How we Scale SMEs & Startups into International Companies With a Vendor Architecture – An Interview with Donald Mac Callum

Coffee at Metta With Donald Mac Callum, Founder 1.0, Co Founder,

 Donald Mac Callum (DM) is the co founder of One Point-Zero along with Eric Voigt. He has worked in Asia for over 15 years, with much of this time in Shenzhen working for Irish founded company PCH International. He graduated from the University of Ulster with a degree in Mechanical Engineering with a Diploma in Business Studies. Donald is constantly on a plane hopping between Europe and Asia helping SME ramp their businesses in Asia.

Interviewer: Conor O’Mara (CO)

CO  Thanks for the coffee in this lovely venue Donald. I love the idea of this place Metta, it’s a great idea of having a place in Hong Kong dedicated to bringing entrepreneurs like yourself together. Speaking of entrepreneurship, I came across an article in Siliconrepublic from a few years ago naming you as one of the 15 Irish pioneers who have brought their talents to Asia. Congratulations on that! I was wondering did that prompt Irish entrepreneurs to reach out to you to try and understand the market  opportunity in Asia?

DM Interestingly enough the reaction was more about Asia as a base for manufacturing. We found that many companies see Asia (and in particular China) as a huge challenge to be left till later. Of course, later rarely if ever happens.

CO: Yes, it does seem like a lot of companies are scared about Asia, which is why we are doing these interviews to help Irish entrepreneurs understand HK is a great base for Asia. Lets go into that later, but first of let lets talk about your accelerator programme. You have set up your Io2HUB accelerator based in Austria., Why Austria? What kind of companies are you helping? And how much of your time is spent between Hong Kong  and Austria?

DM Austria over the past few years has followed a successful economic policy and grown its GDP exceptionally by leveraging opportunities in the European Union. In 2015 Austria adopted a target for a global economic expansion for its industries & services along with building an eco-system for its Eastern neighbors to tap into the European market.   We partnered with the Austrian Trade Commission of Hong Kong and a government led high tech cluster to give innovative SME’s access to Asia’s manufacturing grid.

For the Io2-Hub as 1.0 we were excited about building an accelerator that reduces failure risks for young entrepreneurs and their backers with a “Cash for milestone” program that rewards achievements and keeps start ups on track with their company development. Young talents are enabled to bring disruptive technologies alive through a sustainable growth path for their companies.

CO That sounds like a good idea, so you basically scope out the entire value chain for them and help them understand what it takes to scale their start up into a truly successful business?

DM The first step is to understand in detail what the SME or Start Up is trying to achieve. We then play back to them what we believe it is. We will re-run this stage of the process until we are sure we understand our client. Note we are not looking to correct any miss directions at this stage.  We only want to understand our client and their perception of the how they will achieve their Goals.

After this stage is complete we will map their current state with where we will take them with the process. This is what a typical Over Lay Map looks like…

Fig.1 shows a map overlay for a Company servicing Utility Company across the USA and Europe.

We then consider in detail the impact to our customer’s day to day business. Without going into all the detail the output typically looks something like Fig. 2 below,

Fig 2. What you can see here is the impact of 90 days credit and a reduced MOQ. To our customer it changed their business into a cash flow positive model. It also means the monthly burden was reduced and manageable. The end result is a balance sheet that can command debt for growth or a higher sell price in the market place.

This is our goal with all our customers.

CO You also are a partner at Hong Kong design company Detekt, can you tell us a bit about your role there and how product design has changed in recent years. It seems product development cycles are shortening every year and consumer expectations are just getting higher and higher, especially in China, with the advent of same day delivery from the likes of JD.com and a proliferation of models and brands in areas such as consumer electronics. This must make the job of design all the more important to differentiate brands from other products, but it also makes the time pressure on delivering a design even more I would think?

DM We noticed a gap between product design and design for manufacturing and design for China. With Detekt, we address this so that product design goes hand in hand with the manufacturing process shortening time to market by 6-8 months. For our customers’ it represents an Enterprise solution that considers their business, not just their product. This “critical thinking” allows the product to be brought to market in a structure that is designed for scale and designed for offsetting the financial burden that comes with success.  This ultimately results in a company being able to focus on the “Design and Sell” functions within its own operations.

