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The Innovation Partnership Program

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Can innovation and entrepreneurship be taught? Does Vietnam have the ability to produce innovative and high growth companies to take on global markets? Are there people here who have the time, talent, and commitment to make an impact in the Vietnamese ecosystem?

The governments, donors, and people behind the Innovation Partnership Program (IPP) certainly believe so and with good reason.

Well, what is the IPP?

According to the IPP website:

“Innovation Partnership Program (IPP) is an Official Development Assistance (ODA) program financed jointly by the Governments of Vietnam and Finland. IPP is in its second phase running through 2014-2018.

Working closely with key national and international partners the program aims to scale up innovation training in Vietnam and improve support mechanisms for new innovative companies targeting international markets. Besides providing seed funding and connections for the best teams in Vietnam, IPP builds the capacity of public and private stakeholders through entrepreneurship and innovation training programs.”

The IPP focuses on three different but related areas: developing people, developing companies, and developing the ecosystem.

The Fellowship Program will develop future business leaders and entrepreneurs in Vietnam who will then lead the Fast Track training for the New Innovative Companies.

The New Innovative Companies component will help high growth Vietnamese companies bring a product or service to the global marketplace via Fast Track training and expense reimbursement.

And finally, the IPP will work with Innovation System Development Teams by providing funding for organizations that will raise standards, develop new resources, and positively impact the entrepreneur ecosystem in Vietnam.

In short:

“IPP supports Vietnam’s overall goal of becoming an industrialized middle-income knowledge economy by the year 2020. The program objective is to boost sustainable economic growth in Vietnam through the increased production and export of innovative products and services.”

One can think of the IPP as a pilot program, leading the way for other actors in the local ecosystem to continue on and influence the course of Vietnam’s entrepreneur development from a global perspective. The IPP is currently in its second phase; the conceptual portion started in September and the implementation phase has been ongoing since December. The Fellowship program is scheduled to begin around April, 2015.

The Innovation Fellowship Program

The Fellowship Program will consist of 20 fellows who will be trained by top international and local talent. The fellows will focus on innovation entrepreneurship, and once trained (over the course of two months), they will lead the Fast Track Training (six months) for selected new innovative companies. Trainers from Silicon Valley and other startup communities will come to Vietnam and work with the 20 motivated young people.

In addition to the fellowship requirements, the fellows will be selected on the basis of two primary criteria:

  1. Can they learn how to be entrepreneurs and innovators?
  2. Can they take best practices from the fellowship program and teach others?

In other words, do they have the capacity and attitude to make an impact after graduating from the fellowship program?

The fellowship requires a 40 hour per week commitment and will consist of some classroom and about 80% field work. Fellows will spend most of their time figuring out what customers need and how to find/create value in fulfilling those needs. Each week, the fellows will cover a new framework and ultimately practice and reinforce the learned concepts by the end of the week. The fellows will each receive a $1,000 allowance per month for duration of the fellowship program; the goal is to focus and train a core group of people to have all the tools necessary to create successful companies in Vietnam.

The IPP is currently seeking two local trainers who, if selected, will receive two weeks of training at Stanford University in the US, in addition to a highly competitive salary for the two months of training.

New Innovative Companies

Innovation, high growth, global; these are the words used to describe the kind of companies that the IPP is looking to fund, and eventually, is looking to see created here on a consistent basis.

The New Innovative Companies to be selected will be held to milestones and operational requirements for the duration of the program. The IPP will restrict what funding is used for (which is intended to be used on salaries and training related to development) and will cover only up to 70% of total expenses incurred by the new innovative companies. If people within the new innovative company are being paid, or external consultants are used, then the fees and services must be directly related to business activities. Thus, the new innovative companies will need to show accounting records, show payroll stubs, and show that a bank transfer took place or that the fees were paid out accordingly.

Once new innovative companies are selected, they will be injected into the six-month Fast Track Program (led by the Innovation Fellows) which will culminate in a demo day with the hope that 20 or so investors will be present and ready to look at each new innovative company for potential investment. The IPP does not to take any equity share in exchange for funding (because ODA requires it). Also, there will be no corporate governance oversight by the IPP for the new innovative companies. However, the IPP will have the power to remove teams, whether it’s because of a violation or if it’s clear that a new innovative company won’t be ready to present a compelling final pitch when the fast track training is completed in December 2015 or January 2016.

