INTELLECTUAL CAPITAL REPORT 2010-2011

CONTENT

1) Introduction

2) Company Profile

3) Stakeholders and their Expectation

4) Intellectual Capital

5) Risk Analysis & Mitigation

6) Future Development

1) Introduction

The business environment in Hong Kong is very competitive, and the rapid growing economy of Chinese

industries only makes it even more competitive and is greatly affecting western and local companies on how

they run business in Hong Kong.

Intellectual Capital, to put it in short, refers to all resources and capital that are intangible and non-physical.

Things such as technical knowhow, staff experience, communication skills, client relationship can all be

categorized as Intellectual Capital and they are easily to be overlooked.

In order to gain advantages over the competition, identifying and organizing the Intellectual Capital has proven

to be crucial. Especially in heavy knowledge-based industries such as industrial design, gaining such edge

would be beneficial not only to the company itself, but also the industry that the company serves.

By having our first Intellectual Capital Report, we are trying to state clearly about the abilities of our business

and to set up a framework for ourselves to evaluate and improve.

“Don't get set into one form, adapt it and build your own, and let it grow, be like water.”< Bruce Lee: A Warrior's Journey (2000)>

2) Company Profile

PPhilosophy

“Don't get set into one form, adapt it and build your own, and let it grow, be like water.”< Bruce Lee: A Warrior's

Journey (2000)>

Inspired by a Hong Kong icon, legendary martial artist Bruce Lee, we apply his philosophy not only in our

studio name, but also in many levels in our management and design execution.

In Bewater Studio, flexibility is the value we treasure the most. As a design consultancy, one of the challenges

we face is to provide service to clients span across different industries. Each client has its unique and specific

needs in design and service. We simply do not believe there is one successful formula that can apply to all of

them.

“Jeet Kune Do favors formlessness so that it can assume all forms and since Jeet Kune Do has no style, it can

fit in with all styles.”< Bruce Lee: Tao of Jeet Kune Do (1975)>

We think that such philosophy, although was referring to martial art, can also be applied to design perfectly. We

do not limit ourselves into certain design style, as we believe products in different categories, market or target

users can employ very different style.

As a designer working in Bewater studio, there is no limitation in how to tackle projects or what tools they use.

They can simply use what serve them the best and the most efficient one.

AAbout the Company

Bewater Studio is a Hong Kong based design studio dedicated in creating fresh and ground breaking

products. Formerly Fuse Design, the studio was founded by Eugene Sze in year 2006. Since then, the studio

has been providing services for companies from all over the world, such as Philips, Nissin and Hong Kong

Polytechnic University, just to name a few. In year 2008, Eugene joined by his fellow Poly U graduate, Kylie Yu

and Fai Chan, the studio has been admitted into the InnoCentre organized by Hong Kong Science and

Technology Park as one of the incubatees under their design incubation program. To signify the brand new

start, the studio was renamed as Bewater Studio in 2009.

With our knowledge and experience, we have the capability to tackle various design challenges.

We offer strategic design consulting service in the following areas:

Design opportunity identification

Design Strategy Planning

Market environment research and trend analysis

Idea generation and design development

Cad modeling

Professional product visualization

Prototype production

Design evaluation and refinement

Packaging design

Besides designing for our clients, we also have our own designing projects. We are currently developing our

own brand of products, and is planning to officially launched to the market in year 2011. We hope our creations

not only fulfill the functional needs of people, but also provide a fresh and innovative experience for them.

MMission and Visions

Our ever growing team is young and talented. Our experience spans across industries from consumer

electronics, house-ware, domestic appliances to medical equipment, just to name a few. We are well equipped

to turn ideas into innovative products.

As our name has suggested, we believe design should be flexible and should not be stereotyped. Our minds

are free to allow us embrace multifarious ideas. We also believe good designs should be fundamental, yet

function to improve our surroundings, as water nourishes the world. We always concern about how objects

relate to environment, as well as how products interact with end users. We take responsibility upon ourselves to

bring enthusiastic, original and appealing designs to the world.

