted that the introduction of the SEEDS and BAS support programs has been the result of consultation between the government and BANSEA leadership.

3.2 Government schemes that indirectly support angel investment through the provision of early-stage VC

Angel investment depends on the availability of follow-on VC investment funds to take the start-ups to the next (growth) stage. Although Singapore has attracted a significant amount of venture capital funds to base their operations in Singapore, these funds are predominantly later-stages funds, and invest mostly outside Singapore. Thus a large proportion of the US$1 billion TIF fund-of-fund established in 1999 has gone to US-based VC funds, with extremely limited investment activities in Singapore. Moreover, most members of the Singapore Venture Capital Association (SVCA) do not invest in early-stage start-ups. In order to fill this gap, the Singapore National Research Foundation (NRF) has in recent years established two VC support schemes.

The first of these is the Early-Stage Venture Funding Scheme (ESVF) which was launched in 2008 and seeks to catalyze the formation of early-stage VC funds. Under the scheme, selected VC firms receive co-funding from NRF to invest in locally-based early-stage technology start-ups. Selected VC firms must raise at least $10 million from third-party investors, and NRF matches $1 for every $1 invested. To-date six funds have been selected for such co-funding: BioVeda Capital II; Nanostart Asia; Raffles Venture Partners; Tamarix Capital; Upstream-Expara; and Walden International (NRF 2008).

The second NRF scheme is the Technology Incubation Scheme (TIS). Launched in 2009 and modeled on Israel's Technological Incubator Programme, TIS aims to encourage local and foreign technology incubators to invest in early-stage high-tech start-ups based in Singapore, nurturing them and preparing them to raise funds from VCs. Under TIS, NRF co-invests in Singapore-based high-tech startups accommodated in the selected technology incubators. As of 2010, seven incubators have been funded under TIS: Clearbridge Accelerator; I2G Tech Accelerator; Neoteny Labs; Plug and Play; Social Slingshot; Small World Group; and Stream Global. It is interesting to note that five out of these seven TIS were helmed by foreign investors, who were enticed to set up their incubation operations in Singapore because of the generous co-funding provided by the government. As of the end of 2010, about 11 ventures have been incubated by the various TIS.

In addition to the above NRF funding schemes, the National University of Singapore (NUS) has also contributed to the availability early-stage venture financing. The NUS Entrepreneurship Centre (NEC) secured commitment from senior management of NUS to provide a S$5 million seed-fund to invest in promising NUS-related spin-offs that it incubates at its incubator (the NUS Enterprise Incubator or NEI), with matching funding from a number of government schemes, including the SEEDS fund and SPRING’s Young Entrepreneurs Scheme for Start-ups (YES! Start-ups) scheme (previously known as ETDF). NEC also helps start-ups to apply for various government support schemes such as the EDB Cleantech incubator grant scheme, the SPRING Technology Enterprise Commercialisation Scheme’s Proof of Concept (POC) and Proof of Value (POV) grants, Media Development Authority’s micro-funding scheme, the NRF POC grants, and the NRF ESVF and TIS funds. NEC also maintains close contacts with BANSEA to introduce promising start-ups to BANSEA, SEEDS and BAS investors. Indeed, a disproportion of the investment deals by the ESVF and TIS so far have been in NUS-related spin-offs. Similarly, a number of notable deals by SEEDS and BAS investors which have attracted significant follow-on VC investment or corporate acquisitions were also NUS-related spin-offs. More details about NUS’ role in facilitating angel investment in Singapore can be found in Wong, Ho and Singh (2011).

4. Concluding Remarks

In line with Singapore’s increasing shift towards a knowledge-based, innovation-driven economy, the business angel investment community in Singapore has evolved dynamically in recent years, with greater professionalism and sophistication. The development of the business angel investment community has been driven by both government support policies as well as the emergence of a nascent class of tech-savvy investors comprising of successful entrepreneurs, experienced senior executives from high tech MNCs and local firms, and entrepreneurially-minded academia with connections to Silicon Valley. The cosmopolitan nature of Singaporean economy, with the government pursuing an open policy to attract foreign talents, also facilitated an inflow of foreign angel investors, thus adding to the diversity and vibrancy of the angel investment community in Singapore.

Going forward, a key challenge – and opportunity -- for the further development of Singapore’s angel investment community is to develop stronger global links with angel investors and VCs in leading high tech hubs in the world. Because of the small domestic market, young start-ups in Singapore need to learn to go global quite early, so the angel investors who back these start-ups need to become more savvy in helping them to globalize as well.

References

BANSEA Website (www.BANSEA.org)

Bygrave, W.D. et.al. (2002). “A Study of investing in 29 nations composing the Global Entrepreneurship Monitor”, paper presented at the Babson-Kauffman Entrepreneurship Research Conference, Boulder, Colorado, 6-8 June, 2002

Hindle, K. and Lee, L. (2002). “An exploratory investigation of informal venture capitalists in Singapore”, Venture Capital 4(2): 169-177

NRF (2008). “NRF seeding six venture funds with S$10 million each to

Invest in Singapore-based early-stage start-ups”, NRF Press Release, 31 July 2008, downloaded from http://www.nrf.gov.sg/nrf/uploadedFiles/News_and_Events/ESVF%20Press%20Release.pdf, accessed 30 April 2010.

NRF (2009). “Seven technology incubators providing mentorship and networking to be set up to boost the growth of high tech start-ups in Singapore”, NRF Press Release, 30 December 2009, downloaded from http://www.nrf.gov.sg/nrf/uploadedFiles/News_and_Events/Press_Release/2009/TIS%20Press%20Release%20%28final%29.pdf, accessed 30 April 2010.

SPRING Singapore (2010). “Financing Schemes for Start-Ups”, downloaded from http://www.spring.gov.sg/entrepreneurship/pages/overview.aspx accessed 1 Dec 2010

Wetzel, W.E. (1983). “Angels and Informal Risk Capital”, Sloan Management Review, 24, pp. 23-34

Wong, P.K. and Ho, Y.P. (2003). “Business Angels in Singapore”, Singapore Venture Capital & Private Equity Directory 2004, SVCA, Singapore, pp. 36-42

Wong, P.K. and Ho, Y.P. (2007). “Characteristics and determinants of informal investment in Singapore”, Venture Capital, 9(1): 43-70.

Wong, P.K. and A. Singh. (2008). “From Technology Adopter to Innovator: The Dynamics of Change in the National System of Innovation in Singapore”, chap. 3 in C. Edquist and L. Hommen (eds.), Small Economy Innovation Systems: Comparing Globalization, Change and Policy in Asia and Europe, Elgar, 2008, p. 71-112

Wong, P.K. Ho, Y.P. and Singh, A. (2011). “Towards a Global Knowledge Enterprise: The Entrepreneurial university Model of National University of Singapore”, chapter 7 in Wong, P.K., Y.P. Ho and A. Singh (eds), Academic Entrepreneurship in Asia: The Role and Impact of Universities in National Innovation Systems, Edward Elgar, 2011

Wong, P.K. et.al. (2000-2006). Global Entrepreneurship Monitor (GEM) – Singapore Report, various years (2000-2006)

[1] Informal investors are defined as those who have in the past three years invested in an entrepreneurial business venture started by someone else, excluding the purchase of publicly traded shares or mutual funds

[2] The Total entrepreneurial rate (TEA) rate measures the proportion of a nation’s adult population that is engaging in entrepreneurial activities in one of two ways: in the process of starting up a business or running a newly formed business less than 3.5 years old with significant ownership (Wong and Ho 2007).

The Value of Down-Time

2010-02-20T01:34:00.000+08:00

Over the last couple of decades, the world (at least the richer part) has been moving rapidly towards the so-called network society, where people are always-connected and have access to virtually limitless amount of information through ubiquitous information networks.

However, a funny thing seems to have happened on our way towards this promised land of information cornucopia: people now actually are spending less time thinking. Sure, we spend vastly more time consuming and generating information than ever before, but the amount of time we actually spend in synthesizing and reflecting on the information we already have appears to be dwindling.   One culprit is the the disappearance of "down-time".

We used to have episodic down-times throughout our day -- time gaps between tasks/appointments, and idle times in transit. But the ubiquitous information connectivity has banished such down-times. I was taking an MRT train ride the other day, and as I looked around, practically everyone was occupied with their mobile devices, whether talking, texting, watching video, listening to MP3 or playing games. As they alighted at the train stop, many continued to be occupied with their information appliance while walking. I could imagine them reaching home and immediately going online to catch up with their emails, internet surfing, or social network updating. You go to meetings, the scene is repeated: everyone busy clicking away on their blackberries or iphones under the table whenever there is a null before (and often during) the meeting proceedings.

Because we are constantly bombarded with information, we are constantly distracted.  The messages keep coming to your blackberry, so it is hard to ignore. And everyday brings tons of new apps for your iphone, just a click away for you to try. Your email inbox is forever growing faster than you can delete, let alone read.  Most of us have been so conditioned to respond to the constant flood of information coming at us that we have forgotten what it is like to have down-time.   Indeed,  the "digital native" youth generation has come to equate down-time with boredom: most teenagers can't imagine being idle for an hour with no information to consume.

For me, down-time is not boring, but represents valuable time to think. Thinking requires shutting out distractions, so that you can concentrate on making sense of the information you already have, and to frame and prioritize what new information to look out for. Otherwise, you will just be forever drowning in a sea of new information.

To protect your donw-time for thinking, you need to resist the temptation to be interrupted by your information appliances all the time.   Some of my younger colleagues are surprised when I told them I deliberately chose not to have email connectivity on my mobile phone, so as to reduce the tempations to be distracted. My mobile phone is usually on silent mode as well.

My younger colleagues are also surprised to learn that, once in a while, I chose to take a one hour bus/MRT ride between home and office (on days when my schedule is not packed), and that I often do not turn on my MP3 player during the ride. "Won't that be boring? Aren't you wasting your time by not driving or taking a taxi?" They asked. I told them that it is a good disciplining mechanism to ensure a solid one hour of uninterrupted reflective thinking time.

Of course, down-time is valuable not just for thinking -- I believe we all need to reclaim more down-time to do other things, including to be with our friends and loved ones, to exercise, to pursue our hobby, to relax, daydream, meditate, even to do nothing. It is also true that our information appliances are not just tools for work, but also a valuable means to develop our social life with people who are physically distant from us, as well as for personal entertainment, so it is not an either-or thing.   My basic point is that, just as we need work-life balance, we need a balance of down- and up- time, and a balance between time for reflective thinking and information consumption.

John Lennon once said, "Life is what happens to you when you are busy making plans". I guess a more apt version today would be: "Life is what happens to you when you are busy going online". Are you safeguarding sufficient down-time in your hectic life?

ASEAN's Declining Weight in the World Economy

2010-02-05T06:20:00.003+08:00

[NOTE: An abridged version of this post appears in the Straits Times today.]