Innovative System Development Team

Local or international companies that want to be involved in Vietnam’s entrepreneurship ecosystem transformation can opt to form a consortium and submit their plans for developing specific new parts or for enhancing existing parts.

According to the IPP website:

“IPP’s grants are for covering 70% of internal and external human resource costs related to the innovation project. The first phase grant is approx. €50,000 [approximately 1.2 billion VND]. The most successful teams can receive an additional grant of maximum €200,000 [approximately 4.8 billion VND].

The potential content of the projects may include, but are not limited to, development of a new incubator, creation of new services for existing incubators, planning of a new funding program in the province, adding startup services to existing technology park or initiating a regional cluster growth program.”

To that end, expansion and funding activities, and, most importantly, imagination will be critical to finding new ways to leverage the funding to provide new resources to aspiring and dedicated Vietnamese entrepreneurs.

What’s Ahead for the IPP

February 23 is the deadline to apply for the Fellowship Program, but there is no set deadline to submit an Expression of Interest for the New Innovative Company and Innovation System Developers portions. In the longterm, IPP seeks to train individual people—not just companies. The real value of IPP is in developing people–the human talent–and getting them to share their newfound knowledge with others. Building teams takes time, and even longer to reach the point of creating high-growth companies so things won’t change here overnight, but the program is a great opportunity to head in the right direction.

One huge part of the challenge ahead for all those involved with the IPP is creating a proper technical vocabulary in Vietnamese, and in the long term, a cultural shift for attitudes toward entrepreneurship and innovation within the training programs. While the IPP has a fund amount of approximately $10 million—and it will certainly go further in Vietnam than elsewhere in the west—it will be the people on the ground, in the training sessions, and taking risks to create something great who will show the world just what’s possible in Vietnam.

The crowd at the AMX Seminar at the Hanoi Daewoo Hotel on December 3, 2014.

Building a Brand in Vietnam

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Building a successful brand in Vietnam (or anywhere) requires having a clear idea of local consumer (and by extension, social) norms, trends, and perceptions (i.e., market in general) in addition to understanding the local, regional, and national cultures for successful positioning in a country. Yes, conspicuous consumption exists here in Vietnam but for many brands, simply copying and pasting a western marketing campaign won’t work beyond luxury brands that convey a sense of status to those around the targeted consumer. Sometimes, understanding a market means a change in mindset.

This week we are taking a look at three modern scenarios: the first, a globally known brand seeking to capture market share in Vietnam; the second, a local brand growing domestically (and which could eventually lead to the third scenario); and the third, a local brand entering foreign markets (which will most likely increase in the future). We’ll also explore some potential ways forward for Vietnamese companies in the future.

Global Brand to Local Market

Earlier this month, we were invited to the first ever AMX Seminar in Hanoi, which was followed up by a similar version a few days later in Ho Chi Minh City (HCMC). The audience in Hanoi was primarily comprised of 20-30 Vietnamese Systems Integrators (SI) with less than five foreigners in the audience. After the half-day presentation, we were asked to give feedback on the potential for the AMX brand in the Vietnam market and how to improve service and support overall.

In short, the event was a solid step toward establishing the AMX brand in Vietnam but it won’t be an easy win in this market as Crestron, Savant, and Extron are all available here as well—not to mention local and/or less expensive offerings. So, there’s definitely opportunity for AMX (and any technology brand) to establish itself as a market leader and ride the growing economic wave here—but it will have to be in a personalized manner that resonates with Vietnamese stakeholders and/or expat decision makers.

These technology brands don’t have counterfeit and quality issues to deal with because their products are sold through authorized dealers and country distributors. For other industries, such as cosmetics, there exists a trust deficit: how do local consumers know the products that they are buying are authentic? Thus, consumers prefer hand-carried cosmetic items from trusted friends or associates who are traveling to Vietnam from more developed markets such as Hong Kong. After all, skin and eye products are the ones that you don’t want to be cheap on.

Local Brand to Local Market

Another company that is building a (completely) new brand here in Vietnam is Emigo, which is owned by VinFashion of Vingroup. The Emigo brand was launched earlier this year and it already has two open locations including Vincom Center Ba Trieu and Vincom Mega Mall Times City. Approximately four additional locations are slated to be opened throughout Hanoi in the near future.

