Monday, 9 May 2011

Let us give innovation a new meaning

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

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

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

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

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

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

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

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