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Short on ideas

Released at: 15:40, 13/10/2015

Short on ideas

Vietnamese entrepreneurship appears to often be marked by a lack of creativity.

Luong Minh Ha, Do Thu Hang, & Vuong Thu Trang from Vuong & Associates

October is here, bringing along with it the memories of Apple’s co-founder Steve Jobs - an admirable portrait of his creativity, uniqueness, and determination to bring change. Simple but in no way simplistic, Apple’s slogan “Think Different” led the firm to grow from an idea in Jobs’ garage to one of the most powerful tech giants in the world in 20 years. Apple has achieved and is making tremendous progress, in which entrepreneurial creativity, such as that of Steve Jobs, plays a decisive part.

Today, innovation serves as a great force for the global entrepreneur community. It both represents and demands an “economy of passions”, where education and creative performance take on major roles. However, among the Vietnamese community of entrepreneurs, “creativity” seems to remain a notion that belongs to “legends” from around the world, and thus belongs to café small talk.

Since 1995, despite the significant growth in the number of patents in Vietnam, both the absolute number and the proportion of patents granted to Vietnamese are still modest, as shown in Figure 1.

Figure 1 shows that the proportion of Vietnamese patents occupies a little less than 7 per cent of the total number of patents granted in Vietnam. A whopping 93 per cent share of intellectual properties (patents and useful industrial solutions) granted in Vietnam belong to foreign individuals and businesses, to protect their rights to use their own creative ideas in the country, and possibly the ASEAN region too. More precisely, in 1995 only three out of 56 patents in Vietnam were granted to Vietnamese. When the total number of granted patents significantly rose to 1,368 in 2014, the Vietnamese share remained dismal, at only 36. 

Whether the disappointing numbers demonstrate a deficiency in local firms and entrepreneurs’ capability of pursing innovation or a lack of knowledge and preparation for the acquisition of a patent, they still show how little innovation plays a part in their competitive and development competence. 

As an emerging economy, Vietnam has reasons - some may say “right” too - to explain the contrast between its high growth-rate and low quantity of domestic scientific and technological content. Nonetheless, for the long term, it is a “Blue Economy”, supported more by innovation than capital, that should be the aim. 

The simple statistics shown lead to more complex questions that require research data to answer. A large-scale survey on the perception of innovation has been conducted on a portion of entrepreneurs - or those who had been close to taking up entrepreneurship - in Vietnam, at the end of the first quarter 2015. Out of 3,071 questionnaires collected, 2,823 provide qualified and complete responses to the following directly concerned questions:

Evaluate the level of creativity of the product, service, business model/solution; and
Estimate the chance of success.

The original idea of the survey was to enable researchers to estimate conditional probabilities of some specific events based on socioeconomic and resources conditions. In what follows we take a look at how telling the descriptive statistics are; and fortunately they do give us some insights that are interesting if not surprising.

In the sample composed of 2,823 data points, only 14.1 per cent evaluate their innovation in their entrepreneurial pursuit as significant and 43.6 per cent have “some” innovative value in their business projects. The remaining 42.3 per cent of (would-be) entrepreneurs believe that they don’t possess - or have no need of - any creative competence. See Table 1.

These figures give a warning, to a certain extent, about Vietnamese entrepreneurs’ business organization. The majority of surveyed entrepreneurs have a tendency to mimic products, services, and business models available or prevailing in the market. This thinking is completely opposite to profound evidence on the correlations between entrepreneurship and creativity, affirmed by a large volume of empirical studies. 

Even though creativity - arguably the best resource for sustainable economic growth - hasn’t been tapped efficiently or at all, statistical data still show overly optimistic views within the Vietnamese entrepreneur community.

Figure 2 shows the number of entrepreneurs by their estimated probability of success, with four possibilities:

♦ Certain;
Highly likely;
Somewhat likely; and

In our observation, 52.7 per cent of entrepreneurs estimate their chance of success to be “average”. Over 33 per cent expect the rate to be higher. The remaining 13.7 per cent judge a likely failure. American entrepreneurs would envy the spirit of their Vietnamese counterparts, as according to US Census data less than 49 per cent of the new establishments started between 1977 and 2000 were alive at age five.

An optimistic attitude - believing in a successful future - benefits the entrepreneur by motivating him or her to take on the chance, and quid pro quo rewarding them when their time comes. However, such positivity could turn into a self-made trap if his or her optimism is founded on a failure to foresee possible risks - in other words, on groundless confidence. Unfortunately, Figure 2 shows that the more negative outcome seems more likely to take place.

Subjectively speaking, the majority of entrepreneurs would be more inclined to oppose the previous remark. But the truth is always there: statistical reviews on more than 3,200 startup projects reveal an overwhelming 90 per cent failure rate. Moreover, it’s noteworthy that in most cases the key reason for their collapse appears to be self-destruction instead of fierce market competition. Among the successful 10 per cent, most have had a brush with mortality, having come close to collapse at one point. The ratio of 10:90 speaks for itself.

In reality, every year in Vietnam, along with the growing number of startup businesses, existing businesses are closing incessantly as well, at an even quicker rate than the opening of new businesses at some points. In 2013, the number of newly-registered businesses and closures increased by 10.1 per cent and 11.9 per cent, respectively, compared to those in 2012. In 2014, closures continued to increase by 11.7 per cent despite a 2.7 per cent decrease in new businesses, compared to 2013. See Table 2.

On the relationship between entrepreneurship and creativity, it can also be inferred from this study how Vietnamese entrepreneurs perceive the role of innovation in pursuing success.

Figure 3 shows how Vietnamese entrepreneurs evaluate their chance of success in accordance with three degrees of creative capabilities: a) significant; b) some; and, c) none. For the group of projects with a considerable amount of creativity, few are thought to be at risk of failure, at less than 9 per cent, while those estimated with a high chance of success take more than 50 per cent. This demonstrates that the more creative the business model, the stronger belief the entrepreneur has in the possibility of success.

Interestingly, more than 42 per cent of startup projects are considered to have almost no creativity, of which over 28 per cent still believe that their projects will highly likely succeed. Additionally, 53 per cent expect an average chance of success. Only less than 19 per cent take failure into account as a possible outcome.

It is evident that a majority of the Vietnamese entrepreneur community is convinced that they can succeed without creativity. If they do achieve this, their success will become a counter-example to a proposition affirmed by researchers: that the entrepreneur community is to encourage innovations and inventions, while creating healthy pressure to push the current economy towards change. This, as we all know, will lift the economic system out of equilibrium and likely result in progress. If they do not succeed, however, their inability to innovate and adapt will inevitably lead to elimination from the modern business community, thus putting them in the suffering 90 per cent. And we all know that the latter is logical.

Statistics have shown the general attitude that the entrepreneur community in Vietnam holds towards creativity and innovation. Silicon Valley encourages entrepreneurs to create, and honors the “fearless culture” with the “Fail Fast, Fail Often” dictum. Steve Jobs affirmed that we must be willing to throw away whatever we have done and whoever we were in order to be creative, which bears similarities to what Joseph Schumpeter termed “creative destruction”. But appreciating the teachings does not lessen the difficulty and complexity of climbing the coming steeper learning curve when the majority of Vietnamese entrepreneurs and startup leaders continue to hold onto old business models, extant concepts, and uncreative products, and are complacent with “just-good-enough” performance. This is the trait that Lawrence E. Harrison describes as “static culture” as opposed to his proposed “progressive culture” that humankind needs for a sustainable future.

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