Technological innovation and entrepreneurship boost Hong Kong's future

IS industry leaders virtual panel meeting

Interview by Professor Keng Leng Siau
KS – Keng Leng Siau
Head and Chair Professor of Information Systems, CityU
FY - Fanny Yuen
Managing Director, Financial Services, Accenture
PY - Peter Yan
CEO, Hong Kong Cyberport Management Company Limited
TC - Toa Charm
Former Chief Public Mission Officer,
Hong Kong Cyberport Management Company Limited
ML - Michael Leung
Group Chief Executive Officer,
BOA International Financial Group
EH - Eugene Hsia
Chief Corporate Development
Officer, Hong Kong Science & Technology Parks Corporation

A virtual interview was conducted by Professor Keng Leng Siau, Department Head and Chair Professor of Information Systems, with a group of information systems industry leaders. The interview focused on technological innovation and entrepreneurship in Hong Kong and CityU. CityU has made great strides in this area, initiating HK Tech 300, its flagship innovation and entrepreneurship programme, and introducing HK TECH Tiger, a suite of exceptional programmes for high-flying students. Technological entrepreneurship is one of the focuses of the Department of Information Systems, and many students and alumni participate actively in the HK Tech 300 programme.

KS: What's your view on the technological entrepreneurship opportunities in Hong Kong?

FY: Hong Kong has tremendous opportunities for technological entrepreneurship. With the launch of virtual banks and new investment opportunities such as non-fungible tokens (NFTs), and also with the impact of the pandemic, people have become more digital than ever. The demand for customer-centric products and services, and the capacity for selfservicing are already flourishing in many industries.

PY: In recent years, Hong Kong policy addresses have increased their focus on promoting innovation and technology (I&T), together with the development of the Greater Bay Area (GBA). With our country's support, I&T will become one of the new economic pillars of Hong Kong. The pandemic has reshaped the global economic landscape. FinTech has gone mainstream, virtual banks and insurers are commencing operations, and cashless payments are gaining popularity. WealthTech and roboadvisory solutions have been widely adopted, whilst RegTech has seen rapid growth. Innovation in FinTech has become essential for financial industries to continue thriving in this “new normal.” Other areas such as EdTech, HealthTech, GeronTech (to improve living standards for the elderly), and ArtTech can bring lots of opportunities.

TC: Technological entrepreneurship is definitely on the uptrend. We have around 4,000 startups, many of them high-quality. Arguably, 10+ unicorns have been born in the last five years. Large enterprises are putting more emphasis on intrapreneurship, corporate venture capital, and collaboration with startups. The innovation and technology ecosystem in Hong Kong is also becoming more mature with good support from the government, regulators, investors, and universities. For both students and people working, there are lots of opportunities to pursue an entrepreneurship journey.

ML: Funding is perhaps one of the most critical challenges for tech startups and innovative businesses. Some local universities have started their incubation programmes. The “HK Tech 300” programme organised by CityU, for example, aims to create 300 tech startups amongst its students, alumni, staff members, and other associates in three years. It provides in stages $100,000 seed fund, $1million angel fund, and up to $10 million external fund for aspiring entrepreneurs, as well as sponsored training to get started on the innovative journey. For the wider community, the Cyberport Creative Micro Fund (CCMF) and Cyberport Incubation Programme (CIP) offer generous financial support, from $100,000 to $1.2 million, to highpotential digital tech projects, early startups, as well as entrepreneurs looking for additional resources to accelerate their growth. On the industry side, a leading example is the “FinTech 2025” Strategy crafted by the banking regulator, the HKMA. The Chief Executive, in his election manifesto, emphasised the needs to attract and cultivate innovative talent, enhance Hong Kong's overall competitiveness, and make the city a technological innovation hub connecting GBA to the world.

EH: Entrepreneurs create their own opportunities, usually pursuing their passion and identifying problems that other people are not addressing. From our perspective, we're seeing tremendous growth in biomedical technologies and artificial intelligence, as both standalone and combined disciplines. The technologies themselves are not as critical as the end applications. Proptech and Fintech are two of the biggest consumers of artificial intelligence. Advanced diagnostics and therapeutics in oncology and infectious diseases are accelerating at a tremendous rate.

