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Savantas Technology Policy R.4


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Technology Policy for Hong Kong

Technology Policy for Hong Kong

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    • 1. Technology Policy for Hong Kong Drafted by Al Kwok Founding Member & Governor Savantas Policy Institute
    • 2. Mission
      • Promote Hong Kong’s transition into a knowledge-based economy
      • Facilitate successful transformation of OEMs to:
        • ODMs through systematic “Intellectual Capital Management (ICM)”, “IP Portfolio Development (IPPD)” and “IP Right Protection (IPRP)” – in a corp. culture of continuing innovation
        • OBMs through proper brand differentiation, promotion and protection
      • Promote broad-base adoption of IT applications for quantum jumps in productivity gains (as in Silicon Valley)
      • Promote orderly and synergetic integration of Hong Kong high-tech development efforts into PRD’s regional and China’s global efforts
        • Promote rapid development of complementary core competency in Hong Kong with respect to Greater China market
        • Assist Hong Kong’s high-tech SMEs to serve Mainland markets
        • Create the catalytic efforts to strengthen the ecosystem
    • 3. The 2 Key Paradigms on Global Competitiveness
    • 4. Global Competitiveness
      • Paradigm #1: Ranking of value creating activities
        • Intellectual property (IP) creation is top of the list of value-added activities for knowledge-based society .
        • IP creation (innovation) is based on new applications and new standards .
        • Savvy companies focus its primary resources on IP creations in their core competency areas and outsource less value-added activities like manufacturing & back-end designs.
      • Paradigm #2: Value/demand chain management
        • Customers decide market success of any application.
        • Customers demand complete system-level turnkey solutions .
        • Earlier time-to-mass-production requires closer collaboration along the demand/supply chain .
    • 5. The Value Hierarchy (B.M.) Values/Profit Margins Applications (Mkt. & Standards) System Integration (Archit., …) Engineering (Design, ODM,..) Manufacturing (Process, OEM) Intellectual Property (IP) Outsourcing Trend Consumer recognition Core competency 50% 40% 30% Brand Innovation
    • 6. The Value Hierarchy – Rule #1
      • A corporation defines its profit-making potential by the activities upon which it focuses its key resources.
        • <30% PM (profit margin) for contract manufacturing (OEM)
        • <50% PM for ODM with little IP leadership
        • >50% PM for an IP leader setting a de facto standard
      • The two curves along Core Competency axis (based on Innovation ) and Customer Recognition axis (based on Brand ) form the wall of the bowl holding the potential profit
        • Lowering of either curve will let the potential profit escape
        • In order to achieve high profit (like “Wintel”), a corporation must focus its resources mainly on strengthening its core competency with differentiating IP generation and promoting customer recognition as the leading brand .
    • 7. IP for Commanding Mkt. Position
      • IP defines the ownership of any market territory and one’s position along a product/service food chain:
        • Dell and Compaq/HP dominate PC market
          • Protected by their IP portfolio (brand, patents, know-how, etc.)
          • Controlling the Market/Customer Channels
          • Sitting on the top of the PC food chain
          • Striding to outsource their manufacturing & design work
        • Taiwan manufacturers as manufacturing partners
          • Providing low-cost manufacturing supports (open book for audit!)
          • Managing the logistics for 48-hour global ship-to-order end-customer delivery
          • Financing the WIP and buffer inventories at multiple manufacturing sites world-wide
          • Responsible for all RMAs and replacements to consumers
          • Funding the BRAND (IP) OWNERS ’ businesses, with much lower profit margins (actually <10% gross margin) in return!!
          • At an inferior position along the PC food chain
    • 8. The Value Hierarchy – Rule #2
      • IP development is based on applications
        • Good IP reflects high MARKET VALUES
        • Proper IP portfolio => dominance in a specific appl .
          • “ Wintel” in personal computing; TI in DSP
          • eBay in on-line auction and trading
      • New standards < = new applications => new IP
        • New applications <=> new system integr. (SI) reqmts.