ASEAN has been considered one of the most successful regional groupings in the world since its inception in 1967 to the mid 1990s. Over the period 1980-97, ASEAN achieved higher economic growth than most other regions in the world. However, economic realities dramatically changed in the decade since the onset of the Asian Financial Crisis in 1997 and the emergence of China and India as economic powerhouse in Asia from the mid-1990s. After experiencing a sharp decline in economic performance over 1997-98 as a result of the Asian Financial Crisis, ASEAN as a group did rebound in the ensuing period, but contrary to popular impression, the region had never quite recovered its former competitiveness in the world economy. Not only had ASEAN’s share of world GDP, trade and inward direct foreign investment (DFI) declined between 1997 and 2007, ASEAN’s productivity growth (as measured by the growth of GDP per capita adjusted for inflation and purchasing power parity (PPP)) in the 1997-2007 period had declined both absolutely (when compared to the earlier period of 1980-97) and relatively (when compared to the world average).
Table 1 highlights the declining weight of the group of ten ASEAN countries (ASEAN10) in the global economy in the decade since the Asian financial crisis in 1997. While ASEAN10’s share of the world population increased over 1980-2007, its shares in the world’s GDP, trade and inward DFI all reached their peaks in 1997, and despite some recovery, were still lower in 2007 than in 1997. The most dramatic fall is in ASEAN10’s share of world total inward DFI flows – so much so that ASEAN10’s share of total world inward DFI flows had dropped below its share of world GDP and trade from 1998 onwards, a reversal of the situation before 1997.
It is true that the decline of ASEAN’s weight in the world economy coincided with the rapid rise of China and India. However, even if we net out China and India, ASEAN’s shares of the rest of the world in terms of trade and inward DFI had still not recovered to their peaks in 1997, and only marginally improved in terms of GDP share.
An even more disturbing picture emerges when we examine ASEAN’s competitiveness through the lens of productivity growth (see Table 2). After adjusting for purchasing power parity (PPP) and inflation, the six largest ASEAN countries’ per capita GDP growth in the period 1997-2007 averaged only 2.3% p.a., significantly below the 5.3% p.a. it achieved in the period 1990-97. Even if we discount the sharp drop over 1997-98, ASEAN’s growth in the 1998-2007 period (3.6% p.a.) is still substantially below the average growth it achieved a decade earlier.
More tellingly, the ASEAN6’ average GDP per capita growth performance over 1997-2007 was not only significantly less than that of China (8.7%) and India (5.5%), but had fallen behind the average of the world (2.5%), the group of low income countries (2.9%), lower-middle income countries (5.7%) as well as upper-income countries (3.1%). The only group of countries that grew more slowly than ASEAN6 is the group of high-income countries (2.0%). By 2007, China’s GDP per capita, after PPP adjustment, had already overtaken ASEAN6’s, even though it was only 42% of the latter in 1990.
The global media had rightly highlighted the last decade of the 20th century as the “lost decade” for the largest economy in Asia – Japan. Although less obvious, future economic historians may well refer to the decade after the 1997 Asian Financial Crisis as the lost decade for ASEAN. Yes, ASEAN did recover from the Asian financial crisis and achieved moderate economic growth during that decade. And yes, the rapid rise of the two Asian mega-economies -- China and India -- did contribute to the relative decline of ASEAN in the expanding global economic pie. But the fact remains that ASEAN’s productivity had not kept pace with the rest of the world in the decade of 1997-2007. ASEAN is unlikely to have done better in the recent financial crisis years of 2008-09.
Virtually all economists would agree that the slow pace of economic integration and liberalization among the ASEAN member states has been an important contributing factor in preventing ASEAN from realizing its full economic growth potential. Throughout the last decade, intra-ASEAN trade had been at or below one-quarter of total ASEAN trade, much less than in the case of the European Union (about two-thirds among EU25 and over 40% in NAFTA). As global competition continues to intensify, we can only hope that ASEAN policy makers will make up for lost time by speeding up the economic integration process in the next decade.

Table 1 - ASEAN’s weight in the World Economy
ASEAN10’s Share in: 1980 1990 1997 2000 2007
World Population 8.1% 8.29% 8.43% 8.45% 8.46%
World GDP 2.2% 2.9% 3.9% 3.6% 3.8%
World Trade 3.3% 4.4% 6.5% 6.2% 5.8%
World Inward FDI flows 4.9% 6.2% 7.1% 1.7% 3.3%
World Inward FDI stock 2.6% 3.3% 5.5% 4.6% 3.6%

Table 2 Per Capita Income Growth of ASEAN
Compound Annual Growth Rate of Real GDP per capita (PPP)
1980-1990 1990-1997 1997-2007
ASEAN6 - 5.3 2.3
Low income 0.2 0.6 2.9
Lower middle income 3.2 4.2 5.7
Upper middle income 0.1 -0.6 3.1
High income 2.3 1.7 2.0
World 1.4 1.2 2.5
China 7.7 10.2 8.7
India 3.3 3.4 5.5

Sources for both tables: Wong, P.K. and K.K. Ng (2008), “The Competitiveness of ASEAN after the 1997 Asian Financial Crisis”, LKYSPP-ACI Monograph, December 2008

blogging vs. tweeting as forms of explorative vs. exploitative learning

2010-01-11T10:55:00.001+08:00

I have taken a leave of absence from blogging for the last 4 months, due partly to heavy work & travel schedule, but also because I wanted to focus on experimenting with tweeting as an alternative way to share ideas and information online. Unlike celebrities who need to feed their fan with their latest happenings constantly, my goal was very modest -- to share ideas or information I found interesting with my network of 500+ or so contacts on Facebook and Linkedin. I arranged for my twitter tweets to be broadcast as updates on my Facebook and Linkedin. I wasn't focused on attracting followers who do not know me.

Based on my limited experience over the last 4 months, I've found tweeting to be particularly useful as a mean to share meta-information (information about information). Tweeting is also good for sharing snippets of interesting ideas as they emerge. Its advantage is that it takes little effort, and hence can be done almost in real-time as you yourself come across the information item or idea. In fact, I've come to rely on it as a handy way to bookmark useful ideas or information items I found on the net for myself -- besides being more readily shared with others, its advantage over conventional bookmarking is that it captures the time and annotated context I found the idea/item of interest.

However, the flip side is that tweeting doesn't quite convey sufficiently the nuances surrounding an idea and the contextual rationale/implications of an information item to those we are sharing the information with. For that, blogging is a better format, where you have more rooms to elaborate on the idea, why you found it interesting, and what inputs you are seeking from others.

Browsing tweets also represents an effective way to quickly scan potentially interesting ideas and information across multiple domains of interest -- by choosing the right mix of people to follow, one can get a good feel of the pulse of any community of interest at any moment in time, and after a while, you get a sense of the flow. There is also a greater chance to encounter the kind of serendipitious learning I talked about in an earlier blog. This is different from following blogs, which require more time commitment and a stronger sense of purpose in terms of the specific kind of subject areas or topics you want to dive more into.

Tweeting and blogging thus nicely typify the difference between explorative vs. exploitative learning that I talked about a while ago. In following others' tweets, I'm in an explorative learning mode, browsing for ideas and meta-information that I might find interesting for myself or my networks. I tend to be more targeted and focused in my information search when I read blogs -- I prefer to focus on a small number of bloggers whom I know have interesting thoughts on specific topics of interest to me. This is more akin to exploitative learning. Likewise, in sharing information via tweeting, I'm sending out thoughts and ideas as they emerge, whereas in blogging, I'm in a more reflective mode, trying to synthesize ideas and thoughts that have been brewing for a while. Tweeting is to width search as Blogging is to depth search.

Of course, for someone in my profession -- academic research, education content development and start-up investing -- blogging is still very much closer to the spontaneous/explorative end in the continuum of intellectual thinking; the bulk of my thinking time remains anchored at the other half of the continuum, where highly focused information search and precisely directed exploitative analysis are essential -- that's how good quality academic journal papers are written, and that's how start-up investing due diligence and post-deal venture development work are carried out.

Explorative and exploitative learning are complementary in the intellectual pursuit of everyone. Having experimented with both blogging and tweeting, I've decided both will be an integral part of what I'll do in the future. It feels good to be back blogging again!

To Innovate, Leave Something to Chance

2009-08-23T08:13:00.009+08:00

An old classmate of mine since primary school days has an illustrious career in construction project management. Today, he is the managing director of a leading development company listed on the Malaysian stock exchange. I once asked him what is the single most important success factor in construction project management. "Have a very good checklist, and check it religiously", he said.

What he said resonates with several other experienced project managers I spoke with in other fields such as IT project management and event management. Their common mantra -- if you want flawless execution, leave nothing to chance.

Leave nothing to chance -- this mantra has served Singapore well. Indeed, over the years, Singapore has earned a reputation for efficiency and dependability in project execution. Whether it is physical infrastructure development projects like airport and public transport, or events like the IMF convention or F1, our project planners and managers have done well when it comes to executing according to plan.

But this formula for success is only applicable when you are dealing with projects that have two characteristics -- (1) the end-targets can be well-specified ahead of time, and (2) the means to achieve the targets are also known and well-specified. In other words, you know where exactly you want to go, and you know the available roads and means (transport vehicles, fuels etc) you need to take to get there.

Unfortunately, these conditions do not apply when you are embarking on an innovation journey. When you are trying to innovate, you may know what the end goal is (e.g. kill the cancerous cells but leave normal cells unharmed), but you do not know how to get there; or you may have a fantastic new tool, but don't know what you can do with it. Often, you have incomplete knowledge of both.

Much of the innovation literature tells us that successful innovations often come about serendipitiously, i.e. the innovative ideas are often discovered by accidents and for purposess not originally pursued. Chance encounters and unexpected occurences (accidents) feature prominently as impetus for such innovative breakthroughs as the discovery of penicillin, insulin and viagra and the invention of microwave oven, vulcanized rubber, inkjet printer and paypal, just to name a few. However, this runs counter to the mindset of leaving nothing to chance. In the latter mindset, everything is regimented to achieve the planned tasks at hand, and no wandering out of the defined activities is allowed. The chance of accident has already been minimized by meticulous planning, and even if it still happens, contingent plans have already been specified to get you back on track as quickly as possible.

To improve your chance of coming up with something really innovative, however, you need to do the opposite by leaving something to chance. Allow some time to go on an explorative mode rather than your routine exploitative mode -- i.e. broaden your knowledge search to less familiar territories instead of stomping around familiar grounds . Give your ideas room to mutate by reading and trying things outside your normal routine, and having chance encounters with people you normally do not talk to. And when something unexpected does happen, sit back to ponder what it may mean and explore where it may lead you, rather than hurrying to get back on track with whatever you were originally pursuing.

To leave something to chance, you have to leave some time to chance. One of my favourite quotes is a line I read many years ago in a Princeton University brochure when I was looking for universities to apply. It went something like this -- "There is value to time that has no direction, and that can go in any direction." I have taken to heart this advice over the years.

New opportunities are staring at our face everyday. But most of us are so focused on what we are doing (the rate race...) that we miss seeing them. Are you leaving enough time in your life for chance exploration ?

NOTES

For an enjoyable account of serendipitious discoveries in science, read Royston M. Roberts: Serendipity: Accidental Discoveries in Science. Wiley, 1989.

For a more recent listing of notable serendipitious discoveries and innovations, see the Wikipedia entry on Serendipity.

Exploration vs. exploitation is a central conceptual construct (first introduced by J.G. March) in the innovation management and organization science literatue. If you like to learn more about the distinction between the two modes of innovation and their impact on firm performance, you can read this academic journal article of mine)

Promoting entrepreneurship development in Singapore: Ideas for the Economic Strategies Committee?

2009-08-17T13:12:00.013+08:00

As some of you may be aware, the Singapore government has recently established a high-level, inter-ministerial Economic Strategies Committee (ESC) to develop and recommend strategies to grow Singapore’s future as a leading global city in the heart of Asia. You can visit the ESC website to get more details on the composition, scope and objectives of the ESC, which aims to put forward its key recommendations in January 2010 and will release its full report by mid-2010.

One of the sub-committees (Sub-committee 2) set up under the ESC is tasked to look into "Developing A Vibrant SME Sector And Globally Competitive Local Companies". Co-chaired by Mrs. Lim Hwee Hua (Minister in the Prime Minister’s Office and 2nd Minister (Finance and Transport)) and Dr. Ricky Souw (CEO, Sanwa Group and President of Singapore Precision Engineering and Tools Association), this sub-committee will recommend strategies to:

* Develop a vibrant landscape of entrepreneurial activity
* Foster the growth and internationalisation of Local Globally Competitive Companies
* Strengthen synergies between small and large enterprises

The above issues are highly relevant to the future development of the entrepreneurial ecosystem of Singapore. In addition, there are several other ESC sub-committees that may cover issues of relevant interest to the entrepreneurial community, including Sub-committee 1 (Seizing Growth Opportunities), Sub-committee 4 (Growing Knowledge Capital) and Sub-committee 5 (Making Singapore a Leading Global City).