TEAMbewater

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3) Stakeholders and their Expectation Our TTeam is formed by a group of people from different backgrounds, having different abilities yet share the

same vision to provide good design service and products. As a knowledge-intensive company, team member’s

expertise and experience are the most important assets to the studio.

They expect chances to bring their skills and creation into full play, projects from different industries that can

help them learn and improve both professionally and personally, as well as a comfortable and open working

atmosphere.

Consultant Clients are the main clients of Bewater Studio Ltd. which generate most of our revenue. They are

companies from international, local and mainland China. They span across industries from home appliances,

kitchenware, electronic, etc. They are mainly manufacturers which launch products periodically and need

product design service from time to time.

They expect design house to fit into their brand style, development schedule, working process, as well as good

design quality with reasonable price.

End Users are users of the products that are under the Bewater brand. Since the Bewater products are

currently entering the final stage of development, they can be considered as target and potential users of our

designs. As we are planning to shift more resources in developing our own products, the importance of the end

users is on the rise.

They expect products that can give them unique experience, look good yet practical, as well as reflecting their

taste.

RRetailers include distributors/retailers/chain stores that sell our products. They import our own brand of

products and distribute them to other countries and to the end users. They are the first persons to have

feedback from the target users about our products. They are the important bridge that connects our studio as a

creator to our end users.

They expect products from us that have good sales, hence generate good profit margin. They also expect us

to be flexible enough to fulfill their shipping and ordering requests on the products.

Suppliers include manufacturers/model makers/production house that help us in the process of providing

design services and product development. They are very important to help us on realizing our designs into

actual products.

What they expect from us are regular orders, understanding their limitations which lead to smooth production

process.

OOur Values to the stakeholders

Team

Since the team is formed by a small group of people, and we truly believe every member is equally vital

regardless of their experience and contribution, therefore we do not have a clear hierarchy like many traditional

companies. We operate more like a sports team where everyone within the team has their own role, while they

can cover each other if needed. We encourage members to work together and to share their strength/abilities.

We believe this can help generating more interesting ideas at the same time creating a comfortable and open

studio environment. Also as chance presents, we try to get design projects as diverse as we can from different

product types, markets, companies and even industries. This can enable the members to get experience from

such diverse experience, which they can improve both professionally and personally.

Consultant Clients

With our experience working as a design consultancy for clients from many different countries, industries,

markets, etc, we have developed the abilities to quickly understand what design style the clients are looking

for, or even to build a new design style from the ground up for particular client.

As mentioned in earlier chapter, we pride ourselves to be able to adapt in different situations. We try to be as

flexible as water in order to fit into different industries, schedules and working processes which are required by

our clients. We assign different combination of designers to different projects which play to their strength,

hence maximizing the design results received by the clients.

Our project price is based on an hourly rate basis to calculate. By employing such system helps to make sure

the price that our clients pay is reasonable depends on what service they require.

CCLIENTS consultant

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EEnd Users

When we design our own brand of products, user experience is always our primary consideration. We would

conduct user and market research on the product. We would invite real users into idea workshop so we can

get first-hand users’ opinions. This method has been proven to be successful in bringing new and exciting

designs which custom to the user needs.

Retailers

In our team we have experienced market sales and designers. They all have good market sense as they have

past record to back them up. We have confidence in the products that we design will have good sales.

Moreover, when we design we also consider factors like color options, packaging sizes, SKU (Stock-keeping

unit), MOQ (Minimum Order Quantity) that retailers concern about. From the last couple trade fairs that we

attended, we received very good response from retailers which prove the direction we took is right.

Suppliers

We consider our suppliers an extension of our team. We communicate with them closely as if they were our

team members. And we do not select our suppliers solely based on price. We value their ability and

relationship between us, therefore most of our suppliers that currently working with us have stayed with us

since the very beginning.