        • New applications => new SI/application know-how
        • New applications => new IP & patent applications
        • New applications => new landscape for competition
          • The crowning of new top suppliers
    • 9. The Value/Demand Chain IC H/W Platform IC S/W Platform (API, drivers, etc.) System Application Platform(s) Generic Reference Design (w/ other chips) Differentiated Application Designs Various Applications/Services Consumer Markets (End Users) IC Design houses System Integrators Service Providers For Consumer Electronics Market System Manuf.
    • 10. Example – Cellular phone
      • Rapid market development to maturity depends on close collaboration among value/demand-chain
        • IC design houses -- component suppliers
          • Components: Base-band, media processor, CMOS sensor…
          • Provide the basic H/W & S/W building blocks
        • System integrators – either in-house or 3 rd parties
          • Integrate the components from various sources (suppliers) to build a turnkey solution – incl. H/W, S/W, middleware, appl.….
          • Develop the necessary applications (features) for end-users
        • System manufacturers – handset makers
          • Make the device meet the consumers’ and service providers’ requirements
        • Network service providers – mobile network operators
          • Provide the network communication platform
        • Value-added service providers – applications & services over the network
          • Provide services to any consumer for specific applications
          • Provide the overall VALUES to consumers
    • 11. Value Proposition for System Suppliers
      • Create a self-nurturing ecosystem (to be self-growing) – similar to Intel’s and TI’s “Developer Communities”
        • Provide complete system-level turnkey solutions ASAP for the targeted applications/customers
        • Accelerate time-to-market and time-to-mass production ( profitability )
        • Realize ROI within the earliest possible timeframe
      • Leverage others’ resources along the demand/value-chain by forming a consortium of (1) hardware/IC makers, (2) system integrators, (3) system manufacturers and (4) service providers to collaborate up-front to proactively address all the system integration issues in a well-coordinated manner . 
        • System function requirements
        • H/W, S/W and middleware interface and application requirements
        • Manufacturability and testability issues
        • Field deployment environment , etc.
    • 12. Competitive Landscape, Evaluation & Recommendations
    • 13. Hong Kong’s High-tech R&D Efforts
      • HKITC (Innovation & Technology Commission)
        • Progressively realign Hong Kong’s government-funded R&D efforts for PRD manufacturers’ needs
      • Science Parks – providing cluster effect and servicing platforms
        • HKSTP – focusing on electronics, IT, bioscience & precision engineering
        • Cyberport – focusing on content creation & software application developments
      • Top Universities – conducting researches and training
      • R&D Centers – to foster industrial collaboration to address near-market R&D issues
        • HKASTRI – 1 st government funded R&D center
        • 5 other R&D centers – LSCM, Nano, ICT, APAS, Textile
      • HKTDC (Trade Development Council)
        • Facilitate broad-base alliances to promote cross-border high-tech business developments between Hong Kong and Mainland
    • 14. Hong Kong High-Tech Collaborations
      • “ 7+1” arrangement with MST
        • Framework to facilitate collaboration between HKSTP and China’s 7 National IC Design Bases
      • Shenzhen’s close collaboration with HKSTP & HKUST
      • Hong Kong Mainland Software Industry Cooperation
      • GCSIPTC (SIP Servicing & Trading) project collaboration
        • HKUST, HKSTP, CSIA, 863/MST, CSIP/MII, etc.