I would like to strongly encourage everyone in the entrepreneurial community of Singapore to contribute your ideas. You can do so directly by going to the online consultation page of the ESC website to submit your suggestions and feedback. If you like to share your ideas with others in the community so as the solicit comments and feedback from others, can I suggest that you also submit your thoughts as a response to this blog post -- hopefully we can then generate a healthy online discussion among the community.

I happened to be involved in a task force set up within NUS to provide inputs to the ESC, and so will be more than happy to not only participate in this online discussion myself, but also to champion some of the best ideas emerging from this online discussion (with appropriate attribution of course) through this channel as well. I look forward to your active contribution !

Exploiting the overlooked market niche -- how about the market for left-handers ?

2009-08-08T12:27:00.014+08:00

One of the ways to identify business opportunities is to focus on niche, minority markets that may be overlooked by the big established players who tend to target the mass, mainstream market. One example of a minority market is the market for products designed for left-handed people. Ok, I confess this market is of personal interest to me, as I'm a left-hander myself. Actually, I'm inspired to write this blog because the official International Lef-Handers Day is coming very soon -- August 13 to be exact (that's right, there is actually such a day).

Because lefties account for only about 10-15% of the world's population, most mass consumer products are designed for right handers. While left-hander version do exist, they usually are very hard to find in the mainstream consumer outlets, and usually for high value products only (e.g. golf club, hockey stick, guitars). If you are looking for left-hand scissors, peelers, knives, mugs or can-openers, you will often be out of luck. My own favourite beef is actually the cheque-book that I get from the banks.

I have come across a shop in San Francisco, and one in London, that specializes in goods for left-handers, but I am not aware of any retail shop in Singapore that specializes in this niche market. There are of course quite a few online shops that specialize in left-handed goods, e.g. www.anythingleft-handed.co.uk, thelefthand.com, lefthanded.dk, sinistershop.com, etc but even these are mostly based in the US or Europe, so you incur hefty shipping charges if you are based in most parts of Asia.

Obviously, many of the factors that cause left-handed goods to be more expensive and less efficiently distributed apply to minority products in general -- economy of scale in production, the logic of fast inventory turnover in mass consumer outlets, higher marketing costs to target a niche customer base etc. But clearly, advances in internet and web2.0 marketing technology ought to be able to help improve the market efficiency in matching left-handed consumers with suppliers -- the long-tail argument of Chris Anderson. Notwithstanding some of the online shops I mentioned, I have not really seen this particular long-tail being exploited in most part of Asia though. It may be that, while other minority consumer markets have a higher degree of physical clustering (think of Chinatown in Western societies), left-handers are not geographically concentrated. Or it may be that it is harder to identify and hence target the left-hander consumers, since you can't readily do the segmentation based on the kind of easily available demographic or socio-economic data that marketers capture (when you fill up an application form for any service, they ask you your income and occupation, etc, but did you ever get asked whether you are left or right-handed?).

Still, 10-15% is not exactly a small market segment, so I do believe that there is an under-exploited market opportunity here. Moreover, unlike trying to customize product for other minority market, where you really need to thoroughly understand what features to customize (e.g. color preference, size, packaging) and hence there is considerable product design risk, the cost for customizing product design for the left-handers should be quite low, as it usually involves nothing more than a mirror reflection of the standard product design.

So for the entrepreneurs out there, especially if you are left-handed yourself (or have loved ones who are), why don't you start thinking of ways to exploit this niche market opportunity?

I believe the key challenge is in developing the right marketing strategy. For starters, you could probably target your marketing pitch to parents of young left-handers. During my time, I get punished by some of my primary school teachers for using my left-hand in writing -- that is why I developed stammering as a child, as I was forced to write with my wrong hand for a number of years -- but these days adults are more understanding, and indeed parents with left-handed children (like me -- I have a left-handed daughter, although my son is right-handed) are usually anxious to ensure their children are not handicapped because of their handedness. And in case you do not know, there is no shortage of famous left-handers that you can draw upon for your marketing pitch -- for the artistically inclined, there's Michelangelo, Leonardo Da Vinci, Picasso and Mozart; for the scientist to be, there's Albert Einstein and Marie Curie; for the entrepreneurial, there's Henry Ford, John Rockefeller and of course Bill Gates; and for the politically inclined, there's Julius Ceasar, Napoleon, Alexander the Great and in more recent times, Mahatma Ghandi, Bill Clinton and - yes, Barak Obama. (For those of us who are Singaporean, I'm told that our very own Prime Minister, B.G. Lee, is also a left-hander.)

Do contact me if you know of any interesting venture that targets this niche market opportunity, or if you just want to share with me your own favourite grouses about wrong-handed products.

Silicon Valley-Southeast Asia Entrepreneurial Links

2009-07-10T19:17:00.004+08:00

(Note: A slightly abbreviated version of this was published in The Bold Entrepreneur --TIECON 2009 Special Edition (May 2009), p. 16)

Much has been written about the growing entrepreneurial links between Silicon Valley (SV) and Asia. Up until the late 1990s, the links have been mainly one-way – from Asia to SV. A significant reverse flow has developed since then, with many SV-based Asians returning home to start ventures. In addition, the phenomenon of entrepreneurial circulation and cross-continent venturing has also emerged strongly. Many SV-based VCs have also started operations in Asia.

Much of the public media attention on the growing SV-Asia entrepreneurial links has centered on India and China (including Taiwan), and rightly so. Although the overseas diasporas of Southeast Asia – especially Vietnamese and Filipinos -- have already become sizable in SV since the 1990s, the phenomenon of reverse flow of entrepreneurial talents to Southeast Asia remains nascent. Nevertheless, I predict that entrepreneurial links between SV and Southeast Asia will gain much more visibility over the next decade. In particular, I believe that one spot in Southeast Asia – Singapore -- will play a prominent role in this process. This belief stems not only from my on-going research on SV-Asia entrepreneurial links, but is also bolstered by my own personal experience working on the ground, both in my role as the director of entrepreneurship promotion programs in a leading university in Southeast Asia (the National University of Singapore) as well as in my capacity as an angel investor.

Since the beginning of 2000s, the National University of Singapore (NUS) has established a new entity called NUS Enterprise with the mission to inject an entrepreneurial dimension to NUS education and research. An incubation ecosystem has been established to nurture technology spinoffs by NUS professors and students. Besides physical incubation space, we have established several seed-funding schemes to give promising ventures a head-start. A mentoring scheme has also been developed, involving not only local experienced entrepreneurs and investors as mentors, but also a number of mentors who are SV-based.

Since 2001, we have also started a global entrepreneurial immersion learning program. Each year, about 50+ NUS undergraduate students are sent to SV to intern in early-stage high tech start-ups for one year, while taking entrepreneurship courses at Stanford University on a part-time basis. This NUS Overseas College (NOC) program has since been extended to Philadelphia, Shanghai, Stockholm, Bangalore and Beijing.

As a result of the foundation laid by these and other NUS Enterprise programs, as well as various new support schemes for start-ups by the Singapore government, I am now witnessing a growing stream of new start-ups by our NOC returnees, particularly those returning from SV. Some of these have begun to explore expanding their ventures back in SV. Our incubator has also been receiving increasing enquiries from SV-based ventures to start their Asian operations in Singapore.

As an angel investor and the founding chairman of Business Angel Network Southeast Asia (BANSEA), I am also seeing a growing number of business plans coming from outside Southeast Asia, including from North America. Personally, I have invested in a SV-based venture several years ago to help it establish its Asian regional headquarter in Singapore, and am finalizing a second such deal.

As the saying goes, the best way to predict the future is to create it. I look forward to the opportunity to work with the entrepreneurial community in SV to build stronger links with Southeast Asia.

The virtue of diversity

2009-06-28T13:32:00.005+08:00

It's been a few months since I last blogged. This is partly deliberate, as I tried to experiment with diversifying the media channels to share my ideas. Besides the usual academic journals and conferences that I continue to pursue as an integral part of my day job as a professor in NUS, I have gone back to writing for the traditional print broadcast media (2 articles in the local newspapers & 2 in niche overseas magazines), done 2 overseas radio interviews, taken on more overseas speaking engagements than perhaps I should have (Hong Kong, Paris, Penang and Barcelona...), tried a couple of international webinars, and dabbled in more social networking sites (besides Linkedin, I've added Facebook, Academia, and Twitter).

In reflecting on my experiment with diversifying media outlets over the last few months, I came to 3 basic conclusions. First, different media are good for different purposes, so maintaining a mix of media presence is necessary. The local dailies remain the most effective in local reach; I have acquaintances whom I haven't been in touch for years contacting me after reading my articles in the local newspapers. Face-to-face speaking engagements are still the best mechanisms for reaching new, high power contacts; I not only generated a number of instant consulting/ collaboration invitations from these, but a steady stream of referrals as well. Social networking sites are good for consolidating prior contacts, although not that good for generating new ones.

Second, the diverse channels do have complementary effects. People who met me face-to-face at my speaking engagements subsequently visited my Linkedin homepage and asked to be connected. People who read my newspaper articles searched and downloaded my academic publications online.

Last, but not least, openness to exploring diverse channels is important to develop the kind of novel learning & discovery experiences that lead to what Johansson has aptly called the intersection ideas in his book, The Medici Effect. Basically, intersection ideas are novel ideas that emerge from combining and synthesizing ideas from diverse & unconnected sources, vs. directional ideas that incrementally refine or extend existing ideas within a single field or paradigm. As he persuasively argued in his book, truly radical innovations tend to come from intersectional ideas, not directional ideas.

Some of the more intriguing ideas I have generated over the last few months have emerged from the less common channels I experimented with. For example, I spoke in April at a World Bank-INSEAD forum in Fontainebleau (near Paris) which was primarily targeted at innovation policy makers & practitioners from the former Soviet Union. Although I had spoken in Estonia, Hungary and the Czech Republic and lectured senior Kazakhstan officials before, I claim no real expertise in these transitional economies, and had no intention to do research or make angel investment there. I was amazed, however, to find people from some of these economies who have actually read my stuff, and one of them raised interesting questions that gave me new thoughts about the role of entrepreneurship in economic development. The interactions also convinced me how important Russia is, even though no one from Russia was even there. Two serendipitous outcome emerged: one, I now have Moscow as one of the dots I plan to connect in the near future, and two, I'm now doing new research on the role of entrepreneurs as differentiation agents in complexity economics.

The bottom-line, then, is that if you want to have an innovative edge in what you do, try pursuing diversity of information channels. Explore more dots. You may be surprised by the connections that can emerge.

"Innovated in Asia" – Globalization’s Next Tidal Wave

2009-03-12T11:12:00.004+08:00

[NOTE: An edited & abbreviated version of this post appears in Singapore's Straits Times today]

A key feature in the last two decades of globalization of the world economy has been the massive shift of production activities to Asia. This “Made-in-Asia” wave is most pronounced in the case of electronics/IT manufacturing activities: my research shows that non-Japan Asia accounted for only 8% of world production in 1985, but increased its share to one-quarter by 2000 and as much as 45% by 2007.

I predict that the next twenty years will see a similarly massive shift of innovation activities to Asia. Just as the “Made-in-Asia” wave of the last twenty years has profoundly re-shaped the global economy and indirectly contributed to the massive trade imbalance that is one root cause for the current financial crisis, this “Innovated in Asia” wave will have an even more profound impact on the world.

