Sunway Future X, the innovation hub that houses 42KL and Sunway Future X Farms
Malaysia’s conglomerate Sunway Group has been the forefront of corporate innovation by partnering with different stakeholders of the country’s tech ecosystem.
Of late, the group has started several initiatives including a startup incubator, corporate venture capital fund, and also runs several programmes in partnership with renowned VCs funds such as Gobi Partners, Tuas Capital Partners, and The Hive.
In this conversation with e27, group Chief Innovation Officer and Director of Sunway iLabs, Matt Van Leeuwen, sheds lights on Malaysia’s corporate innovation scene and how the group contributes to the overall innovation culture in the country.
Edited excerpts.
How does Sunway define corporate innovation? Is it about inculcating into and fostering innovation among its employees? Or is it about partnering with startups and working with them for a long term? Or is it much beyond that?
Corporate innovation is a phrase that means different things to different people.
We believe that for corporate innovation there is no one-size-fits-all model, but rather a model that is unique to its own ecosystem.
For example, Amazon’s innovation drive centres around customer obsession, Apple is famed for their design approach, and Toyota has innovated around the ‘kaizen’ process improvement concept.
Sunway Group defines corporate innovation as implementing new innovation opportunities into our existing businesses through different innovation vehicles or programmes: we have both an inside-out and an outside-in approach.
The inside-out approach is based around our own research and development initiatives in our businesses for more incremental innovation initiatives such as product, service, or process innovation.
The outside-in approach involves partnering with different entrepreneurs and startups for more disruptive innovation such as new products/services, markets, or business model innovation.
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Our innovation ecosystem comprises quite a few stakeholders. We have Sunway Ventures (corporate venture building arm), Sunway iLabs (an incubator and accelerator which is a partnership between our education arm Sunway Education Group and the corporation Sunway Group), as well as SunSEA Capital (a regional-focused corporate VC arm which can provide funding for bigger ticket sizes, such as Series A/B).
We also partner closely with other VC funds, such as Gobi Partners, Tuas Capital Partners, and The Hive. These initiatives give us a view on the latest technologies and trends in the market and is a mechanism to build successful innovations.
In the past few years, internally, we have been focusing on the digitalisation of our businesses as well as building an innovation ecosystem. We have invested more than RM200 million (US$48 million) in our digital transformation initiatives which include digitalising our procurement processes, integrating robotic automation for operational efficiencies, and developing customer focused apps for Sunway Medical Centre, amongst other things.
Generally, we have defined six verticals as areas which are synergistic for us, where we will invest in and where we have the know-how to scale: smart cities, edutech, digital health, agrifood-tech, e-commerce and fintech.
Sunway City Kuala Lumpur, the group’s flagship township, now functions as a living lab where these new solutions can be test-bedded.
When we evaluate startups, we are looking a lot at the strategic fit with the Sunway Group and how we can leverage our existing businesses to help grow the startups. This strategic fit is sometimes more important than just financial returns.
What kind of a work/business culture does the group follow — a startup culture or corporate culture? How are these two cultures different from each other, from a Sunway standpoint?
We are very fortunate to be operating in a corporate culture where our founder and Chairman, Tan Sri Jeffrey Cheah, himself is an innovator and entrepreneur, and therefore is committed to drive innovation with a long-term vision.
Sunway Group itself started as a small tin-mining company and has grown into a conglomerate with 13 business divisions with three public-listed companies with a combined market capitalisation of circa RM 16 billion (US$3.9 billion), and operates in 50 locations worldwide.
Innovation and sustainable development is part of our DNA and there is a culture of experimentation where we have a history of taking good bets on the future and doubling down on the ones that work really well — that’s how Sunway Group has grown. We have been successful in scaling up our many businesses to become market leaders in their own right.
One of the reasons we started up the CVC and other components of the innovation ecosystem is to deepen this culture of entrepreneurship by enlarging our entrepreneurship community. We believe that by bringing in students, researchers, investors and external entrepreneurs together, we can expand our innovation horizons beyond what we are already doing ourselves.
I think that Steve Blank puts it best when describing the difference between a startup and a corporation. According to him, a startup is a temporary organisation designed to search for a repeatable and scalable business model. Corporations are organisations which already have these repeatable and scalable business models.
