With inbound tourism in Vietnam growing at almost twice the rate of the Asia Pacific region, it would seem like the ideal time for entrepreneurs to jump into the tourism market. Yet, imitation within the Vietnamese tourism industry is leaving innovators at a disadvantage. For innovation to flourish, it will require deliberate investment in an ecosystem to support entrepreneurs. (Presented by Jason Lusk, Managing Director, Clickable Vietnam, TEDx BaDinh, April 16, 2017)
Transcript
I love Vietnam; Do you want to know what i hate? I hate sea urchins. I don’t hate all sea urchins. No, I specifically hate the sea urchins that you get on a boat tour in Vietnam.
Have you ever been on these boat tours? NaTrang, Phu Quoc – it really doesn’t matter. It’s as if somebody issued a nationwide decree saying that all boat tours in Vietnam have to be exactly alike. You sit on a wooden bench, you snorkel around some average coral for a while and eventually some disgruntled fisherman with a forced smile walks up holding a plastic bin of sea urchins.
At first they look ok, Snorkeling kind of works up an appetite but then you think to yourself: “Hey, I paid for this tour, and so far the best thing about it has been these urchins. Now you’re asking me to pay more?” And actually when you’ve been on more than one boat tour – as I have – and you realize that this scene replays itself over and over again all over Vietnam it leaves even more of a bad taste in your mouth.
So has this always been a fixture of Vietnamese tourism? Have these passionless pay-by-the-urchin tours always been around?
No, I don’t think so. I imagine something else happened. Here’s what I imagine: Once upon a time there was a fisherman, let’s call him Cuong – he’s a handsome guy – and Cuong had a great idea for a tour: he would take visitors out on his fishing boat, he would take them to all the most beautiful places along the coast – all the places he had known and loved since he was a boy; at around lunchtime he would lay anchor in some gorgeous inlet and with all the grace of an Olympic diver he would plunge headfirst into the sea. His guests would gather along the edge of the boat to try to get a glimpse of the legend at work, and as if by magic Cuong would appear on the ladder of the boat with a sack full of sea urchins.
And then of course, Cuong being Cuong , he would open them right then and there with a knife he kept strapped to his thigh. People loved his tour, especially the ladies. They come in greater and greater numbers.
But then it all started to fall apart.
What happened? Well Cuong’s neighbours in the fishing village started to get jealous; they started to think to themselves “Well boy, this tourism thing seems profitable. It seems more profitable than fishing. I know what we’ll do. Why don’t we copy the sea urchin tour?”
And they did. Bit by bit supply outpaced demand, all the good guides quit, quality plummeted and before you know it the passionless sea urchin tours that we know and loathe today were born.
This sort of imitation is endemic in Vietnamese tourism – it happens all the time: competitors wait for an innovator to come out with a great product and then they pounce.
Sometimes they even copy your name.
I know the CEO of a midsize tour company here in Vietnam. I called him one day and he was in a hospital in Hai Phong. I said: “What’s happened?” He said: “A woman has been injured in a boating accident”. I said: “My God, somebody has been injured on your tour?!” He said: “Well, no. No. She was injured on our competitors tour, you know the tour that sounds just like ours. They just dumped her at the nearest hospital. The problem is all the time – even now – she thought she was on one of ours.”
I thought, wow, this imitation thing is really a problem, right?
So what are we to believe? Are we to believe that tourism in Vietnam is sunk? Are we to believe that in the great global competition to attract more tourists to Vietnam we’ve already lost the game? Not really.
I don’t know if you guys have heard about a little film called Kong: Skull Island that was filmed here? It did ok at the box office. Thanks to films like that one and thanks to a curious travel media the world is starting to wake up to the fact that Vietnam is a beautiful, almost other-worldly place that is full of natural attractions.