In many ways, innovation has been among the least globalized economic activities in the world economy, with most forms of innovation activities – whether measured in terms of R&D expenditure, scientific publications, intellectual property (IP) creation, and sales of new products embodying such IPs – still being dominated by North America, Western Europe and Japan. But the picture is changing fast. For example, my own research shows that, while only 0.6% of the cumulative number of patents granted by the US Patent Office between 1976 and 1990 involved a first inventor based in non-Japan Asia, this had increased to 4.1% for patents granted over 1991-2000, and 9% for the 2001-2007 period. While indigenous Asian firms have been a strong driver of this shift, so too have global high tech firms from the western nations: my research shows that, among the top 500 global firms in terms of US patent ownership, over 6% of their patents granted since 2000 were invented in non-Japan Asia, vs. just 0.1% for the period 1976-90.

The surge in innovation activities across Asia is not evenly distributed. The three Asian NIEs (Korea, Taiwan and Singapore) led the first wave of growth in the late 1980s; today, these three NIEs have all spent a higher share of their GDP on R&D than UK and France. Since the late 1990s, China (and to a smaller extent India) have been leading the second wave of growth. Although China’s R&D expenditure to GDP ratio is still less than 1.5%, after adjusting for Purchasing Power Parity (PPP), China is now spending almost as much as Japan in R&D.

The drivers for the recent surge in innovative activities in Asia are many. One is the shift towards Made-in-Asia itself: before one can learn to innovate, one needs to learn how to master the use of existing technology first. The massive growth of increasingly technology-intensive production activities in Asia – especially manufacturing in China and software programming in India – has thus built the foundation upon which many innovative activities can be carried out. While it is true that much of these new innovation activities are still incremental in nature, they do contribute significantly to enhancing Asia’s competitiveness.

Another contributing factor has been the dramatic spread of internet access around the globe and its substantial impacts on lowering the geographic barriers to information flow. This not only shortens the diffusion time-lag of new knowledge from the advanced nations to Asia, but also hastens cross-border research collaboration. Increasingly, Asia is becoming integrated not just in terms of physical supply chains linking components production to final assembly, but also in terms of product design and its manufacturing. For example, two of the top three creators of US patents in China are Taiwanese firms, which also have substantial manufacturing operations in China.

A third factor is the surge in educated talents across Asia. Today, Asia graduates more technically trained manpower than Western Europe and USA combined. Although much of the tertiary-education in Asia remains of lower quality, peaks of excellence are emerging as many Asian governments increasingly pursue policies to make their leading universities globally competitive.

I predict that the current global economic recession will hasten the shift of innovation activities to Asia. Firstly, the severe financial meltdown will accelerate the return flow of the Asian diasporas in the advanced economies back to Asia. Already, many Asian high tech entrepreneurs are leaving Silicon Valley to look for venture funding and market opportunities back in Asia.

Secondly, the market demand for innovation will shift more rapidly to Asia. As highlighted by my other NUS Business School colleagues in earlier articles, while poor governance of the banking systems in the US and Europe has been the proximate cause for the dramatic collapse of the global financial system, it is the massive build-up of huge and rising imbalance in global financial flows that makes the current global system unsustainable.

In essence, while easy consumer credit has fueled the demand for a wide range of consumer goods-related innovations in the rich economies, over the next decade, I believe that we will see a substantial re-balancing of the global economy, with domestic market growth in Asia becoming a much bigger part of world demand.

This will in turn not only drive more innovations in Asia, but more importantly, it will also transform the nature of innovation activities on a global scale. “Innovated in Asia” will not be just about shifting innovation activities to Asia; it will be about creating new organizational models and financing methods of innovation to create new products and services that are more appropriate for the Asian socio-economic context. For example, innovation to meet the needs of low-income population in emerging economies – what C.K. Prahalad had called the “bottom of the pyramid” – will feature more prominently in the future. So will the “Open Innovation” model, especially the use of open source technology for disruptive cost innovation.

Bangladesh pioneering micro-financing. The Aravind Eye Hospital in India overtaking the leading hospitals in UK in eye surgery operations. Korea’s NCSoft and China’s Shanda dominating the global online game industry. Taiwan’s Giant becoming the world’s leading bicycle innovator. And Slumdog Millionaires winning the Oscars. These “Innovated in Asia” wavelets will gather momentum and coalesce into tidal waves over the next two decades.

The 3Cs of Business Plan

2008-11-29T22:41:00.009+08:00

[NOTE: An abridged version of this post was published by the Business Times (Singapore) on Nov. 17. ]

One question I’m asked most frequently by budding young entrepreneurs is, “What does an investor look for in a business plan?” I get asked this in my various capacities – as an entrepreneurship educator, as the director of NUS Entrepreneurship Centre, which provides seed funding to entrepreneurial start-ups by NUS professors, students and alumni, and as an active business angel investor, having invested in about a dozen start-ups in Singapore, Silicon Valley, China and India over the last decade or so.

There are of course literally thousands of how-to books about business plan writing that will offer you checklists on what a business plan should cover. Having been pitched business plan hundreds of times, I have learned to distill the essence of what I personally look for in a business plan down to three core questions, which I have dubbed the 3 C’s. Just as many of you have heard of the 4 P’s of marketing (product, price, place and promotion), I hope that many of you will remember the 3 C’s of start-up investing after reading this -- whether you are (or plan to be) an investment professional evaluating start-up business plans, or an entrepreneur pitching plan to investors.

So what are the 3 C’s? Here they are:

How does the venture CREATE value ?
How does the venture CAPTURE value ?
How does the venture COMMUNICATE value?

At the heart of any new venture is the identification of a potential opportunity, and a plan of actions to exploit it. So any good business plan must tell us how good the opportunity is, and how and why the people behind the plan can exploit it better than others. I believe the 3 C’s help discipline our thinking about the opportunity and its exploitation, by providing three sets of tests for the viability of any proposed business.

Value CREATION

Every business, no matter what it does, can only exist because it creates value for some customers. So the opportunity that a business plan seeks to exploit must be translatable into very specific answers to the following series of questions:

• What is the customer problem (“pain”) or need that you have identified ?
• How big is it – how many such customers are there ?
• Who will pay for it to be solved/fulfilled, and for how much?
• What specific products/services are you going to offer to solve/fulfil these pains/needs?
• By how much would the value of these products/services exceed the total cost of providing the solution?

I’m afraid that many business plans that I have come across fail to pass even this first test – while they talked about the wonderful technical inventions or business ideas they have discovered, they either failed to demonstrate the existence of real paying customers who will want to pay for them, or they did not take into account the full cost of converting their ideas into actually usable products, which will render the venture financially non-viable.

Value CAPTURE

Many entrepreneurs, particularly techies, think that they have a viable business just because they have developed something that people actually want. Unfortunately, this is often not true, because you may not be able to capture much of the value that you create due to the existence of competition. And competition comes from not just other companies offering similar products or services – as Michael Porter has summarized it nicely, there are five sources of competitive pressures that any business needs to watch out for:

• Existing Rivals offering similar products
• Potential New Entrants
• Close Substitutes
• Powerful Buyers
• Powerful Suppliers

In combination, these competitive pressures drive your price down, or squeeze your margins to nothing. To pass the value capture test, a business plan needs to (a) convincingly show why some of these competitive forces are absent (AND will remain so even after you have entered the market) ; or (b) clearly identify the unique competitive advantages that your venture has to counter each of these competitive forces.

It is usually a bad idea for a business plan to proclaim that there is no competition, as many naïve business plans do. To the experienced investor, this may mean either that the entrepreneur has not done his/her homework, or that the business opportunity is actually non-existent or so tiny that nobody else bothers to enter. From an investor’s perspective, the existence of competition is actually a good thing, for it provides a validation that the market potential is real, not imagined. The challenge is for the entrepreneur to show that his/her offering is so good that it can capture a viable market share, despite the competition.

Value COMMUNICATION

Even after a business plan has passed the above two tests, we are still not home free yet – there is the remaining test of how the venture can communicate its value convincingly to its customers and resource partners. This is of particular concerns for new start-ups trying to offer radically new products/services that are not familiar to the customers.

First of all, there is the liabilities of newness – if the new venture needs to sell to large enterprises (or to sell through large distribution channels), this is usually a big warning sign, for many of these establishments tend to be conservative and will not buy from an unknown entity with no prior track-records, no matter how good the product is. Secondly, when the product/service itself is novel, as is typically the case with new start-ups trying to commercialize new technologies or business ideas, a lot of educating of the users (as well as the relevant partners such as component suppliers and sales channels) is usually needed, which will not only raise the upfront cost, but also delay the revenue stream.

While the above examples highlight the go-to-market challenge, I have used the word communication to embrace the broader range of credibility and visibility challenges that a new venture needs to address – you may have a great product innovation, but unless people are aware of it, understand what it does, and have trust in your organization to deliver it, there will be great resistance to first adoptions – everybody is waiting for other credible reference customers to prove its viability first. What is worse, if your innovation disrupts the existing business ecosystem and requires new distribution channels or adaptations by existing suppliers, you are unlikely to get the complementary resources to help you get started. You will also have difficulty attracting top talent to join your venture if you cannot communicate a compelling vision to them.

Unless a business plan clearly addresses how it is able to overcome these value communication challenges – and still shows viability even after factoring these communication costs and time delays into its financial projection -- it is still not fundable even if it passes the earlier two tests. For example, I personally view more favourably a start-up plan that allocates stock options to attract credible people to join its board of directors and management team – besides showing that the venture is serious about attracting the right resources to enhance its execution capability, it also signals that the founders recognize the need to address its credibility challenges.

I use this 3Cs framework not only to screen business plan pitches, but also to monitor and advise the companies that I’ve invested in. I would be interested in any suggestion you have on how to refine it.

Global Entrepreneurship Week III

2008-11-21T22:46:00.004+08:00

I managed to participate at 5 different events in the Week over the last 3 days, including speaking at 2 of them (the Microsoft BizSpark Launch and the BANSEA-Creative Community Singapore (CCS) Networking Event on Alternative Financing for Creative Businesses).

It is great to see Microsoft coming around to trying to work with early stage start-up companies, and I'm pleased that they have invited NUS Entrepreneurship Centre to be one of their network partners. While the free access to Microsoft software tools will certainly be very helpful, I believe one real beneifit for our Singapore-based start-ups would be to leverage their participation in BizSpark to gain regional and even global visibility. As a manifestation of Microsoft's power to draw media visibility, the event already gained coverage by Today, Channel News Asia Online, and Lianhe Zaobao, with more promised next week.

Although I have not yet invested in any "creative" businesses, this is not due to lack of interest on my part, just that I've not come across really interesting deal flows in this marketspace so far. Many entrepreneurial ventures in creative industries in Singapore have in the past tended to be run as social enterprises (depending largely on public grants/subsidies) or as lifestyle businesses that do not scale. But sensing that things may be changing, I took up the opportunity (as chairman of Business Angel Network Southeast Asia (BANSEA)) to co-organize the event with CCS as a way to get a better feel of the creative business entrepreneurial community in Singapore. I was pleasantly surprised by the high turnout -- over 100 participants -- and the level of energy during the informal networking. In my talk, I tried to highlight the need for creative business entrepreneurs to consider pursuing business models that are scaleable in order to make their businesses fundable by angel investors. I also highlighted some of the innovative financing methods that have been introduced in recent years in other countries (e.g. how a successful film production in Korea has received over 40% of its financing through micro-investments by online netizens) to encourage the creative business community to think more creatively about meeting its financing challenge. Through the event, besides meeting some very nice people, I've come to learned quite a bit about what CCS is doing to promote creative businesses in Singapore -- you can visit their website to learn more -- https://app.creativecommunity.sg/

The Technology Commercialization Forum (TCF) organized by the Industrial Liaison Office (ILO) of NUS Enterprise also drew a very high turnout (over 300 participants). I was particularly impressed by the keynote speech by the president of the Association of University Technology Managers (AUTM), where he made a passionate plea for policy makers to consider the long-term societal impacts of university technology commercialization, instead of focusing narrowly on licensing revenue generation in the short term. I truly agree with him that what really motivates some of us to do what we do (promoting innovation & entrepreneurship) is to try to make the world a better place. I would like to encourage you to read the Better World Project Reports recently produced by AUTM (downloadable from http://www.betterworldproject.net/reports.cfm) which provide interesting examples of university innovations that have truly made a significant impacts on the world.