He also said that in the early stages of a startup, focusing on “execution” will put you out of business. Instead, you need a “learning and discovery” process so you can get the company to the point where you know what to execute.
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Corporations, on the other hand, are organisations which have perfected the execution but need to be reminded, perhaps to partake in the learning and discovery process again for future growth.
Sunway is fortunate to have the best of both worlds, so both these can work in symbiosis. There’s the corporate environment for talents who enjoy a more regimented role and thrive in repeatable, scalable businesses; and the startup environment for a more social work culture, and an agile ecosystem that can drive the start-up thinking forward.
In addition, Sunway Group is also a corporation with a purpose — to drive sustainable development, which is centred around societal value and a powerful impetus for innovation to take place. Here, people come to work with the expectation to channel their imaginations and effort to create something of value for the community at large.
As you said, you have multiple business interests and divisions and are capable of developing your own tech products and solutions. But why do you think you still need to partner and work with startups to support your various businesses? How do these benefit each other?
Our internal R&D programmes are currently more focused on digital transformation, driving operational efficiencies and incremental innovation.
For example, Sunway Construction, the group’s construction arm, is focusing on advancing Virtual Design Construction (VDC) technology to develop 7D models which are capable of performing efficient energy, heat emission, light and sun path analyses on buildings which will result in compliance to Green Building Index specifications as well as 8D models which will bring mobility to the Environment, Safety & Health processes.
Another example would be where Sunway Paving Solutions has innovated permeable concrete pavers, where rainfall can permeate through the tiles and into the soil underneath to prevent flash floods.
The startups whom we are partnering with are more focused on disruption and regional scalability. As they say ‘we don’t know what we don’t know’, and the startups that we partner or seek to partner with bring new ideas and even new markets where we can accelerate our innovation ambitions.
It is widely perceived that corporates, especially in Asia Pacific, are often resistant to change and are unwilling to break the status-quo. How true is this when it comes to Malaysia’s conglomerates? Where does Sunway stand here?
Asian companies such as Samsung, Huawei, Alibaba Group, Sony, Tencent, LG, Xiaomi, Toyota and Hitachi are often ranked as some of the most innovative companies in the world including BCG’s 50 most innovative companies of 2020.
According to the World Intellectual Property Organisation’s Global Innovation Index (GII), Singapore and the Republic of Korea rank in the top 10 on the index, while Hong Kong, China, Japan, Malaysia, the UAE, Vietnam, Thailand, India, and Philippines rank in the top 50 countries in the world. Malaysia is the second most innovative country, only next to China in the middle-income economy category.
Matt Van Leeuwen, group Chief Innovation Officer and Director of Sunway iLabs
Sunway Group’s ethos, as a conglomerate with an ambition to drive the goals of sustainable development, aims to play an important role in driving the innovation culture across the nation and the region.
The B40 community is a big opportunity for Malaysia. Affordable housing, digital banking and education are areas where we are looking to address challenges and be inclusive for people in the lower socio-economic groups of society.
I believe that Malaysia is really a great locale for startup incubation. It has relatively low cost to start a business, high quality of living and progressive talent, offers fast-tracked visas and has robust government support for entrepreneurs.
Can you talk about the different corporate innovation drives initiated by Sunway?
Here in Sunway, we believe ideas are everywhere, so we aim to make innovation everyone’s job, and doesn’t just belong in one department or function. There are always multiple projects happening at several levels across the group.
We have invested >RM200 million (US$48 million) in digital transformation for last 10-plus years and build up a number of success stories, e.g. e-invoicing to enhance procurement practices, robotic process automation to gain operational efficiency, customer focused apps for healthcare.
We have built an entrepreneurship ecosystem comprising Sunway iLabs, Sunway Ventures and SunSea Capital. Sunway iLabs has run more than 250 days of hackathons/industry challenges, built a community of over 60,000 students, entrepreneurs, and investors, accelerated over 75 startups, and created 4 venture builds in a period of less than four years.
We have ventured into the fintech space with Sunway Money and Sunway Credit, as well as preparing to venture into the digital banking space.
For some consumer-facing businesses, we have built some apps that improve and personalise customer experiences, such as the Sunway Property App and Sunway Medical Centre App (Sunmed Go).