In fact, the Asia Pacific region in which we sit is the fastest growing region for inbound tourism in the world, with inbound tourism sitting at around 5% per year. But Vietnam is growing at nearly twice that rate at 9.5% per year. At that pace tourism will account for $19bn in economic activity per year by the year 2020 accounting for about 7% of GDP. So, the tailwinds seem to be at Vietnam’s back. Now would seem to be the ideal time to pivot and to make Vietnam the gorilla of tourism it deserves to be. (See what I did there?)
But I’m convinced that imitation and this failure to innovate are robbing Vietnam of some of its potential. Can we measure it? Can we quantify the degree to which Vietnam is being hurt by this phenomenon? Yes we can.
There’s been a lot of research done on innovation, and one of the better pieces of research was done by a Stanford University professor named Abramovitz. What professor Abramovitz did was measure the output of the US in some of its fastest growing years from 1870 to 1950. Now if you talk to economists they will tell you there are two ways to increase a nation’s economic output: one is to increase the number of inputs: labour, capital – in our case tourists; the other way is to get more productivity out of those inputs though innovation.
Only 15% of economic growth could be accounted for by increased labour and capital; the other 85% was due to increased innovation.
So what does this tell us for Vietnam? How is it relevant to tourism in Vietnam? Well it tells us that without innovation we aren’t meeting our potential. With innovation we should be able to get tourists to come back more often, stay longer and spend more.
This has a big impact on sustainability, sustainable tourism – right? Because Vietnam like many destinations in the developing world depends on two assets to fund tourism. One of those is its bountiful nature – the beauty of its natural assets – and the other is its rich cultural heritage. Neither of those assets is helped along when we bulldoze vast swathes of destinations like Phong Nha, like Sapa, like Halong Bay for mega resorts, for theme parks, for cable cars. Those things rob Vietnam of its heritage and they steal from its economic future.
Innovation points in a different direction. Innovation might allow us to focus on quality over quantity of tourist, and it might save today’s emerging destinations from tomorrow’s bulldozer.
So innovation is extremely important. How do we get more of it?
I’m happy to say there are some green shoots of change – this is an entrepreneurial country. Over the past several months I’ve been helping to launch a new tourism startup accelerator in Vietnam. It’s called MIST – Mekong Innovation Startup Tourism, it’s funded by the Asian Development Bank. Applications for this program closed two weeks ago. Let me tell you about one application – a motorbike tour – in the city of Hue, that’s led and operated entirely by women. Now that might not sound exciting and innovative to you because it’s not tech, but let me tell you it is innovative because imagine you’re a solo female traveler, which is a growing segment. Now the best way to access central Vietnam is on the back of a motorbike but as a solo female traveller you might not feel comfortable jumping on the back of a strange man’s bike and jetting off into the rice paddies. But now you have a way to have that experience – you never had that before.
On the more technological side there was another applicant to the accelerator program that offers an online concierge service to visitors to Hanoi and Ho Chi Minh City. Imagine you’re a tourist and you’re wandering around Hanoi near the Opera House and you’re looking for a great bowl of vegetarian noodles. Now you don’t have to scroll through hundreds of listings on some review site, you can contact a real expert who’s going to deliver real advice personalised to your needs and desires – pretty cool and pretty innovative. Those are just two of the startups that applied to this program, there were 250 others – plenty of green shoots of change.
How do we encourage that? How do we get more innovation?
Well what Vietnam needs to do is form a cluster of innovation. We have a unique opportunity in 2017 to form a cluster of tourism innovation in Vietnam. I use this word cluster deliberately, a cluster according to Harvard Business School Economist Michael Porter is ‘a grouping of related companies and institutions all in one place’ so, film production in Hollywood, chemicals in central Germany or perhaps the most famous cluster of all – Silicone Valley.
Now if you’re not familiar with this term “cluster” don’t worry, you probably talk about clusters all the time. Outside of academic circles the word cluster has lost currency, the more popular term these days is “ecosystem”.
How many of you haven’t heard in the Vietnamese media about building an ecosystem for technology or an ecosystem for startups? We refer to them all the time.