Global Entrepreneurship Week II

2008-11-19T09:42:00.005+08:00

The Global Entrepreneurship Week (GEW) has started this week. I have attended two of the many events organized in Singapore so far -- the World Cafe organized by Temasek Polytechnic on the first day, and the Opening Ceremony on the second day. As my centre is one of the co-organizers of GEW Singapore, I'm particularly pleased that the Kauffman Foundation has chosen Singapore as one of the selected countries outside USA/UK that they will give on the ground coverage. In fact, they actually sent two people to participate in Singapore's Opening Ceremony -- Jonathan Ortmans, the man in charge of the GEW world-wide, and Dr. Paul Kedrosky, who is doing videoblogging of GEW happenings in selected countries worldwide. You can see his blog post on Singapore's GEW Opening Ceremony at the main GEW website http://unleashingideas.org/.

At the World Cafe, I enjoyed the opportunity to interact with the primary and secondary school kids as well as polytechnic students, especially hearing their views on what they think are the most important traits of an entrepreneur. We were also asked to discuss the question on whether entrepreneurs are born or made, which I didn't like so much -- for reasons I can't fathom, many people seem to like to ask this question. Interestingly, the topic that seemed to have generated the most amount of participation among the kids (at least in the tables where I participated) was that of parents' reluctance to let their kids try anything entrepreneurial that detracts from their study, and the pressure on the kids to study hard and get a good job.

I was happy to note that there were quite a few new faces at the Opening Ceremony. I think it is important that our activities reach out to new people -- there is no point to keep preaching to the converted.

I am looking forward to attending more events during the rest of the week. In particular, I think the Speednetwork The Globe, organized by The Digital Movement (TDM) in Singapore, seems interesting and worth checking out -- visit www.thedigitalmovement.org/gew.

Global Entrepreneurship Week

2008-11-03T10:36:00.006+08:00

The inaugural Global Entrepreneurship Week (GEW) will take place in the week of 17-23 Nov. 2008. Jointly coordinated by Kauffman Foundation in the US and Make Your Mark in UK, the goal of the week-long program is to encourage people from around the world to celebrate the spirit of innovation, entrepreneurship and creativity during one common week every year. To-date, organizations in 78 countries from around the world have committed to host a wide variety of events and activities during this inaugural GEW week.

I applaud this global campaign to raise awareness and interest in entrepreneurship, and am pleased to say that my centre (The NUS Entrepreneurship Centre) has taken the initiative to jointly host GEW in Singapore with the Action Community for Entrepreneurship (ACE). Together, we have engaged 35 other partner institutions to organize more than 40 events and activities throughout the GEW week. You can check out the latest GEW happenings in Singapore at this website -- http://entrepreneurshipweeksg.org. You can also find out what other countries are doing at this global website -- www.unleashingideas.org. A number of experimental global flagship events will take place to enable people from around the world to participate in simultaneously, including "Speednetwork the Globe" and the "Global Innovation Tournament".

Like any start-up idea, this year's inaugural GEW will probably be somewhat experimental and unpolished, but I believe that GEW truly has the potential to become not only THE annual platform for nations to celebrate the spirit of entrepreneurship in their respective countries, but also to emerge as an interesting global virtual platform for new entrepreneurial ideas from anywhere in the world to be paraded and tested on a global scale. I would therefore like to urge you to give this new initiative your support by attending events in your country that interest you, and by tuning in to the global website to see what is happening around the globe and blogging about them. More importantly, I encourage you to see the GEW as your opportunity to make your mark on a global scale, by unleashing new social networking ideas and novel events/games/activities that will capture the imagination and interest of the millions of entrepreneurially-minded people who will be tuning in from around the world. I look forward in particular to your suggestion on how my centre and ACE can work with you to launch your ideas in this and future GEW, not just in Singapore, but also to the world.

The worst of times...the best of times?

2008-10-13T10:09:00.004+08:00

As I write, the global financial market has seized up, stock markets worldwide have plunged, investor panic is everywhere, and the global economy is fast sliding into recession, with the spectre of Depression 2.0 looming large indeed.

The chill had already frozen the venture capital investing market, with major VC funds holding back new investments. The mood is probably best captured in a presentation made at a recent partners' meeting of Sequoia Capital, one of the leading VC in Silicon Valley. The title of the presentation slides said it all -- "RIP: Good Times" -- you can view it at www.venturebeat.com (click here).

On a personal note, one of my investee companies (through my angel fund (BAF Spectrum)) had witnessed first-hand the chilling effect of this global financial meltdown -- it received a termsheet from an Asian regional office of a blue-chip, Silicon Valley-based VC firm about 3 months ago, and despite the fact that it cleared all their due diligence checking, the VC firm recently walked away from the deal. We found out later that their US headquarter had told them to hold all investment indefinitely, period. I have similarly learned from a friend who is a general partner of a VC fund that his institutional investors are asking him to put a hold on investing for the time being.

While there may still be a chance that some semblance of calm may return to the global financial market in response to the latest efforts by the governments of G7 and other nations to use tax-payers' money to shore up ailing banks and inject liquidity into the financial system, it is clear that, even in the best case scenario, this workout is going to take some time, and that the real world economy is already heading into a recession that is unlikely to be reversed within the next 12 months, even if we are lucky to avoid a severe and much longer period of negative growth.

In this worst of times, my best advice to entrepreneurial start-ups that have received seed-funding in the last 1-3 years, but have not yet reached steady cash-flow positive mode, is to move quickly towards a cash conservation mode with whatever cash you still have, for it will be extremely challenging to tap the venture capital market for your next round of funding over the next 6-12 months, if not longer. Find ways to reduce expenditure and explore interim sources of revenue to generate cash, and if it is possible, try to apply for some form of government grant for innovation to help stretch your run-way. It may be painful, but letting some people go may be the only realistic alternative to survive for some.

Thankfully, in Singapore, a number of government agencies like SPRING and MDA have recently launched new innovation grant schemes (e.g. the the first batch of POC and POV grant awards were awarded by SPRING this month) , so I would encourage our existing start-ups to apply for these. I also hope that the five new early-stage VC funds recently co-funded by the National Research Foundation (NRF) of Singapore will start their operations by early next year.

For would be entrepreneurs who are thinking of starting up your ventures, while the coming 6-12 months may seem to be the worst of times to do so, it could also possibly be the best of times, especially if you are convinced that you really have a great business idea, and your initial need for capital over the next 12 months is modest or you can self-fund/bootstrap a large part of it. When an economy is in recession, the cost of starting a business is lower than in normal times -- rent is down, input costs are lower, and the job market is soft, so attracting people to work for you becomes easier. It is true that venture investors will be extremely tight-fist and valuation is likely to be low, but hopefully you don't need to raise that much (yet), there is also less competition, and the entrepreneurs who are prepared to start-up at such a difficult time may get better noticed for their passion and tenacity. History has indeed shown that some of the most successful companies got going at or near the bottom of venture investing cycles -- both Cisco and Facebook got their first funding during the downturns of Silicon Valley. The ideal timing is that, by the time your product is developed and ready to go-to-market, the economy is turning up and the market starts to roar again. Better still, if your start-up idea involves substantial cost innovation, your product or service can still find a market in a recession itself -- by helping people or enterprises to survive recession better through cost savings.

The worst of times can still present opportunities, and thus becomes the best of times to start-up -- for the entrepreneurs who discover the right opportunities and are bold enough to act. As an early-stage angel investor, I'm still prepared to make seed investment in this period of gloom -- for the reasons stated above -- if the right start-up comes along.

Lessons from the Starting Up of StartUp@Singapore

2008-09-30T11:00:00.001+08:00

I'm pleased that the annual StartUp@Singapore (S@S) business plan competition will enter its 10th year of operation when its official launch event is held this 22nd Oct. You can visit the S@S website for more details.

As the original founder of S@S way back in 1999, I must say that I do feel a sense of pride that the competition has not only survived, but has indeed grown to meet my original goals. Firstly, while I and my centre (NUS Entrepreneurship Centre) had played a lead role in the organizing of the events in the earlier years, the event has been fully run by NUS students since 2 years ago. Secondly, the number of participating teams in recent years had consistently exceeded 200, and indeed last year recorded the largest number of participating teams ever. Thirdly, the event had also been able to raise sufficient corporate sponsorship to become fully self-funded last year, and I am cautiously confident that the new student organizing team will be able to achieve the same this year, despite the distinctly harshier funding environment this year. Last, but not least, I believe the venture had now evolved to become more than just a business plan competition, but a highly effective program to get people to learn experientially about entrepreneurship by engaging in the early stages of the start-up process itself -- writing a plan, building a team, learning networking skills, and pitching to potential investors and getting mentoring feedback.

Looking back, I think the start-up of StartUp@Singapore itself may serve as an interesting case study about the entrepreneuring process -- opportunity recognition, brand positioning, fund raising, team building and execution. It all started in Q2 1998 when I was asked by the then deputy vice-chancellor of NUS, Prof C.C. Hang, to lead a task force to develop a plan on how to promote technopreneurship education in NUS. The vice-chancellor subsequently approved our plan in Q4 1998, and I found myself being asked to start up a new centre at the end of 1998 to implement the plan. (Incidentally, I decided to call the centre by the name of Centre for Management of Innovation & Technopreneurship (CMIT), since I'm from MIT...).

Although the main mission for the new centre was to introduce the teaching of technopreneurship to NUS undergraduates (this was how I got the mandate to start the Technopreneurship Minor Program...), I knew that I had to go beyond the classroom to raise awareness and interest in entrepreneurship in NUS. Being an MIT alumnus, I had vaguely heard of the MIT $50K business plan competition, and realized that there was an opportunity to start a similar business plan competition in NUS. (I actually knew I was going to do this when I was chairing the task force, but I did not mention it as a "to-do" thing in the task force's plan, as I didn't want to be stuck with it as a KPI in case I could not pull it off...). So as soon as I managed to get the Technopreneurship Minor Program successfully rolled out in July 1999, I went to visit MIT to talk with the MIT student organizers of the $50K Competition. After the meeting, I was quite confident that I knew enough to organize such a competition in NUS. But on the flight home, I became convinced that I had the opportunity to do more than that -- I saw the opportunity of having a competition that catered to not just NUS, but the whole of Singapore, because no one was doing any such competition in Singapore then.

So the first thing I did was to recruit an NUS student leader to join me to form the core management team. The student leader -- Ong Kee Sing -- was at that time the president of the NUS Entrepreneurship Society. He had earlier been trying to develop a business idea competition primarily among business school students, but I convinced him to take on something much bigger. We effectively divided our roles, with me playing the salesman & fund raiser role, while Kee Sing took on the COO role to actually build the NUS student team to run the competition. Between Kee Sing and me, we also came up with the name and logo-- I came up with the StartUp@Singapore name, while Kee Sing got the logo designed (which still largely stands today). I deliberately wanted a name that had Singapore in it to give it the right brand positioning, and even tried to get it trademarked (which I couldn't as there was some rules at that time about us not being a legal entity to own a trademark...).