      • 3 MOUs on IC/IP-related collaboration
        • “ GCSIPTC project” among HKSTP, CBSIA, TSOCC & CASPA
        • “ GCICDAP” alliance among HKSTP, CBSIA, BICDB & CASPA
        • “ GCSIPTC project” among HKSTP, CBSIA, FSA & CASPA
      • China Special Interest Group between China SIA (semi.) and VSIA to promote SIP Reuse & Standardization
        • HKSTP and HKUST are members
    • 15. Hong Kong’s Key Differentiation
      • One-country-two-systems flexibility (yet to be explored)
      • Legal system
        • Well-respected common-law based legal system
          • Presumed innocence and entitled to due process
        • Well-respected Hong Kong International Arbitration Center
      • Financial system
        • Well-established international financial infrastructure
        • Internationally recognized security exchange market (IPO)
        • Anti-corruption is the norm
      • Freedom of movements
        • Free entry (no visa needed) & world-class transportation hub
        • Free port (no duty) & world-class logistics center
      • Free access of information
        • Free flow of information (no artificial firewalls)
        • Content creation with virtually no censorship
    • 16. Opportunities – Market Aspects
      • The next 2 decades is the expansion phase of Information Age where content creation and content/service delivery are drivers of growth
      • Developments of platforms and ecosystem for content creation and delivery are highly valued propositions
        • Interactive multimedia content mass-creation capabilities
        • Mobile multimedia mass-delivery know-how
        • proper business model to make that some recurring service
      • Real-time vital data acquisition and analyses to predict customer behaviors are critical links to CRM (key to win)
        • RFID-enabled real-time tracking and data acquisition
        • Massive data filtering and analysis capabilities
        • Convert data into valuable business intelligence as a routine
      • China is booming and consumer power is growing. China consumers value differentiating services and provide large enough customer base to drive down the unit cost and increase the cumulative profit.
    • 17. Implications & Mutual Understanding
      • Mainland acknowledged Hong Kong’s legal system is more suitable for IP protection, servicing & trading
      • Hong Kong’s high-tech development efforts are regarded as integral parts of PRD’s regional and China’s global efforts to establish a FAVORABLE ECOSYSTEM to foster SUSTAINABLE SELF-ENRICHING high-tech developments
      • Resource sharing and COMPLEMENTARY core competency developments are the bases for long-term win-win collaborations between Hong Kong and Mainland
      • United for a better future of PRD : Hong Kong and its close mainland neighbors understand they should be partners instead of competitors
    • 18. Savantas’ Recommendation
      • Take full advantage of Hong Kong’s unique differentiation – play to HK’s strength
      • Complement the efforts by Hong Kong & Mainland R&D centers – seek synergy
      • Collaborate with Mainland’s IT business development efforts – fit into the big picture
      • Focus Hong Kong’s new effort to develop true LONG-TERM CORE COMPETENCY vital to China’s growth – build to last
    • 19. Savantas Technology Focus Areas
      • (1) Intellectual capital management (ICM), IP portfolio development (IPPD) & IP right protection (IPRP)
      • (2) Software business development:
        • (A) Web-based application services (for China market)
        • (B) Software outsourcing (especially BPO) to HK/Mainland instead of India (for US & EU market)
      • Content creation and delivery
        • Consumer: (3) Mobile multimedia e-services
        • Corporate: (4) RFID-enabled applications
      • (5) “Green” technologies: environmental & energy conservation
        • To be a responsible “GLOBAL CITIZEN”
    • 20. ICM, IPPD & IPRP
      • The supreme methodology for a company or country to achieve continuing innovation and technological and market dominance:
        • ICM (Intellectual Capital Management):
          • The vital CORPORATE culture and system necessary for continuous improvement of one’s DOMAIN KNOWLEDGE & Core Competence (including the interdisciplinary areas) within the chosen competitive landscape – “the domain”
        • IPPD (IP Portfolio Development) – offensive strategy:
          • IP strategy to expand one’s dominance over the chosen competitive landscape – spreading the influence
        • IPRP (IP Right Protection) – consolidation strategy:
          • IP strategy to secure one’s IP Rights (claimed monopoly) in one’s occupied market territories – defending one’s ground
    • 21. Green Technology Focus
      • There are many profitable business opportunities to transfer the know-how in the following 4 “Green” areas for China market and feel great about it.
        • Land and Resource Management
          • China needs this badly with poorly-managed land and water resources
        • Industrial Pollutions and Clean-up
          • Definitely PRD needs this
        • Energy Conservation and Alternative Energies
          • We all need this. Hong Kong should take the lead.