KS: What are the key benefits and challenges of launching a tech startup in Hong Kong?

FY: The key benefits are location, being in the heart of Asia and being an integral part of the GBA. It's easy for startups in Hong Kong to expand into both GBA and Asia Pacific. Also, being an international finance centre, Hong Kong's tax and legal infrastructure provides a friendly environment for startups. Government support for innovation and the availability of venture funding are also important.

One of the key challenges is space – Hong Kong office rentals are expensive compared to other cities in the Asia Pacific region. Also, advisory support – startups require advice on their business plan, potential market size, and products/ solutions. Ease of working with large enterprises is another issue. Large corporates will need to provide more support to adopt new service providers, including bank financing.

PY: The challenge is access to business support and resources. Entrepreneurs need business partners to facilitate commercialisation and testing. They need clients to place orders and then generate cash flow for the company. They might also need technical support during product development. Investors are essential to provide capital, while professional services providers can support companies in business development and governance. The government and Cyberport have been providing support to entrepreneurs so they can get the resources they need. A major benefit is the extensive international reach from a strategic Asia location. Hong Kong is the perfect connector between China and the rest of the world. And the city's reputation as a global business hub and its robust economic ties with other ASEAN countries make it a great entry point for foreign investors looking for a stepping stone into Asia. Cyberport has signed MoUs in the GBA, and startups can tap resources and professional experience to accelerate access to mainland markets. Practical facilitation services range from company registration, legal and taxation, policy clarification, and business operations to talent recruitment and sourcing facilities.

TC: Benefits are twofold. On the one hand, startups gather a group of passionate talents to focus on solving a pain point and contribute to the enterprises as well as wider society. This gives a good space for these talents to innovate and realise their dreams. It also creates a positive impact to encourage more people to be entrepreneurs, creates jobs, and hopefully grows local into global companies. On the other hand, enterprises can tap into the innovation from tech startups to solve their business problems, capture new opportunities in the digital economy, and accelerate their digital transformation. Certainly, challenges are not easy to resolve: talent acquisition and retention, cash flow, fundraising, growing pains, collaboration with enterprises (e.g., compliance, data privacy, etc.), market expansion, etc.

ML: Many people in the startup and creative business communities lament the shortage of talent here in Hong Kong. The truth, I suppose, is that most youngsters are not confident enough to enter higher-risk startups due to reasons such as the high cost of living, so they'd rather go for jobs in more stable industries like banking and finance. Besides, many mainland graduates choose to return home for the ample opportunities there. While Hong Kong may be a great testbed for creative ideas and innovative products, as a city of 7 million people, it is not big enough for many successful startups to attain an economy of scale for sustainable growth. GBA, ASEAN, and other areas are definitely open frontiers, but startups will face severe competition as they strive to commercialise and localise their innovations for foreign markets.

EH: Hong Kong is diverse in terms of landscape, population mix, density, variety of industries, etc. – meaning that it is an optimal testbed for new ideas. If it works in Hong Kong, it will likely work elsewhere in the world with minimal modification. The GBA further extends the idea of “testbed,” offering a market ten times the size of Hong Kong and serving as a fantastic entry to the mainland market. Hong Kong is also a springboard to the ASEAN markets. Hence, by combining GBA and ASEAN, Hong Kong is strategically placed to easily enable startups to grow regionally. Against that, the top three challenges for tech startups here currently are geopolitics, Covid, and the speed of regulatory support.

KS: Do you have any advice for tech startups in Hong Kong?

FY: Do more research on market and customer needs, market size, sustainability, and the ease of adopting and integrating the solutions.

PY: Co-creation with corporates has become increasingly popular in the I&T sector. Working closely with clients allows startups to better address their needs, and to get instant feedback in order to optimise their solutions. The FinTech PoC Subsidy Scheme is a perfect example of co-creation, with 93 projects approved in the first cohort. The government is actively promoting open data and Commercial Data Interchange (CDI). HKMA's Open API journey has arrived at phases 3 and 4. Utilising open data sources allows startups to explore business opportunities and test the feasibility of their solutions. Open APIs can help startups accelerate solutions development and focus on the core of those solutions.