The next thing I had to tackle was fund-raising, which involved selling the whole idea to some corporate sponsors. Those of you who know me personally would know that I'm a terrible salesman, but what saved the day was the lucky timing -- if you remember, Q4 1999 was close to the peak of the dotcom boom, so despite the bad salesman that I was, when I made the round to call on all the venture capitalists and government agencies that I knew (or had someone I knew to introduce), I actually managed to convince sufficient numbers to pony up enough sponsorship money -- I got NSTB to match the S$50K prize money, and several VCs to fund the operational costs. I must credit a venture capitalist friend, Mrs. Chin Tahn Joo, for helping to open the doors to some of her VC contacts for me. It is only after I had gotten some confirmed sponsorship funding that I went to my boss Prof Hang for his blessing.

Marketing the competition to students and the general budding entrepreneurial community turned out to be relatively easy once I had the prize money (and several prominent VCs to agree to serve as judges) -- the dotcom euphoria certainly helped to draw in a lot of interests. We ended up receiving over 200 business plan executive summary submissions, twice the target that I promised my boss. I was also lucky in my choice of COO -- Kee Sing did a great job marshalling a team of dedicated NUS students, and despite some minor hiccups, their execution was great. (One of the things I have learned as an educator working with young talents over the years is to hold my tongue -- it is often better to let them try and do something that you knew would likely fail, instead of stopping them from doing so (so long as it does not have serious consequences) -- people learn from their mistakes much better than if they didn't try in the first place. )

Despite the good start, the following year the competition nearly died -- just as the dotcom boom made the start-up at the end of 1999 easy, the dotcom crash in 2000 made everything difficult -- sponsorship from VCs dried up, NSTB was transitioning out of its stewardship of the T21 initiative, and entrepreneurial interests among Singaporeans nosedived. We had enough of foresight towards the end of the first competition to know that the second year would be tough, and I prudently stashed away some surplus funds from the first year to roll over to the second year. I was also able to rope in a long-term strategic partner -- the NUS Business School Alumni Society -- to help in the organizing effort. Their help in securing sponsorship from their alumni networks was crucial to make up partially for the loss of VC sponsorship. The number of participating teams dropped by half, but to cut the story short, we managed to persevere and survive.

In the intervening years, we had the good fortune of finding a succession of capable and passionate NUS student leaders to take the helm of S@S, and over time the student leads themselves had developed a very effective peer-to-peer process of grooming their own successor. My mantra to each student lead team is to try something new each year, and over the years, we have indeed seen a continuous streams of experimentation and innovations to the competition (e.g. introducing a youth category, reaching out to the heartlanders, bootcamps, advertising on buses, etc) . Some of these worked, some didn't, but I believe we all learned a lot in the process, and the fact that there's always something new kept the excitement up and made it fun. While my actual role in S@S had reduced over the years (even though I had continued to serve as co-chair of the steering committee), I must say that it has always been a privilege for me to have the opportunity to work with such entrepreneurial young talents -- it is they, collectively, who have taken ownership of S@S and built it into what it is today.

If I may draw any lesson from my own involvement in the early founding of S@S, it is the following: Borrow ideas from others, but define your own unique opportunity; use your first mover advantage to stake-out a clear brand positioning; recruit a self-motivated team; under-promise so you can over-deliver; emphasize execution & experimentation over endless debates on ideas; and last, but not least, recognize that lady luck gives, but also takes away, so be prepared for both.

In closing, I would like to link back to my last blog entry about double social entrepreneurship: I believe that StartUp@Singapore has the potential to become a double social entrepreneurship model. Indeed, my wish is that S@S will be copied by others around the world, for our ultimate goal is to get more people, especially those from the developing world, to learn experientially about entrepreneurship. So here's my suggestion to our future student leads of S@S: make it easier, not harder, for others in the developing world to copy us!

"Double-Social" Entrepreneurship

2008-09-23T21:37:00.010+08:00

You all know the saying -- give a man a fish, he lives a day; teach him how to fish, and he lives a lifetime. There is certainly profound truth in this -- that imparting knowledge does more to improve lives than charity -- and I am not knocking it. The world needs more of both.

But reality is a bit more complicated. First, teaching someone fishing can be time-intensive and difficult to scale, unless one invents a better teaching methodology. Second, if fishing requires the use of a fishing equipment, then knowing how to fish is not enough -- you have to get the fishing equipment as well, which may be costly, especially if someone owns the intellectual property behind it and can charge a monopoly price.

What I am getting at is that doing good is not just a matter of good intention, it requires a good understanding of the role of innovation and scalable business model. This brings me to the concept of social entrepreneurship. Or, shall I say, the common misconception of what social entrepreneurship is about.

Social entrepreneurship has become a big buzzword these days, but like all buzzwords, its meaning has become vague and (as I will argue) potentially misleading. Generally, the term has been used to mean entrepreneurial activities directed at addressing some social problem (doing good), instead of making money for the entrepreneurs (doing well). In this sense, some have equated social enterprise with non-profit organization. There are some who believe that one can do good while doing well at the same time, and distinguish social entrepreneurship as having this characteristic, vs. the traditional non-profits that can do good but cannot do well, and thus need to rely on charity to fund its do-good activities. There are of course further distinctions -- some use the term to mean only a venture that can do good and do well at the same time, while others would include a venture that makes money in some conventional profit making activities and use the profit to subsidize its social (non-money making) activities. Regardless, most people seem to agree that the label "social" in social entrepreneurship refers to the intention of the venture -- trying to do good.

While this definition of social entrepreneurship (let's call it SE1) is certainly useful in highlighting its difference from conventional, purely profit-seeking venture in terms of its goal, it is in another sense not very helpful at all, because it doesn't tell us how social entrepreneurship actually differs from conventional entrepreneurship in terms of its entrepreneurial process.

I would like to argue that there is actually another meaning of social entrepreneurship that focuses on the process, not the goal. In this interpretation (let's call it SE2), social entrepreneurship is about a process of entrepreneuring that essentially socialize the core innovation or knowledge asset, versus conventional entrepreneuring, which emphasizes keeping one's core innovation or knowledge asset proprietary or private. In other words, in social entrepreneurship, the entrepreneur creates a new innovation or knowledge-asset, then allows (indeed, encourages or empowers) others to replicate it, whereas the conventional entrepreneurial model would have the entrepreneur trying to protect its innovation (e.g. seeking intellectual property rights protection with the aim to prevent others from imitating it).

The open-source model is essentially an example of social entrepreneurial model in the SE2 sense. Another example is the Wikipedia model. What makes the open-source and Wiki models powerful is that it encourages not only others to use its innovation, but also to contribute their own innovation or content which in turn is freely distributed. In other words, an SE2 entrepreneurial model unleashes and multiplies many more entrepreneurial contributions. Now, the open-source or Wiki model does not actually do away with the concept of intellectual property rights -- it just defines it differently from the conventional proprietary right, and involves a different form of licensing. It also involves a different entrepreneurial process or model for managing future innovations on top of the prior innovation, one that is social in nature (community of volunteer coders, user contents aggregation).

In my view , the really powerful social entrepreneurial ventures are therefore those that not only seek to achieve social goals (SE1), but also do it with a socialistic innovation process (SE2). If I may come back to the fishing analogy -- a social program to get volunteers to teach people how to fish and a chairty program to dole out fish both have social goals (SE1), and the former is certainly better than the latter. But even better would be an entrepreneur that invents a better way to fish that dramatically reduces the cost of the fishing equipment compared to existing technologies , then gives his or her invention away to the people to not only encourage them to use it (at the much lower cost compared to existing technology), but also to make their own improvement, and to have such improvements freely diffused as well. An alternative example would be an entrepreneur that invents a more scalable model to teach fishing, such that people who learn how to fish can easily (and are motivated/obligated to) become teachers of others.

There are actually a growing number of examples of such "double-social" entrepreneurship emerging in the developing world. One of the best examples I know is that of the Aravind Eye-Hospital in India, well documented in C.K. Prahalad's book, The fortune at the Bottom of the Pyramid. In essence, Aravind not only pioneered an innovative product technology (low-cost lens) and an innovative process technology (low-cost eye-surgery process), but literally make them available to a vast number of poor patients who could not otherwise afford it, using a business model that charges a small margin on more well-off patients to cover patients who cannot pay at all, or very little. The Aravind hospital system includes innovating a highly scalable model for training village girls to become effective nurses that handle most of the work conventionally done by doctors and surgeons, leaving the latter to concentrate only on work that truly require their critical skills.

The world needs more entrepreneurs with social goals. But what is truly in short supply are the double-soical entrepreneurs who have the vision and innovative know-how to create a venture that combines social entrepreneurial processes and social goals.

What's Wrong (or Right) about Singapore's Entrepreneurial Ecosystem, Part II

2008-08-25T22:18:00.011+08:00

I would like to thank the dozen or so of you who sent me emails to share your views on Singapore's entrepreneurial ecosystem (also the five who left comments on my blog). While many of you have (rightly) highlighted the lack of early stage finance (angel investors, early-stage venture capitalists) as a major impediment in Singapore, I would like to highlight another factor that may be just as important, if not more so -- the lack of advanced firms that provide the seed-bed for the development of advanced skills and knowledge, and that are willing to try adopting new, advanced but unproven technology from small start-ups, i.e. serving as lead-users to other start-ups. Indeed, in certain business sectors where such advanced firms were present, Singapore had actually witnessed sizable emergence and growth of start-ups, contrary to the perception that Singapore's entrepreneurial ecosystem has been uniformly weak for start-ups in general.

From the mid-1980s to the late 1990s, Singapore had actually experienced significant start-up growth in one sector -- the supporting industry to the hard-disk drive (HDD) industry. If you examine the number of companies that IPOed in the 1990s, you will find a sizable number came from this sector -- ranging from precision engineering firms like MMI, Brilliant and Seksun to contract manufacturing firms like Natsteel Electronics and JIT (both had since been acquired by others). Others like facility engineering services firms Perdana Consulting had also done well, even though they did not go public. These firms were arguably technology-intensive, and some of them were able to compete globally, although nearly all of them started by serving the major HDD assemblers located in Singapore from the mid-1980s -- Seagate, Conner, Maxtor, Western Digital, etc. Indeed, quite a few of these firms were started by ex-employees of these HDD assemblers, who accumulated deep business or manufacturing process technology domain knowledge of the industry, before coming out to become component suppliers or service providers to the same or related industry. (For those of you who want to know more about this dynamic process of new firm formation in the HDD sector in Singapore in the 1980s and 1990s, you can consult the chapter I wrote on Singapore for a book on the globalization of the data storage industry published by Stanford Business Press in 2000 -- the book actually bears the title "From Silicon Valley to Singapore: Location and Competitive Advantage in the Hard Disk Drive Industry". )

This new firm spawning process is actually not that much different from the ways in which advanced firms in successive high tech industries in Silicon Valley have spawn the subsequent creation of new start-ups through the process fo employees leaving to become entrepreneurs -- whether it is Fairchild in Semiconductor, HP in electronic instrumentation, or Apple in personal computers. The one difference between what happened in Silicon Valley and Singapore's hdd industry is that, while the advanced firms in Silicon Valley were engaged in product innovation, those in Singapore's hdd industry were engaged primarily in manufacturing operations, albeit with some involvement in manufactruing process innovation. The employees in Singapore hdd industry thus learned primarily about manufacturing operations and process innovation, and the start-ups they created naturally drew on what they learned -- hence it is no surprise that their start-ups were concentrated in component production and assembly, process automation and contract assembly services, etc.

It is interesting to note that early stage financing has NOT been a major limiting factor to the creation of many of these hdd-related start-ups -- the main reasons being that there existed a critical mass of people who understood the industry, and the fact that there was a ready market for the products and services of these start-ups, which reduced the perceived risk of investing in such companies. Some of these start-ups were self-funded by the entrepreneurs themsevles and their friends who had accumulated savings as employees in the hdd firms; some of the funding came from former industry senior executives, other investment came from other business executives and professionals in related industries, and later, private equity funds and investment bankers who were familiar with the industry. The key point is that such investment were forthcoming from people who knew the industry, who knew the entrepreneurs, and who could assessed the risk because of their domain knowledge and people knowledge.