CO That sounds like a really great framework you have developed. Often, it’s hard for smaller companies to scale their operations globally and those that do normally think of Silicon Valley first, with Asia coming much later. You have delivered over 100 products over a range of different product categories during your career, so what are the key success factors and how do you help companies ramp up their operations in Asia and do any of the companies you help look at Asia as a market opportunity in its own right? If not, why?

DM It’s very simple really. We start at the end. We look at our client three to five years out and what success might look like. We then work all the way back and build a “Vendor Architecture” around their needs today and tomorrow. No two products or Companies are the same and should not be treated as such.

SME’s and Start Ups alike are often in possession of innovative tech that needs access to world class partners to scale their business. We clearly see more and more benefits to launch in China, a market that adopts new technology faster than developed economies. Creating a safe environment considering IP-protection along with a robust design and cash needs are all major milestones that have to be accomplished prior to launch. We think that China should be addressed in any growth scenario at the outset. Registering your trademark and patents is advisable. Depending on the industry and product we would look at market entry options and position a launch on a timeline either parallel; or serial with other geographical markets. We do see a small number of clients look at the opportunity, but generally people find it too daunting an exercise and very risky to pursue in any meaningful manner.

CO  Well hopefully through these case studies and showing Irish companies that people like you can help, some of the fears can be allayed and the market opportunity here capitalized on more Donald. I think its important for companies to at least come to not only Hong Kong, but also places like Shenzhen to see just how developed they are these days. And on that, You’ve spent a long time in Asia, much of it with PCH International. How was your experience in Shenzhen, you must have seen the city grow from a large international manufacturing hub to a truly world city with very fancy buildings and areas to live?

DM Let me start by saying that I travelled to Shenzhen for 7 days and that was 15 years ago. There was no plan, just a spirit of adventure. The emergence of Shenzhen reminds me of Ireland in the 90’s. I started work in Dublin in ‘91 and witnessed the Celtic Tiger from its beginnings all the way through to when manufacturing for the best part left Ireland in 2001/2. I could see the same signs of this rapid development in Shenzhen. except it has 3 times the population of Ireland in a space half the size of Donegal. It was incredible to see whole sections of the city being torn down and replaced with state of the art facilities and buildings. The other incredible item was the speed at which the city changed. Buildings would go up at about the rate of 2 floors per week. That a lot of floors in the space of 8 months. Also, it was very clear that the government had a long-term plan for Shenzhen. The first Metro line opened on 28^th December 2004. Today the Shenzhen Metro has eight lines, 166 stations, and covers over 286 kilometers’. In February this year, the government announced that work on four new metro lines would start in 2017 at a cost of 160 billion Yuan (21 billion euro).

Put simply, I think today there are few people in the world who don’t know where Shenzhen is…

CO And its right beside Hong Kong too, so very easy to travel between both cities. How different do you think Shenzhen is to Hong Kong?  Is it possible to set up in Hong Kong as a base and look at the whole Pearl River Delta as a market opportunity for example. Or are the legal structures, ways of doing business and respect for intellectual property just too different?

DM I don’t think the question is to compare Shenzhen and Hong Kong but more to understand what each has to offer.

For us, Hong Kong has several advantages. It is in a unique geo position. It is only 5 hours away from any ASEAN country, making  making it a hub for commercial activities. Its proximity to the Pearl River Delta gives access to a wealth of technology and an area that is at the forefront of China’s latest developments. With its high density of trading houses, it has served us well to test new products and ideas with some of the worlds’ most influential distributor,s allowing for almost instant scaling and a global reach.

Considering the Pearl River Delta as a market is no different to considering any other market. The challenge is that the retail culture is not as well understood, as say Singapore. Therein lies the opportunity.

As for intellectual property, we believe this is becoming less of an issue if you register your patent in China. The Chinese Government is taking infringement of China patents very seriously indeed, resulting in opportunists avoiding China registered patents and Trademarks. China has come a long way in recent years in terms of IP development.  Huawei and ZTE have been 2 of the top 5 filers of patents globally for each of the last 5 years and China has moved from being an imitator to an innovator in terms of products and business practices. For example, JD.com and Alibaba have been doing same day delivery in Chinese ecommerce years  before Amazon introduced same day delivery with Amazon Prime. They also expanded into the fresh food market 2 years before Amazon’s recent entry into the market with the acquisition of Whole Foods. China is a truly innovative country with consumers who are really willing to try new products. It’s a market that companies should seriously consider as part of their strategy.