Most recently, we partnered with Huawei and Celcom (an Axiata company) for the implementation of 5G technology in our flagship township and to test-bed 5G powered innovations.
We have also launched a telemedicine Command and Control Centre at Sunway Medical Centre.
One of the more recent initiatives, which we launched September 2020, was the Sunway Innovation Matching Fund where we connected our business units’ problem statements to the Sunway Education Group for solutions building by our researchers and students. Funding support is provided by the business units themselves while resources and ideas come from the Sunway Education Group.
We have started with three projects with more in the pipeline. In addition to the innovations coming out from this programme, we also intend to establish an innovation culture and mindset.
To complement this top-down approach, we will also look towards launching a programme this year with a bottom-up approach where we will tap into the younger talents to identify some of the problems as well as come up with solutions to these problems.
With this new initiative, we hope to cultivate a new generation of intrapreneurs within Sunway comprising of our millennial and Gen Z talent pool.
You are currently working with the Singapore government, through Enterprise SG, to source partners for its business units as part of its OIC programme? Can you share more details about this programme? Which of Sunway’s business units are seeking innovation partners?
We participated in the inaugural Southeast Asia Open Innovation Challenge (SEA OIC) as one of Southeast Asia’s largest conglomerate to match their problem statements with startups, scaleups and SMEs which have the solutions to these problems.
We have currently selected the companies according to our designated verticals which will embark with us on three- to six-month pilots, where solutions may be adapted in digital health, edutech, and agrifood tech.
Is the government doing enough to promote a culture of innovation among large conglomerates/corporates? Are there any specific initiatives?
The government has a range of incentives including tax allowances (ITA), pioneer status programmes (allowing for tax exemptions), super deductions, MSC-Malaysia status, reinvestment allowances, special economic region allowances, special tax incentives recently launched under the PENJANA programme, green tech initiatives, halal tax incentives, and bionexus incentives.
The latest efforts such as the launch of the MyDigital blueprint and initiatives by MDEC and other agencies are also helping corporations become more innovative.
For instance, MDEC has several initiatives such as the Digital Transformation Acceleration Programme Grant, and the Digital Transformation Labs.
Having said that, we hope to see more corporations joining the space to build a more robust startup ecosystem in Malaysia. Agencies like MAVCAP are actively encouraging more corporates to get involved.
Towards this end, I’d suggest for corporates to try out different corporate innovation activities and ultimately built their own unique model.
Again, there is no one-size-fits-all for corporate innovation. Experimentation is important. You can dip your toes in the water by exploring partnerships with startups or by running hackathons and industry challenges. But ultimately, it needs to be clear what the longer term vision and objectives are.
Otherwise, it stays with what we call “innovation theatre”, which is good for show, but won’t move the needle for the corporations.
CVC plays a vital role in encouraging innovation. However, Asia seems to be lagging behind the West in this area. What are the reasons for this lagging? How can Asia overcome its barriers, if any?
In the recent years, CVC activity has caught up in Asia. According to the latest report by CB Insights, CVC-backed deals shares in Asia has hovered about 40 per cent from 2018-2020, which is a little higher than the deal shares in North America. However, CVC has still a long way to go in Asia, where a lot of corporates are only still scratching the surface.
Where does Malaysia’s corporate world stand in terms of CVC?
There has been increased corporate interest in setting up CVCs with market leaders such as Sunway, Axiata and Petronas setting up their own CVCs.
Sunway has Sunway iLabs, Sunway Ventures and Sun SEA Capital which provides funds at several ticket sizes, covering the early seed stages up to Series B rounds.
CVC is not just an important source of funding for the country’s ecosystem but also a source of mentorship and market access that startups need to thrive.
How crucial is ‘intrapreneurship’ for the corporate world? Does Sunway foster an intrapreneurship culture? Can you share details?
Prior to COVID-19, companies were already facing a challenging and unpredictable environment. As we prepare for a post-pandemic world, industry digitalisation is continuing to happen at an even more breakneck speed, market trends will continue to shift, and new business models must emerge.
According to business strategist Kaihan Krippendorff, research data shows that 70 per cent of transformative innovation are conceived, developed and commercialised by employees working within large companies.
Sunway fosters intraprenuership through several initiatives, including conducting design sprints and hackathons, Innovation Matching Funds, accelerators and others.
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Image Credit: Sunway Group
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