Fast forward to the 1990s and 2000's, we can witness a similar burst of Singapore-based start-ups in the offshore and marine services sectors -- with Keppel FELS and Sembawang Corp serving as the advanced firms that have become globally competitive (collectively they controlled more than 2/3 of the world's market for offshore platform construction), many such offshore and marine services firms were spawn, including quite a few that have IPOed in recent year, e.g. KS Energy, Swiber and Ezra. Again, the same process can be discerned -- knowledge gained from the advanced firms emboldened some of their employees and distributors to become entrepreneurs, and the ready market provided by these advanced firms for a wide range of services reduced the risks for such entrepreneurial entries.

The point is that, where there exists advanced firms, Singapore has been able to support healthy new firm formation and growth. It is only when entrepreneurs in Singapore try to start new ventures in sectors where Singapore does NOT already have some advanced firms and lead-users as anchors that they encounter difficulty in getting funded. It is NOT that Singapore has no high net-worth angel investors, or that such people are inherently risk adverse. It is because the entrepreneurs are trying to start companies in sectors that the existing angel investors do not understand, do not know the entrepreneurs, and cannot assess the risk competently.

In this sense, entrepreneurs in Singapore who are trying to do what Silicon Valley is best at -- starting new companies that pioneer new product innovation using cutting edge technology and targetting at lead-users -- are doing it in the wrong place. Singapore had produced some successful manufacturing firms because we were a major manufacturing base for some rather advanced manufacturing operations by global MNCs. But because Singapore had NOT been a base for advanced global MNCs to perform their product innovation activities, we had not been able to acquire much advanced know-how in product innovation. Unless and until a szable base of advanced firms and lead-users are carrying out their product innovation activities in Singapore, thereby enabling a sizable number of Singaporean engineers and managers to acquire such advanced know-how to become entrepreneurs and investors, it would continue to be difficult for product-innovation-based entrepreneurial start-ups to get started and funded in Singapore.

I would highlight two implications from the above observation. First, Singapore's entrepreneurial ecosystem is not uniformly weak or backward; there are sectors where Singapore's ecosystem may arguably be better than what can be found even in Silicon Valley. Just as Silicon Valley has a great ecosystem for, say, web 2.0 start-ups now because it already has advanced firms in web 2.0 and hence lots of people, including VCs and angel investors and entrepreneurs, who understand web2.0, Singapore has a great ecosystem for marine services start-ups for the same reasons. The key is to pick the right type of business to start in Singapore -- businesses that best leverage on the strength of Singapore's existing (and emerging) ecosystem. Some of my own recent angel investments have been guided by this perspective (more on this in future blogs...).

Second, entrepreneurial ecosystem is not static, but can evolve over time. In particular, public policy can play an important role in stimulating or accelerating the pace of change in certain directions. Thus, notwithstanding the difficulties in starting product-innovation-based new ventures in Singapore that I highlighted above, specific policy interventions, e.g. public co-funding schemes to reduce risk of angel investors, bringing in experienced mentors that have the relevant industry, business and technology knowledge, and public support scheme for early internationalization and cross-border fund-raising, can help nurture the beginning of some limited successes, which in turn will spawn more start-ups over time, in a virtuous cycle. This is something that my centre (NUS Entrepreneurship Centre) in NUS is trying to do for NUS-related spin-offs; again, more on this in some future blogs...

don't think out of the box... get out of the box!

2008-07-30T08:28:00.010+08:00

Hardly a day passes without my hearing someone uttering the exhortation to "think out of the box". I am sure the folks who utter this cliche meant well -- surely it's good for us to become more creative in our thinking -- but I actually think that this exhortation can be counter-productive and in some contexts may in fact be down-right wrong. The problem with this "think-out-of-the-box" metaphor is that it encourages the belief that one can actually solve real world problems by sitting where one is -- one just needs to be able to think in clever and creative ways. While this imagery certainly appeals to our intellect, I believe a more appropriate metaphor for many of us, especially the intellectual type, is not so much to try to think out of the box, but to GET out of the box -- i.e. get out of our comfort zone and actually go down to the ground where the real action is, so that we can experience first-hand what the real problem is like, as opposed to what we IMAGINE it to be.

We already have too many smart bureaucrats who sit in their air-conditioned office to dream up clever policies or regulations that unfortunately don't work (or make things worse) in practice because their clever policies have omitted certain realities on the ground (for those of you living in Singapore, you may recall the recent incidence of the Land Transport Authority (LTA) coming up with new regulation on where taxi can stop that was well-intentioned but turned out to be impractical and had to be retracted -- would this has happened if the officers involved have actually gone to the ground themselves?). We already have too many smart business school professors sitting in their ivory towers writing clever papers that have little relevance or impact, because they don't bother to talk to the actual folks in industry (ok, some of my colleagues will kill me for saying this...). And yes, we already have too many smart entrepreneurs writing fancy business plans without first going out to observe or talk to potential customers about what their actual pain points are.

Too many wrong solutions are implemented because people imagine what the problem is, instead of being out there to personally experience and learn what the real problem is. What we need to exhort more is for people to get out to the real world to learn first-hand -- the creative thinking can come later, after you have a better grasp of what the real problem is. I particularly stress this point to young entrepreneurs that I'm advising -- by all means, do your homework to formulate your product strategies and develop your go-to-market plans carefully, but what is more important is to start engaging potential customers and to learn about what their real pain points are as early as you can -- unfortunately, very often this cannot be done effectively without actually launching a product into the market. You will get far more ideas about what to do next, when you have real feedback on a real product, than if you just talk about your product concept on paper -- the quality of the conversation is just not the same. The worst business plans are those that provide fanciful market segmentation analysis, but cannot name actual companies or persons that the entrepreneurs have personally talked with or observed about the specific needs, and how their proposed product are actually addressing such needs.

Don't get me wrong -- I'm not suggesting that we become constrained to the existing reality and become enslaved to working within the mold of conventional wisdom; indeed, a large part of achieving truly radical innovation is to upset the existing order with disruptive ideas, and to do this we do need maverick, out-of-the-box thinking. I do believe, though, that all innovation, to be successful, must solve some actual or latent user needs, and often these needs are not well articulated, so the best way to discover what they are is to be out there and observe how the users grapple with their problems in their natural context. In this regard, I believe we all can become better innovators and entrepreneurs if we learn to become more like anthropologists (one of the ten faces of innovation as identifed by IDEO's Tom Kelley). Afterall, discovering opportunities is at the heart of entrepreneurship, and the best way to discover opportunities is to become more observant about people's needs and desires.

So, if you have been thinking hard trying to discover the next great entrepreneurial opportunity, stop thinking and try getting out of your box first.

What's wrong (or right) about Singapore's entrepreneurial ecosystem ?

2008-07-06T01:08:00.001+08:00

Silicon Valley has become the Mecca for would-be high tech entrepreneurs AND government policy makers around the world. A large proportion of entrepreneurs founding companies in Silicon Valley are immigrants coming from outside the US (see e.g. Annalee Saxenian's Silicon Valley's New Immigrant Entrepreneurs, and Angelika Blendstrup's They Made It), and hardly a day passed without some government somewhere in the world declaring that they intend to make their countries/regions to become the next Silicon Valley. There have been many articles and quite a few scholarly books on how the Silicon Valley entrepreneurial ecosystem works ( the three books I most recommend are : The Silicon Valley Edge, Understanding Silicon Valley: The Anatomy of an Entrepreneurial Region, and Regional Advantage: Culture and Competition in Silicon Valley and Route 128 ) , as well as an increasing number of works that seek to compare various Silicon-Valley-wannabe-regions in the world with the real McCoy (see e.g. Building High Tech Clusters: Silicon Valley and Beyond, Cloning Silicon Valley: The Next Generation High Tech Hotspots, Creating Silicon Valley in Europe, The Inside Story of China's High Tech Industry: Making Silicon Valley in Beijing ). I myself have contributed a chapter each on Singapore in two of the latest such books (Making IT: The Rise of Asia in High Tech, edited by Rowen, Hancock & Miller, Stanford U Press 2006, and Growing Industrial Clusters in Asia, edited by Yusuf, Nabeshima and Yamashita, World Bank 2008).

Many official government delegations from Singapore have visited the Silicon Valley in recent years to learn how it works, and to find elements that they can adopt back home. There has been significant changes in government policies towards improving Singapore's environment for high tech entrepreneurship in recent years, and some of these recent policy changes clearly bear the imprint of what have been learned about Silicon Valley through such visits. Nevertheless, a casual browsing through a number of popular blog sites on Singapore's entrepreneurship scene, like Sg.Entrepreneurs, seem to suggest that many entrepreneurs are not happy with the environment for entrepreneurship in Singapore. Since 2002, a stream of my own NUS students, who spent their one-year internship with high tech start-ups in Silicon Valley under the NUS Overseas College (NOC) program, had come back to Singapore, and many would invariably tell me soon after their return home that they greatly missed SiliconValley, and that they lamented various weaknesses in Singapore's entrepreneurial ecysystem when compared with that of the Silicon Valley.

In this and the next couple of blogs, I would like to focus on how Singapore's entrepreneurial ecosystem can become more vibrant and dynamic. While I do have some points of view (including some contrarian ones, as you will see...), I would like to start by encouraging my readers to contribute their own comments on what specific aspects of Singapore's entrepreneurial ecosystem they found lacking when compared with Silicon Valley (or other high tech hubs in the world), and what they think could be done to improve things, and by whom. I would like to encourage you to go beyond just observing differences between Singapore and Silicon Valley, by probing more into the underlying reasons for such observed weaknesses, as well as to ask more fundamental questions, e.g. what aspects of Silicon Valley (or other high tech regions) should we actually try to emulate ? Might some of the observed differences actually suggest strengths we have that we can build upon to differentiate ourselves from other high tech hubs, rather than just trying to ape what they are good at? I look forward to your contribution and the interesting exchange that can emerge !

Correction on my post on Gabriel Garcia Marquez

2008-07-02T19:51:00.002+08:00

I stand corrected -- since my post about the poem by Gabriel Garcia Marquez sent to me by my friend, I have received two emails alerting me that the poem is actually a hoax -- one of them, Readymade, has kindly left a comment on my post. The actual author of the poem was apparently a Mexican.

I take this as a great example of the working of the wisdom of the crowd, and the reason why wikipedia works.

Social networking across generations

2008-06-27T17:14:00.002+08:00

To further expand on my last blog about the potential of social networking applications involving the elderly, consider one of the the biggest problems confronting most healthcare systems: the problem of medication compliance, which is particularly acute among elderly patients. Basically, many patients fail to take their medications as prescribed, either out of forgetfulness/laziness, or false sense of recovery (leading to premature termination of medicine taking). Because of non-compliance, many medication prescriptions fail to have their intended effects on the patients. In addition, the efficacy of many drugs cannot be scientifically verified because of the compounding effect of non-compliance.

There are no easy solution to this huge problem, although I have come across a number of interesting innovations trying to deal with it, including one by a Singapore-based start-up called RemindCap. As the name suggests, the company makes a medicine bottle that has a special cap fitted with electronics that can be programmed to beep when it is not opened at the prescribed time interval. While I like this innovation, it is not as creative as another one that came out of Japan: they also put a special cap on the medicine bottle meant for the elderly patients, but instead of just beeping, they add a network connection that links the cap opening to a digital pet belonging to the grandchildren of the patients (many Japanese children play such digital pet rearing games). If the cap is not opened at the prescribed times, the digital pet grows weaker and eventually die. So out of love for their grandchildren, the elderly patients become more diligent in adhering to the medicine taking schedule. I find this example fascinating, because it not only utilize digital technology (as does RemindCap), but also incorporates deep insights of the social bond between the patients and their grandchildren, and taps the power of grandparental love to overcome their own human weakness.