TC: Customer-centric, focus, ecosystem, global mindset, and a core team are the critical success factors. Startups need to understand the real business problems of their target customers. Focus on an area for a start and do it better than anybody else. Produce a business plan and product roadmap for the next few years. Do market sizing properly. Engage with the innovation and technology ecosystem to build, grow and sustain your networks. A global mindset is also important. Can you find locations with business problems similar to those that you are working on? How can startups scale their innovation to these markets? Lastly, build a passionate, positive team with common purpose and value and tech/ business balance. The team also needs to have a “mastermind” of experienced advisors in business and tech areas.

ML: I would use the four-letter word “CORE”, as in “Core Competency”:
C: curiosity/ creativity/ courage/ commitment/ connection (or contact)
O: open-mind/ optimism/ opportunity/ objectivity
R: risk-taking/ resilience/ resolve/ resource/ result-orientation
E: energy/ enthusiasm/ empathy/ engagement

EH: Validate the market for your idea. Adopt a “First Principles” approach. Passion should be your primary driver. Work hard, really hard! Focus on having the best quality, building the best team.

KS: What will be the next wave of innovation?

FY: Ecosystem partnership leveraging API, blockchain, and automation.

PY: AI and big data. More enterprises will realise that tonnes of data are generated in their daily operation. The development of IoT will enable further data collection. AI technology allows us to analyse these data and react quickly. Tremendous business opportunities can be discovered through this analysis. The metaverse will provide brand new experiences in gaming, entertainment, leisure, art & exhibitions, and conferences. As a leader in the entertainment and creative media industries, Hong Kong is well placed. Some Cyberport startups are exploring opportunities offered by the metaverse, for example, Animoca, OliveX, Nikopicto, etc. NFTs are best used for unique assets, which is perhaps why we hear a lot about their use in the art world. Other intangible assets such as patents, copyrights, trademarks, and other forms of intellectual property can also be turned into NFTs for rights protection and transactions.

TC: AI, big data, and machine learning have lots of innovations coming up. We are still in the “artificial narrow network” or weak AI stage. I am expecting a lot more innovation in human-machine collaboration in all industries and in our homes as well. Metaverse has recently gained a lot of attention for a reason. Young people are early adopters, but it will go mainstream as the investment potential is very attractive. NFTs, asset tokenisation, cryptocurrency, etc., will be getting more popular. Blockchain will become as mainstream as the internet is today. On the other side of the coin, cybersecurity, RegTech, data privacy, and AI ethics will increase in importance. There are a lot more opportunities for tech startups in all these areas. All in all, there has been no better time for Hong Kong people to be a part of the innovation and technology ecosystem.

ML: In the information technology space, I believe the rapid increases in computing power, data storage, and network bandwidth will fuel the next wave of innovations, in what is commonly referred to as the “4th Industrial (or Intellectual?) Revolution.” In everyday life, we will see Web 4.0, including accelerated deployments of blockchain/ DLT, smart contracts, etc., in DeFi (Decentralised Finance), as well as advanced VR, AR, ER, and MR technologies in applications such as NFT and metaverse. This new generation of applications will respond to human emotion, sentiment, and privacy in interactive and immersive virtual environments in ways that we have never experienced before.

EH: It depends on whether it's “incremental” innovation or “curve-jumping” innovation. Incremental innovations happen every day in every sector. It is very rare that we see curvejumping innovations because they require tremendous tenacity to be successful.

KS: Is there anything else you would like to share with our readers?

ML: I have been the chair or a member of judging panels of many startup and innovation awards in the past few years. I am excited to see so many wonderful ideas and projects winning well-deserved prizes and funding support. Time and again, I saw some familiar faces coming back in front of me after a year or two, presenting yet another great idea and a new plan. I wholeheartedly admire their courage, creativity, and conviction. I look forward to seeing more young disruptors and entrepreneurs gathering their “CORE” spirits and strengths, and keeping Hong Kong a leading place for tech startups and innovative businesses for GBA and around the world. Keep trying, and we'll get there!

EH: There is nothing as difficult – or as rewarding – as being an entrepreneur. Before you start your own venture, make sure you have thoroughly studied the Dunning- Kruger effect. Understand where you are on the curve.