        • Applications of Emerging Green Technologies
          • We need to monitor and understand the future trends.   
    • 22. Savantas’ Vision for Hong Kong IT Development
    • 23. Information Age
      • Information Age (the age of knowledge-based society) is built on 3 successive global platforms:
        • 1) Hardware platform that is mass-affordable
        • 2) Network platform that is universally accessible
        • 3) Content/service platform that enables experience sharing
      • Hardware platform means electronic devices…
        • A vast network of electronic devices covering access (personal access devices), edge and core levels
        • Made mass-affordable with semiconductor technology (scalability of CMOS)
      • Network platform for global internet (Internet Protocol-based) connectivity
        • Information highways, storages & traffic management
        • Enable information-sharing for anybody anywhere anytime
      • Content/service platform for experience sharing
        • Application service providers (ASP) for corporate clients
        • Content providers for various consumer markets
      • IT (Information Technology) is the technological and associated business process engineering (BPE) know-how to optimize the interactions among the 3 platforms for valued service deliveries to consumers
        • Technology being disruptive in nature drives business process re-engineering for competitive advantages - that’s change!
        • The shorter the technology/product lifecycles as fuelled by scalability of CMOS (the first cause on the supply side), the quicker the business process re-engineering cycles will be for better services (the first cause on the demand side)
    • 24. IT Business Areas & Opportunities Moore’s Law and Metcalfe’s Law (acting on H/W and Network Platforms respectively) are fuelling on-going IT systems re-engineering for global improvements (changes) like magma shaping earth’s crust’s movements High-valued services with good business potentials Network environment given (by providers) or to be set up Data mining from public domain to add values Factors given or to be used “as is” – not to reinvent H/W components S/W & F/W Network Platform System (H/W) Platform Network Services/environments: Internet, cellular, WiMAX System Integration Protocols & Interfaces (Open stds. for reuse?) Content Layer Service Platform CRM, ERP, POS, etc. Applications (ASP) Consumer Services Public Domain Company Proprietary Bus. Domain Knowledge Instructions & Interfaces New ICs and Devices every 18 months or less
    • 25. Explanations about the Diagram (1)
      • H/W and System platform
        • Use H/W and systems available in the market
        • Too late to enter the market and be competitive
          • Taiwanese manufacturers dominate in consumer market
        • Too costly to build the manufacturing infrastructure
      • Network platform
        • Use available technologies in the market – little R&D
        • Focus on mobile wireless networks for fast growth
        • 3 types of network platforms for business development
          • Open consumer platforms – owned by Telco
          • Open industrial platforms – area for creative approach
          • Proprietary close-systems for internal uses
    • 26. Explanations about the Diagram (2)
      • Service platform
        • ASPs (Application Service Providers) to address SMEs’ and OEMs’ needs
        • System integration know-how for cost advantages
        • Embedded S/W and F/W to protect against piracy and secure customer loyalty
      • Content platform
        • Extract useful database from open (public) domain
          • E.g., map, directories, reviews, pricing info., etc.