Of course we can see various limitaitons to this particular innovation as a business (e.g. not all elderly patients have grand children who play digital pets, so the addressable market is reduced...), but my basic point is that the internet and digital media have the power to leverage and enrich social relationships, even among people who are not IT-savvy in the literal sense. The issue is not technology; what we need is imagination, empathy for and understanding of human weaknesses, emotions and desires.

The example above pertains to social networking across generations, but one can easily think of many other forms of scoial links (e.g. imagine teenagers playing in a virtual world game, in which their avatars can only gain strength if their team-mates exercise on a treadmill machine...who knows what this may do to kids' obesity...). I do believe that the potential for using digital technology to connect the elderly and young children is particularly vast and untapped...if you think about it, which demographic groups have got the most amount of leisure time for play and social interaction? The elderly and their grandchildren! Indeed, they have more in common than they have with the middle generation (who are busy working). Sadly, these two generations are increasingly physically separated in most urbanized societies, as nuclear family becomes the norm. I hope a new generation of entrepreneurs will create the imaginative digital tools to help them re-connect with one another...

Reverse Mentoring

2008-06-24T00:20:00.002+08:00

We all know that the culture of personal mentoring of new entrepreneurs by experienced investors and entrepreneurs has been a key part of the vibrancy of the Silicon Valley entrepreneurial ecosystem. I am happy to see that this concept is beginning to take root in Singapore as well, with more young entrepreneurs looking for mentors, and an increasing number of experienced entrepreneurs and venture capitalists/angel investors learning to take on this role. Indeed, since about 2 years ago, my own organization (NUS Entrepreneurship Centre) has started to engage a number of mentors to help advise and coach some of our NUS spin-off companies. Besides recruiting a number of experienced investors based in Singapore, I have also engaged a number of "international visiting mentors" who are experienced entrepreneurs based in Silicon Valley, to tap their global business experience.

In a macro-sense, mentoring represents a kind of market process, albeit imperfect, to recycle the tacit knowledge and experience of one generation to another. The more efficient this recyling process, the more productive the entrepreneurial creation process is likely to be, as the new generation learns through their mentors how to avoid many of the mistakes made by the earlier generation. The growing interest in mentoring among the entrepreneurial community in Singapore thus augurs well, even though we are still at a nascent stage and there are still lots of room for improving the mentorship process in Singapore (e.g. while it is a widely accepted practice in Silicon Valley for entrepreneurs to provide stock options to mentors, this is seldom done in Singapore, and many mentor-mentee relationships are fuzzy and lack a disciplined process).

However, the purpose of my blog today is not to dwell on this issue (maybe it can be the subject of another blog...). Instead, I would like to suggest that we should start looking at promoting a different kind of mentoring -- that of reverse mentoring, i.e. mentoring of an older generation by a younger one.

The main aim of reverse mentoring is to overcome a major flip-side of experience -- as the world is constantly changing, often times experience gained at one time period may no longer be applicable to a later time period, and indeed, an over-reliance on past experience can close one's mind to fresh perspectives and prevents one from innovating new approaches. Just as the greenhorn can benefit from coaching by the experienced, the experienced can also benefit from coaching by the young, who often are much more attuned to new developments and new possibilities in the world, particularly new technologies, new social trends and new cultural values.

While the concept of reverse mentoring is not really new -- e.g. Tom Kelley, the founder of the famous design company in Silicon Valley, IDEO, has a good discussion of it in his recent book, The Ten Faces of Innovation -- it has not caught on yet in any significant way, even in Silicon Valley.

My prediction is that reverse mentoring will become a major new phenomenon over the next 10 years: while the full potential of the digital revolution as a transformational force in both the enterprise and consumer market is becoming ripe to be exploited over the next decade, many of the senior managers in my generation who are still occupying position of influence over the key strategic business decisions of their organizations have NOT personally learned and embraced many of the new emerging digital media and technologies themselves. In contrast, the new digital media and technologies -- be it social network, virtual world, re-mix, etc. -- have become second nature to the generation of younsters who are only now entering the labor market. There is thus a great need -- and a great opportunity -- for the reverse transfer of knowledge, whereby the managers & policy makers of my generation can learn from the tech-savvy generation of youngsters -- be they students, employees or entrepreneurs -- the potentials and nuances of the new digital media and technologies, through the same process of personal mentoring, except that it is now the young teaching the old.

One of the great privilege of being an academic professor in a university like NUS is the opportunity to learn from the continuous flow of bright students who hail from the new digital generation. Indeed, the free, open-enquiry academic environment of a university provides a wonderful context for reverse mentoring to be practiced -- provided that the professors come with the open-mind to learn, reverse mentoring can naturally occur. In contrast, in business corporate and government departmental settings where relationships are more hierarchical, reverse mentoring goes against the grain of the organizational authority pyramid, and will usually not occur unless there is explicit recognition by senior management that learning from the new generation need to be an integral part of their organizational culture, and that specific formal mechanisms are put in place within the organization to facilitate it.

As Tom Kelley pointed out, reverse mentoring should be an integral part of a truly innovative culture. To those of you who are like me, I encourage you to consider having one or more reverse mentors for yourself, to help you refresh your mind to the changes in the world. To underline my own commitment to this idea, I have started the process of recruiting a number of my NUS students to serve as reverse mentor in digital media/technologies for me and my management team at my organization (NUS Entrepreneurship Centre). (Incidentally, I have started my blog with my 14-year old daughter as my reverse mentor.)

To those of you from the digital generation, I encourage you to consider the entrepreneurial opportunities of creating new reverse-mentoring businesses for the baby-boomer generation. With reference to my previous blog, I believe that those of you who can innovate ways to get the elderly and soon-to-be-elderly to embrace more effectively the new digital technologies -- in their own idiosyncratic ways -- will be well positioned to exploit the much larger opportunities of the globally exploding elderly and soon-to-be-elderly market.

Follow the Big Waves, but Think Contrarian

2008-06-21T17:59:00.000+08:00

We are now in the midst of the Web 2.0 craze, and every other entrepreneur I meet these days is trying to start a new Social networking site. Never mind that even the most talked about ones -- Facebook, Youtube, Second Life, Twitter -- have not turned profitable yet.

I do believe that Web2.0 and Social Networking will become big, indeed much, much bigger than what we can even imagine today. But I very much agree with the advice offered by Peter Thiel, the ex-CEO of Paypal and currently founder and president of Clarium Capital Management (which was the early investor in Facebook), when he spoke at the recent TIECON 2008 that I was fortunate to be able to attend. His advice -- yes, follow the big waves, but think contrarian: meaning, don't do what everyone is thinking of doing, or can easily think of doing. Just as anyone could think of starting a pet dog food portal in the Web 1.0 days, most of the social networking sites I get pitched these days have the same feel -- it's too obvious, so even if it works, there'll be many others around the world who have, or will have, started the same thing.

My own contrarian thinking is that, while everyone sees the young and tech savvy generation as the natural targets for Web2.0 -- after all, most people my generation are considered lost cause as we "just don't get it" -- some of the most significant value creation will be found in applying the power of social networking to the elderly generation today. I think it is a fallacy that, just because many of the people in that generation (and I'm trending towards that soon...) are IT illiterate, they won't be able to benefit from the social networking power of the internet.

One example from Japan that I like very much is the thermo-flask maker who adds an internet connection to the flask. The old parent living alone in their rural home in Japan start their day pouring hot water from the flask to make tea. If for some reason the flask is not activated, the flask is programmed to send an alert to their son working in Tokyo, who can then call back to find out if there is anything unusual. We are obviously not even scratching the full power of social networking and user-generated content in this case, but you get the idea.

My contrarian bet is on the start-up that exploits the intersection of the two exploding sets -- social networking and aging population -- while others are mostly looking at the young and cool. Send me your business plan if you have one sitting in this sweet spot!

In arriving at this contrarian bet I'm connecting two different dots -- the fact that I'm part of the aging population myself, becoming increasingly aware of the challenges I will face soon as an elderly, and the fact that my involvement in NUS Entrepreneurship Centre and in angel investing keep me constantly exposed to new web2.0 ideas; in particular, the NUS Overseas College (NOC) students that I come into contact with often keep me abreast with the latest developments in Web2.0 from Silicon Valley, China as well as right here in Singapore. One such group of NOC returnee students in Singapore, who called themselves the E27, is now running an incubator for interactive digital media (IDM) for my centre (Garag3). I would encourage you to visit their E27 website to find out the latest happenings in the web2.0 community in Singapore.

Gabriel Garcia Marquez

2008-06-21T17:26:00.000+08:00

I recently received this beautiful "farewell letter" written by Gabriel Garcia Marquez, a Colombian Nobel laureate in literature who is diagnosed with terminal cancer. When I was an undergraduate student at MIT, I used to read and love Gabriel's books -- those were the days when we were all passionate about changing the world and righting the world's injustice, and his writings stoked the fire in our belly. Reading his letter now brings back bitter-sweet memories of my Cambridge days, and helps me to connect back to an earlier dot in my life.

The friend who sent it to me is a Malaysian (part of the Malaysian-who-studied-in New Zealand friendship network of my wife who studied in New Zealand...) whose wife had recently died of cancer. I have forwarded it to one of my NUS students who is completing a one-year internship program in Silicon Valley (the NUS Overseas College Program), and he in turn has posted it on a new web-portal that he and several other NOC and Stanford classmates have developed called spread-the-love (www.spreadelove.com). They hope to make it into a platform for people to "discover, share and collaborate around the things that they love".

I recommend you to go to this spread-the-love web-site to read Gabriel's touching letter, as well as to learn more about what that portal is trying to do, and hopefully you can contribute towards their effort as well. For those of you who have not read Gabriel's books before, I would strongly recommend them as well.

Connecting the Dots

2008-06-09T09:08:00.001+08:00

The title of my blog is inspired by the "Connecting the Dots" speech by Steve Job at the 2005 Stanford University commencement. Being someone with an unusual background and diverse interests, I certainly have many dots to connect. I am part of the overseas ethnic Chinese diaspora -- born in Malaysia, but now a Singapore citizen. I studied physics and electrical engineering/computer science for my BSc's and MSc at MIT, and completed my PhD there in regional planning/industrial policy. I was an entrepreneur, a social activist, and now an active business angel investor and public policy consultant, while holding a day-job at the National University of Singapore (NUS) as a tenured, full professor in both the NUS Business School and the Lee Kuan Yew School of Public Policy, where I teach and research on both high tech entrepreneurship and innovation strategy/competitiveness policy. I am also the director of the NUS Entrepreneurship Centre, where I spearhead the university's wide range of programs -- incubator, seed funds, mentoring, etc. -- to nurture entrepreneurship among NUS professors and students. I have strong links to the Silicon Valley, having spent sabbatical leaves at U.C. Berkeley and Stanford University, but also the Nordic countries, as well as Korea, Taiwan and China. Notwithstanding my strong intellectual conviction in the positivist scientific world view, I am philosophically a Buddhist, and a learner of Qigong.

In this blog, I will try to share my intellectual journeys in connecting the diverse dots of my own life to arrive at my somewhat unconventional perspectives on various issues, but in particular on how Asia is being transformed by the forces of technological AND social innovation and entrepreneurship, where the technological and social entrepreneurial venturing opportunities will lie (and what I am doing to invest in them), and what the key socio-economic challenges we will need to look out for (and the kind of public policy innovations that I am advocating for Singapore and other Asian states to adopt). Like Steve, I believe that great insights come from the synergy of diverse experiences, and our ability to empathize (from personal experience) is just as important as our ability to conceptualize (from intellectual analysis). I am also a big fan of the Small World, Strength of Weak Ties perspective, and the serendipity of knowledge discovery and innovation (see the book by James Burke).

As I begin my blog journeys, I welcome your comments and look forward to seeing how your dots and mine can begin to connect...