From air travel to bottled water to tech start-ups, entrepreneurial thinking is proving to be a positive force for change across the region.
Innovation has changed the world throughout history. Centuries ago, many highly valued inventions emanated in the East, ranging from silk to paper and porcelain to gunpowder. More recently, consumer-focused innovation has become commonly associated with US and European tech companies. Nokia, Apple, Microsoft, Google, Facebook, Tesla and Amazon are among the names to have devised products that changed the way people live their lives. But beyond the laboratories of Silicon Valley, innovation is turning full circle. Today, Asia is becoming a cradle for new inventions that are applied across the region, and around the world.
From Tokyo to Seoul, from Singapore to Bangkok, and from Shanghai to Taipei, Asia’s own cultural and technical diversity is shaping the development of new products and services. While Japan and South Korea have been at the forefront of Asian innovation since the 1950s, Indochina is again nurturing its inventive capacities and entrepreneurial South East Asian firms are incubating new solutions.
Both Japanese and Korea were forced to rebuild their economies entirely following the ravages of war. After developing lowcost manufacturing industries, ambitious companies in both countries later scaled the value chain to create and sell addedvalue products that became famous worldwide. Japan’s shinkansen bullet trains have impressed the world since the mid-1960s, but the late 1980s and 1990s were golden years for dynamic Japanese thinking and technical prowess. Sony’s iconic Walkman altered the way people consumed music, while Toyota globalized the concept of lean manufacturing.
In 1954, South Korea emerged from the bitter war that resulted in the separation of the Korean Peninsula. Its impoverished status was described as an “impossible country,” by author David Hudor. Korean leaders set to work at creating a technologydriven economy that would one day be able to compete both regionally and globally. Today, Korea is recognized as one of the most wired and technologically advanced economies on the planet, and companies such as Samsung and LG have been at the forefront of modern consumer technologies.
Japanese and Korean companies are facing new regional competitors, however – particularly from China. Fast-internationalizing brands like Haier, Huawei, Lenovo, Xiaomi and Tencent (owner of the multi-functional WeChat social network service) show that China is rebooting its innovative capabilities. According to a 2014 report published by the World Intellectual Property Organization (WIPO), China ranked first globally in patent applications, with around 700,000 being lodged by Chinese companies.
Many Japanese and South Korean companies are listed in the Thomson Reuters Top 100 Global Innovators list, but to further grow in competitive markets, significant investment is being channeled into R&D capabilities to create exciting new products and invent new business solutions. Robotics and specialized machinery, for example, are areas where highly defined competence is difficult to emulate. As the race to innovate heats up, North East Asia will be a hotspot worth watching in the coming years.
An acronym for Unique Human Adventure, UHA Mikakuto is a Japanese candy maker that specializes in producing and selling confectionary products, including milk and butter candies, fruit gummies, snacks and throat-care candies. Headquartered in Osaka, it has operations across Japan, including Tokyo, Sapporo, Sendai, Nagoya, Hiroshima and Fukuoka.
Facing strong competition from home and abroad, UHA Mikakuto has sought to become “extraordinary” in its industry. Yasumasa Yamada, President & CEO of UHA Mikakuto, stresses the innovative mindset of his company. “There is no single way to see something, and it is essential to be flexible for something new. That is why our company looks to new areas of innovation, where we can continue to delight consumers with fun and delicious food products,” explains Mr. Yamada. While many other players focus on portfolio renovation or creative marketing programs – which are easily replicated – UHA Mikakuto has approached innovation in a different way.
With geometric shaped doors and windows that create a futuristic look and feel, UHA Mikakuto’s Nara Factory evokes a science fiction movie. But beyond the aesthetic appeal is an unmatched technological strength and capability. Since 1958, the company has been committed to investing in advanced technological innovations to improve efficiency and reduce costs. The world’s fastest wrapping line for the “Tokunoh (high concentrated) Milk” candy produces 1,000 units a minute. Original thinking and optimized production methods have made it possible to lower costs on the “Gummi” production line. In addition, the factory is further complemented with smart resource planning and an information network that deals immediately with issues regarding inventory levels.
The UHA model encapsulates the Japanese approach to innovation. “Japan has very few natural resources, which is a blessing in disguise. People are constantly considering and reconsidering how they can use, succeed and renovate those resources spontaneously,” says Mr. Yamada.
For any organization, or any country or society, innovation begins with a 'mindset'. There needs to be an openness, a willingness to continue to move forward, to embrace change and to find and develop better, more efficient solutions in order to grow and improve.John Riady, Executive Director, Lippo Group
While emerging South East Asian nations, such as Myanmar and Cambodia, are coveted low-cost manufacturing options as costs rise in China, countries like Singapore, Malaysia, Thailand and Indonesia are producing inventive start-ups and SMEs that eschew the region’s old reputation for producing “imitations of the West.” Previously, innovations in the region were productcentric, but in an environment where globalized competition is generating new creative frictions, lateral thinking is being applied in service delivery.