4) Intellectual Capital

Human Capital

45%

Structural Capital

20%

Relational Capital

35%

Intellectual Capital Weighting of bewater studio ltd. (as of Jan.,2011)

Creative Ability 18%

Team Work 12%

Personal Character 8%

Communication

Skill 7%Innovation

Management

System 6%

Project Management 5%

IT System

4%Knowledge Management &

Sharing System 3%

IP Management 2%

Team Member 10%

Consultant Client 8%

End User 6%

Supplier

4%

Retailer 3%

Industrial Association 2%

Same Line of Business 2%

HHuman Capital

All members in our design team are degree holders of Industrial Design courses from the Hong Kong

Polytechnic University. 60% of them graduated with first-honor. One of our directors, Ms Kylie Yu, has obtained

Master Degree in Design and was the only student honored with Outstanding Student Award in year 2008.

Members of the team prior from joining together, has had experience in design and product development in

both large and small corporations. Such experience has equipped them with abilities to design products span

across diverse industries, as well as international brand and local companies. This is particularly important to

us since many of our consultant clients are looking for high quality design that is up to the level of international

design firm. We are not only able to provide that, and also have the advantages of being a local company and

with competitive price.

Creative ability is no doubt one of our valuable human capitals, but we also treasure Personal Character as

much since nice character is an essential ingredient of good team work.

Since our team is formed by a small group of talents, good team work is even more important. In Bewater

studio, we co-operate more like a basketball team than a traditional company. The team leaders may be more

experienced, but the responsibilities of all the team members are equally the same. All of the members have

their own role, yet they are versatile and can cover each other’s work if needed. We treasure communication

and team chemistry. And we share same vision and work towards a common goal.

To have good team work, communication skill is an essential ability. Besides, design also works as a bridge to

link together different parties including clients, engineers, suppliers, etc. who are from HK, Overseas or

Mainland China. Good communication and language skills are important for our team members.

WORKSHOPcollaboration

][

SStructural Capital

As a design studio, unlike normal companies, innovation management has been woven into our daily works.

After we confirm every project, a brainstorming section we called “workshop” would be carried.

During workshops, ideas are bounced back and forth among members to generate new concepts. We use

various design methods such as mind mapping, to help us analyzing our ideas.

In order to better manage our projects, we use documents like project brief and time sheets in various stages

of the projects.

We recently migrated out e-mail system to G-mail service. The advantage of this move is to allow us to better

utilize the power of the internet. This gives us more control over our projects when we are out of office.

We have registered our own brand “bewater” and applying patent for some of our products. Our current IP

management is relatively minor but it is getting more important to us since we will be launching more products

and putting more emphasis on our brand in the future.

INSPIRATIONdesign

][

Innovativebreaks new ground, have not seen before

Knownfamiliar, have seen before

Extreme

challe

ng

e a

nd e

xte

nd

the n

orm

s

Trad

ition

alaccep

ted a

s a

com

mon app

roach

Mass market / Mainstream

Larger volumes

Purely functional

No appeal

Branding / Specialization

Brand recognition

Extreme design as flagship item

a a , a e see be o e

research & analysis – market study

finding design opportunity

product study

research & analysis – product study

research & analysis – user scenario

Design Methods

RRelational Capital

Since our team is formed by a small group of people, so our relationship is more like friends rather than boss

and staffs. Team members will be kept into conversations of important issues such as office relocation, which

we believe would increase their involvement.

Consultant client is another major stake holder to our studio, so we do not take our relationship with them

lightly. We take an “in-person” approach when serving our clients, which means besides critical project

milestones, we would sit down with them face to face as much as we can. We believe talking in person is much

more effective than discussing via phone and email only, and would create more opportunities by having more

interaction and jamming ideas.

We would also consider different aspects in our design projects, such as end users, consultant clients, retailers

and suppliers. By understanding their preferences and limitations, we could produce designs that all parties

are happy with.

