Feature Stories

14.10.2019

Driving Innovation

Universities are the most effective and productive source for driving basic innovation in a broad sense, says Nicholas YANG, the Secretary for Innovation and Technology. While Hong Kong benefits from some of the best universities in the region and the development in the Greater Bay Area, the city will have a bigger role to play.

Five years ago, the Hong Kong entrepreneurial ecosystem had little to show for itself. It was easy for critics to say that Hong Kong had fallen behind other cities, and that the few thriving startups were isolated successes that were not supported by a robust ecosystem.

Today, the picture has changed as reflected by some key indicators. In 2014, Hong Kong had no unicorns – defined as companies with a valuation of US$1 billion or more. By 2018, there were eight unicorns in Hong Kong. In 2014, Hong Kong had just 22 co-working spaces, but this number had increased to over 90 today. In 2014, the amount of venture capitalist (VC) investment in Hong Kong startups was HK$1.27 billion. By 2018, this number had increased 14 fold to HK$17.8 billion.

Startups achieve double-digit growth

The figures regarding venture capital funding are the most telling, says Nicholas Yang, the HKSAR Government’s Secretary for Innovation and Technology. “We [the government] cannot tell VCs to invest more. They are willing to invest because of the improving deal flow in Hong Kong,” he says. “We have some of the top global VCs in the city. This is because our startups have achieved double-digit growth, and moreover, that growth is quality growth.”

The Innovation and Technology Bureau (ITB) was formed by the HKSAR government in 2015. Yang is the first minister of innovation and technology to serve in Hong Kong.

Yang and his team at the ITB have launched many initiatives to encourage venture capital co-investment, promote STEM (Science, Technology, Engineering and Mathematics) education, and to incentivize research and development.

The latest initiatives include to promote innovation within the government. A Smart Government Innovation Lab (‘Smart Lab’) officially opened in May. The Smart Lab serves as a platform for government departments to explain their problems and needs. In response, the Smart Lab invites local innovators to explore and build solutions. Yang calls the Smart Lab an “ecosystem builder”.

The government’s procurement system no longer prioritizes price over innovation. Instead of awarding projects to the lowest qualified bidder, the new procurement methodology gives more weight to innovative technological solutions.

“This is a change of mindset,” Yang says. “We are willing to pay more for innovation – one of the ways to promote innovation.”

Areas of highest growth potential

Yang says there is much more to be done. He has identified the four areas which have the highest growth potential for the Hong Kong ecosystem: healthcare, artificial intelligence (AI) and robotics, fintech, and smart city initiatives. There is a local or global need to be addressed for each of these areas, and Hong Kong has the strength to help address that need.  

Hong Kong and other advanced economies in Asia, have an aging population and a shrinking workforce. Currently, the median age in Hong Kong is 44. This drives the need for innovation in the healthcare sector, as well as the demand for service robots that leverage artificial intelligence, Yang says.

“In the near future, over half of our population will be over 50 years old,” Yang adds. “A different kind of healthcare needs to be developed for the population. This is a daunting task.”

A vision for the future

Yang’s vision for Hong Kong’s future includes new economic sectors which feature innovation. He thinks new sectors could evolve from the four high-potential sectors. It could also result from other technology-driven sectors, such as e-sports, which is a high-growth segment in digital entertainment.

“In five years’ time, I hope you will see one or more new economic sectors accounting for three to five per cent of our GDP,” Yang says.

The future of Hong Kong’s tech ecosystem is determined by many different stakeholders, notably by the entrepreneurs themselves. Yang wants Hong Kong entrepreneurs to explore opportunities in building standards and platforms for emerging technologies.

“If you can build a standard, everybody will follow you. If you build a platform, a lot of people are going to depend on you,” he says. For instance, the implementation of 5G Internet of Things (IoT) will require new standards and platforms, Yang notes.

Yang stresses that entrepreneurs need to be fearless in the face of challenging problems.  

“I encourage entrepreneurs to continue to think out of the box,” he says. “Don’t avoid the most difficult problems. If you can solve one or two of the most difficult problems, think about the difference you will have made.”

“People tend to say, go for the low hanging fruits. But innovation and technology are about solving the most difficult problems,” Yang says.

 “Innovation and technology are about solving the most difficult problems.”
Nicholas Yang, Secretary for Innovation and Technology, Innovation and Technology Bureau

About the Innovation and Technology Bureau

  • Established by the HKSAR Government in 2015
  • To develop Hong Kong into a knowledge-based economy and an innovation hub for technology and its application in the region