The Emigo brand has the potential to make an impact on the fashion scene here since its offerings are more affordable than brand name imported clothing lines (its designs are similar to Zara or H&M) and there is always an element of national pride in buying from a Vietnamese brand. It remains to be seen how the Emigo brand will be built domestically but for sure Vietnamese shoppers will want to inspect the materials and quality of the real products for themselves before deciding whether or not to buy into the brand.

If Emigo can resonate with local consumers then it might be able to build momentum here and expand abroad—if those are indeed the plans that VinFashion has in store for the brand. Still, could we see Emigo products in western stores one day? If so, then perhaps the clothing label will read “Created in Vietnam” in addition to “Made in Vietnam.”

Local Brand to Global Market

Brands coming into Vietnam have the advantage of prestige and case studies in western markets—but what about the reverse situation? How would a Vietnamese brand fare in the global marketplace? When foreigners hear “Vietnam,” what is their impression of Vietnam, i.e., what is Vietnam to them? And, what is Vietnam known for globally? These are all questions that Vietnamese brands looking to go abroad will have to find the answers to in order to enter new markets in the most efficient way possible.

A Vietnamese client recently told us that they wanted to build a “Vietnamese iPhone” in part due to the success of Apple’s iPhone in Vietnam and the rest of the world. Instead, we suggested that they differentiate their product by creating a secure smartphone (similar to the Blackphone or Boeing Black). Given last year’s revelations by Edward Snowden and Glenn Greenwald, security conscious companies might prefer another option for secure handset communications beyond American and Chinese manufacturers, especially if the alternative price point is attractive. Or a suitable Vietnamese startup could always take a page from Xiaomi’s book (2010 wasn’t so long ago).

The growing risk for Vietnamese companies who have the technical skills to produce something for other markets is that they might create something that only Vietnamese consumers will like. For example, when Yamaha Vietnam unveiled its website redesign in a “flat design” style, the feedback they got from Vietnamese visitors was that the website had no information and was hard to navigate. Vietnamese taste and design considerations can be very unique, even in Southeast Asia. Another way to think about about going to another market is that it’s not realistic for an American company to come to Vietnam, do things the “American” way and expect to be successful. Similarly, how do you think a Vietnamese company trying to do things the “Vietnamese” way in the US (or any other country) will fare?

Choosing the Long Term

During a conversation last week with some Vietnamese/New York fashion industry insiders in Hanoi, we discussed how to create and position a future clothing brand here in Vietnam. What is Vietnam’s competitive advantage in manufacturing? Vietnam’s current advantage is its low cost of labor (in addition to other financial incentives) which has prompted giants like Samsung and Intel to setup multi-billion dollar manufacturing facilities here.

However, inexpensive labor won’t last forever nor will Vietnam’s “Golden Population Structure” remain intact. Just as investment has flowed into Vietnam from China, so too will investment flow into a location with less expensive labor costs—perhaps to another neighbor as well. So looking ahead, what product or service might Vietnam have in the future that will give it an advantage in the global marketplace?

Today, Vietnam has plenty of raw materials but they aren’t finished goods which Vietnamese manufacturers can command a premium for. Not to mention that we live in a world of limited resources, so what can Vietnam offer the world in the future? One way to answer this question is to think about the challenges that Vietnam will face in the future (and that other countries will have as well). If Vietnamese companies continue to or start working on solutions for those problems then they can be ahead of the curve. After all, there is innovation here–many Vietnamese are “professional improvisers” in their daily lives and they are quick and resilient learners, as history has shown.

In the future, Vietnam won’t be the only country that has a rising national power consumption (and therefore rising demand for coal if alternative sources don’t emerge), it won’t be the only country with more cars on the road (and therefore more air pollution), and when sea levels rise it won’t just affect a single city like Can Tho in the Mekong Delta—it’ll affect hundreds of cities and displace millions of people. The point here is that the challenges of the future won’t be exclusively Vietnamese, but Vietnamese-origin—and not uniquely Vietnamese—solutions can be used to solve the challenges of the future (if those problems are solved here first or at the very least knowledge can be shared abroad). However, it takes a long term mindset to truly tackle these transnational issues of our time in addition to investments in education, human capital, and financial resources for research and development.

Peter Drucker, the 20th century’s greatest management thinker advised to always choose the long term, because it always comes true. Focus on your long-term strategy, but take advantage of the short-term opportunities in the meantime–that’s how a future brand in Vietnam will be forged, and how Vietnam–the brand–can begin to take shape as well.