So whether we refer to it as a cluster or an ecosystem, what Dr Porter says is that these are critical for developing the productivity of industries and the competitiveness of nations. But it takes a lot of ingredients to make a Silicon Valley: it takes favourable government policies, great universities, venture capitalist associations, and a mix of companies – small, medium and large.
Now if you’ve been paying attention to the media in Vietnam you’ll know Vietnam would very much like to be a Silicon Valley of tech here is southeast Asia – a new Silicon Valley of tech. Unfortunately that’s not going to happen in the short term. It’s a worthy goal and i think it’s worth pursuing it but there’s a lot of competition and it will take time to put all of those necessary ingredients in place. But I’m here to tell you there is one industry here in Vietnam that is ready to be a viable ecosystem. I think you know where I’m going with this.
That industry is tourism.
Think about it, we have a favourable policy environment already – oh yes we do – the government is in fact doing its part. Visa rules are changing, public money is being invested in tourism promotion, and public spaces – like the walking street around Hoan Kiem Lake – are being transformed. We have universities offering advanced training in tourism and hospitality management. We have a great mix of companies big and small and entrepreneurial startups.
All that’s missing is the connective tissue – sharing and collaboration – those are the things that make an ecosystem great. We’ve invested all this time and these resources into building an ecosystem for tech and tech startups in Vietnam so why can’t we – why shouldn’t we? – expend the same resources building a cluster for tourism innovation? An industry that already accounts for 6 – 7% of GDP?
But you’re skeptical, i can see it in your eyes, there’s an elephant in the room and that elephant – his name is Cuong.
How can I stand here and tell you that sharing and collaboration are the answer when you already know that tourism in Vietnam is hawk versus hawk, innovator versus imitator. Am I just being naive? Well let me retort.
In Silicon Valley there’s plenty of imitation – name one tech company that’s never had an imitator, you can’t. Tech companies compete ferociously and they imitate each other all the time. There’s every incentive in the world for them to do so and there’s no law to prevent them in most cases.
The theft of a trademark sure but the theft of an idea? No.
So what does Silicon Valley provide to protect ideas, to protect innovators that the tourism industry in Vietnam does not currently provide? It provides an exit – a way for innovators to cash out, to win the game, and to put innovation in the hands of those entities strong enough to protect innovation.
That’s how innovation is protected by the strong.
Silicon Valley has evolved over the years with certain actors in the sphere. We can name them, there are the innovators, these are the startups that with their own risks and their own passions bring ideas to market; then there are the financiers – the investors, the angel investors, the private equity firms – they finance the whole thing; Then we have vendors, we have service providers that make the whole industry more efficient. Then we have the big companies themselves that usually play the critical role of partnering with and sometimes even acquiring innovative startups – like Facebook and Google. Google has acquired 204 innovative startups over the course of its history.
Imagine if we could structure Vietnam’s tourism industry in the exact same way. Imagine what that would do for our friend Cuong, imagine Cuong might be able to partner with or even be acquired by one of the big tour companies so he can still sell his tour under their name. He might even be able to demand a premium price for his tour that way. Or maybe an investor would sweep in and acquire a new boat that’s so big and so grand that none of the other fishermen in that fishing village could copy that experience.
Cuong would survive, Cuong would win the game, right?
You see when an ecosystem is formed it creates networks, it provides the mechanism for the innovators, the investors and the big established players to get to know each other and when they know each other they can do deals and we can put innovation in the hands of the strong.
We are able to protect it and we provide an incentive for those innovators to keep innovating. And it’s not the only way in which an innovative ecosystem helps entrepreneurship, grows economies, when you create a cluster of innovative tourism companies all in one place it creates a market for service providers to the industry – management solutions, marketing solutions, back office software. There’s all sorts of innovations where the end customer is not the tourist but the tour company. Innovations are like rocket fuel for entrepreneurship.
So what I’m asking you to consider today and asking Vietnam to encourage is a mindset shift. The tourism industry here needs to start thinking and acting like Silicon Valley because when you give Cuong a way to win, it’s not just a victory for him, it’s a victory for tourism and a victory for Vietnam’s economy.
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