““in-person” Approach with Consultant Clients

Meeting with Life Power Health Ltd. Engineers in Dong Guan China Workshop with Supor Co., Ltd. Design and marketing team in Hangzhou China

SSome of bewater’s past activities:

The Next Exhibition 2009 IDT Expo 2009

2nd Shunde Expo 2009 3rd Shunde Expo 2010

HK Houseware Fair 2010 HK Gift & Premium 2010 Design Tokyo 2010

IDT Expo 2010 Design & Culture Tour - Discover Design 2010

PPress coverage of bewater:

Mingpo 14/06/2010Sing Tao Daily 15/05/2010 am 730 23/11/2010

exporter’s bulletin Autumn 2010

5) Risk Analysis & Mitigation

Risk Probability Effect Outcome Intellectual Capitals

Loss of team members 6 7 42 Human Capitals:

Creative ability, Team work

Consultant client switch to

other design consultancy

7 4 28 Relational Capitals:

Consultant client

Disappointing sales 4 6 24 Structural Capitals:

IP management

Relational Capitals:

Retailer, End user

Lack of supplier support 3 5 15 Relational Capitals:

Supplier, Retailer, End user

Risk of infringement 5 2 10 Structural Capitals:

IP management

Relational Capitals:

Retailer, End user

LLoss of team members

Analysis:

Members of the team are our most important Intellectual Capital. They are the core factor of our success.

Losing member would weaken our creativity. Also it would break up our team chemistry. A candidate who has

the right combination of talent and personality is not easy to come by, so it is crucial to keep our team intact.

Mitigation:

Communication and sharing of thoughts and experiences between team members will be encouraged both

formally and informally. Some workshops focusing on sharing skills and experience can be organized. And

management will share more about the company development to the team, to let them understand more about

situation and grow together.

On the other hand, we need to develop ways to document skills and abilities of members in the form of working

guide or handbook, hence transferring the Human capital to Structural capital.

Consultant clients may switch to other design consultancy

Analysis:

Currently our major revenue is generated from our consultant projects. The business environment of industrial

design is very competitive. Hence losing client to our competition will greatly affect our company financially.

Mitigation:

Preparation of clients’ background will be enhanced, since better understanding always lead to better

communication. To enhance time management and cost control, which helps providing working schedule and

price to be competitive that fits our client needs. Most importantly is we have to maintain high design quality.

DDisappointing sales

Analysis:

Although our own brand of products is still in the development stage, we expect to have 10-15% of revenue to

be generated from it. Disappointing sales will certainly affect us financially, and it will also hurt our reputations

as a brand and as a design studio.

Mitigation:

Extended research to be conducted in order to understand target users’ needs more and staying sensitive to

markets. Better control in production cost while maintaining production quality would generate successful

products.

Lack of supplier support

Analysis:

Suppliers are crucial to productions both in products of our brand and consultant projects. They affect how we

deliver our products and service in terms of cost, quality and time just to name a few.

Mitigation:

Communication with the suppliers will be enhanced. Working out production plans in advance in order to

smoothen the process.

RRisk of infringement

Analysis:

Countless hours has been spent in developing products of our brand. Being copied by other manufacturers will

affect our investment, hurt our brand recognition, and also affect the trust from retailers and end users to us.

Mitigation:

To have our brand and product registered beforehand in order to have better protection over our Intellectual

properties. To create unique user experience by design that is not easy to be copied.

6 ) Future DevelopmentThis is such a precious chance for us to review what our existing capitals are in this Intellectual Capital Report.

Some of them are so unseen that we have even neglected during our work every day.

By realizing what abilities we have already and analyzing necessary information systematically, we have come

up with a report to communicate among ourselves, the stakeholders, and the public.

Members of our team, healthy working environment, and well-managed business relationships, many other

values stated in this report are the factors of our success. These crucial values are not only supporting us to

stand strong today, but also equipping us to prepare for the challenge in the future.

The following are the areas for improvement:

1. Renew our Intellectual Capital Report annually to evaluate our intellectual capital status.

2. Strengthen our incentive scheme to reward members with excellent performance.

3. Provide more occupational training for members to grow.

4. Organize more workshops to share each other’s strength with the rest of the team.

5. Strengthen our brand recognition by promotion and exhibitions

We hope that by having our first Intellectual Capital Report will help us and our stakeholders to understand

more about our values and abilities that is not easy to be discovered. In addition it can set up a framework for

ourselves to evaluate and improve upon.

PRODUCTSour own brand of

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