        • Assist clients to gather valuable (proprietary) CRM and POS data systematically through RFID applications
    • 27. Mainland IT Market Characteristics
      • Customers’ preference
        • One-stop turn-key service with full accountability
        • Pay-for-usage and no up-front large license fee
        • Productivity gain > the cost (pay for itself)
        • Free trial run (without charge)
        • No need for in-house IT supporting staff
        • Zero maintenance and upgrade costs
      • Providers’ preference
        • IP protection – no disclosure & piracy
        • Control marketing and supporting costs
        • Secure customer loyalty and expand business
    • 28. Business Model for Web-based ASP
      • Provide “one-stop turn-key” service
      • Proprietary know-how differentiation
        • S/W+H/W system integration know-how
        • High-valued data analysis/report services
          • Itemized monthly service charges
      • IP leverage (crucial factor)
        • Patented IP for barriers against competition
        • “ License” S/W for monthly services instead 1-time sale
      • Pricing strategy
        • One-time customization NRE (set-up) charge
        • H/W (easy to obsolete) pass-on with mark-up
        • Monthly service charges
          • For rights to use proprietary web-based application S/W
    • 29. Content Creation and Delivery
      • Areas of focus/expertise development
        • Mobile multimedia e-Services
        • Real-time CRM/POS (RFID-enabled)
      • High profitability through IP leverage
        • Protected high-value service revenues
        • Secure “long-term” mission-critical service contracts
      • Service portfolio/platform
        • Broad service portfolio for client dependence
        • Multiple recurring service revenue streams
    • 30. Service Portfolio/Items
      • To be provided as itemized services within a portfolio
        • Top priorities (high value-added)
          • CRM, POS, operation backbone for franchise chains
        • Second priorities
          • Content providing, mobile services, security monitoring
        • Third priorities
          • IT outsourcing, logistics/ERP, global data backup
    • 31. Network Platforms
      • Must be mobile
        • Internet: WLAN / WiMAX
        • Cellular: 2.5G compatible
          • GPRS-compatible: GSM/CDMA
      • Must be capable to enable multi-media interactive services
        • Targeting at mobile personal devices
        • From text-based “short message services” to true Mobile Multimedia Services
    • 32. Hong Kong as e-Service Launch Site
      • Hong Kong’s unique advantages
        • The most mature logistics and global servicing hub with “global mindset” in China
        • The best place to:
          • integrate the advanced Western know-how into some e-Service platform,
          • refine for Hong Kong/Mainland customers’ needs (local customization),
            • develop IA (Intellectual Assets) & protect with IPR
          • test market in Hong Kong and PRD
          • and then proliferate into other Mainland cities
    • 33. Savantas’ Core Focus Areas
      • As a think tank dedicated to policy studies for HK’s transformation into a knowledge-based economy, Savantas’ core focus areas are:
      • Technology & Innovation
        • The know-how and skill-sets for value & wealth creations for lasting mutual prosperity in peaceful coexistence
      • SMEs -- as innovators creating value & wealth for the society
      • Education
        • On-going knowledge acquisition to stay productive and world-class
      • Middle Class
        • As the leading force of a knowledge-based society
        • HK as an example for China to develop its Middle Class society
      • Social Policy -- to establish a favorable socioeconomic ecosystem for a knowledge-based economy based on merits & choices
      • Political Development
        • Developing a favorable ecosystem for the convergence of one-country-two-systems into a new one with shared identity and vision for a harmonious advanced Middle-Class society ( 小康社會 )
    • 34. Savantas’ Vision on Software Outsourcing to Hong Kong/Mainalnd
    • 35. Opportunity to Compete with India
      • India’s position as the indisputably best place for software outsourcing is eroding
        • Response time, quality of services (QoS), trade secret protection, high turn-over and overall cost control are major problems
        • US corporations are looking for alternatives where they can have better controls and QoS
          • Hong Kong’s common-law legal system can provide great comfort
          • PRD as the largest China consumer and IT market is a good reason to be close-by for better CRM & POS supports
    • 36. HK/SZ Joint Advantages (vs. India)
      • Leverage 1-country-2-systems advantages by combining the best of both Hong Kong and Shenzhen (Mainland)
      • Advantages that Hong Kong can offer
        • Common-law legal system (same as or better than India)
          • Presume innocence, due process, transparency & anti-corruption
        • Trade secret and IP protection (better than India)
        • ICT infrastructure and international logistics center (much better)
        • World-class financial service infrastructure (much better)
        • Project and Customer Service management (same or better)
        • Freedom of movement -- no visa req. / international access (better)
        • Free flow of information -- little censorship & no artificial firewall
      • Advantages that Shenzhen can offer
        • Large low-cost and stable ICT engineer pool (better than India)
        • Best market-entry and design-in site in China (no match in India)
      • A SEZ (Special Economic Zone) should be set up on HK side of the HK/SZ border to realize these joint advantages