Founded in Malaysia in 2001, AirAsia is a blue-ribbon example of a modern, entrepreneurial South East Asian company. Even though the low-cost carrier (LCC) business model had been proven in Europe and North America, the concept was largely unfamiliar to Asia. Faced with this challenge, company founder Tony Fernandes and his team decided to challenge conventional thinking.
“We made a lot of bold moves from day one. We ran promotional campaigns that were unheard of, partnered with global brands like Manchester United and never adhered to the status quo. In the early days we commissioned a local artist to come up with comic strips to educate the market on the LCC business model,” says Tony Fernandes. “Everyone thought we were crazy at first, but it didn’t take long for people to embrace AirAsia and what we have to offer.”
Put simply, AirAsia revolutionized air travel in South East Asia. Today, LCCs in the region account for more than half of total flight capacity, compared to 30 percent in North America and 37 percent in Europe. But the innovative impact of AirAsia reaches further. AirAsia’s success encouraged other LCCs to grow and expand transregionally, and it empowered a new generation of aspirational travelers to fly to destinations that previously were out of their price range, or on routes that did not even exist.
“I am truly humbled by the amount of international recognition AirAsia has received over the years, but it’s a testament to our guests embracing our brand. Innovation is in our DNA and we will continue to disrupt the market whether it is through our new products or services,” says Tony Fernandes.
Beyond the aviation industry, the climate for innovation in South East Asia looks promising. Much of the innovative spirit is rooted in young start-ups, striving for their piece of the pie. TechinAsia.com noted that 2014 was a “blockbuster year for start-up investments,” as venture rounds crossed the USD 10 million barrier. However, money is not just flowing into the region, South East Asia is also incubating its own resources.
“The amount of talent and energy that is coming from this part of the world is very encouraging. I just launched a start-up incubator and accelerator program with my partners. Our hope is to identify, mentor and fund entrepreneurs across South East Asia, and to encourage more innovation and growth,” says Tony Fernandes.
Premium brand innovation in Indochina
In 2008, India’s Tata Motors made headlines when it launched Tata Nano, proclaimed as the world’s cheapest car. This low-cost, low-price car seemed a natural fit to the demands of young, aspirational consumers in a rapidly developing auto market. But such a pricing strategy can quickly become obsolete as consumer spending power changes. Sales of the Tata Nano flopped. In 2015, Tata introduced the redesigned, higher priced Tata Nano Gen-X with extra features and a focus on comfort and style, rather than simply price. Its previous experiences with the low-cost Nano, however, provide a salutary lesson about the unpredictability of consumer behavior in fast-developing markets.
Aligning market opportunities and efficient delivery is not a simple premise. Bernard Forey, Chairman & CEO of Kulara Holdings in Cambodia, is an entrepreneurial visionary who has founded several businesses in different industries across South East Asia. A true believer in the powers of market observation and opportunity spotting, Bernard Forey’s latest project is Eau Kulen, a premium natural mineral water sourced in Cambodia. It is, he admits, a rather unusual proposition – but one that underpins the value of entrepreneurial valor.
“I have been involved with four mineral water businesses in Asia. When I looked at the market, imported waters from France and Italy dominated, but very good spring waters could be found in Cambodia. And nobody had created a local branded water. It was an opportunity that interested me,” says Bernard Forey.
A previous venture, La Vie mineral water in Vietnam, laid the groundwork for Eau Kulen. Partnering with SIPA, Italy-based global leader of stretch-blow molding machines, the French businessman was on route to supplying a gap in Cambodia’s premium water market.
“The product we have created is very good, as good as Evian for quality,” says Bernard Forey. “We want to prove that you can produce a high-quality water in Cambodia, and then maybe sell it into other markets in Asia.”
Ten years ago, the idea of producing a luxury water brand in Cambodia would have seemed inconceivable. But Eau Kulen’s success is a reminder about the capacity of emerging markets to diversify. In an era of unprecedented change, innovation can take many forms – but, as ever, customer desires and needs must remain the driving factor.
A bright future ahead
Asia’s appetite for product and service innovation is growing, but numerous challenges exist. The difficulty of marrying technical development and innovation with commercial infrastructure, education and a culture of risk has been cited as a barrier to innovation in Indonesia. Despite these challenges, John Riady, Executive Director of Indonesia-based Lippo Group, believes the outlook is positive.
“Some cultures have a starting point that makes them more conducive to innovation, perhaps because they are more used to risk taking in business or are more tolerant of failing and starting again. But this is not a static status quo. We can change, and in fact are, changing that,” says John Riady.
Young, hungry minds are triggering Asia’s new attitude towards business transformation – both at home, and with an eye on broader horizons. “The default nature of organizations is to be un-innovative, to become too comfortable and to remain in a comfort zone – especially when things are going well,” says John Riady. “It sometimes requires a deliberate intervention to remind people of the instant need not just to embrace change but to affect it as well.”
The catalyst tends to be younger people. “If you speak to graduates today, they are tech-savvy, they want to create, they want to innovate. They don’t accept that they can’t do their own thing. In Indonesia, this is very evident,” says John Riady. “Young people see examples of success at home and abroad, and it inspires them. They are engaged with technology, and they use multiple platforms in many things they do.”