To really enhance progress in an enterprise and shareholder value, a company must stimulate innovation to encourage breakthrough change.

This is the secret of Charles Schwab Corp, the pioneer of online trading and the biggest broker in cyberspace, according to its President and co-CEO Mr David Pottruck who spoke at a Chamber luncheon on October 4.

"Our biggest breakthrough came when we started carefully listening to our customers. They wanted value for money with unlimited access to our call centres where they could get advice," he said.

Charles Schwab currently has 2.8 million online accounts, up from 1.8 million a year ago. It has an impressive share of 25 per cent of average daily trades. This astronomical growth was the result of a concentration on customer service.

"We consistently ask customers what they want and what we fail in. With careful listening and a trained ear we remove any frictions and frustrations they may have and give them an excellent service comprising a marriage of technology and people," he said.

As early as 1985 Charles Schwab started online trading, all be it using the slow, limited technology of the time.

"In the late 80s and early 90s we converted to a Windows based programme called ‘Street Smart’. In 1994 there was a boom in household PC buying and we had 300,000 clients conducting online trading with us," he said.

In 1996 Charles Schwab moved to the Internet and decided to upgrade an existing service which was less expensive called e.Schwab. However, clients using this service were limited in the number of times they could contact call centres for advice.

The other, more expensive, service available was the Charles Schwab Service, here customers had unlimited access to call centres so could receive advice on their investments at any time.

"We believed e.Schwab, the cheaper service, would be the one to take off, but we were wrong – although e.Schwab was thriving, Charles Schwab was the one to grow fastest," he said.

Even with this booming growth, Mr Pottruck found that customers were not happy.

The e.Schwab clients were satisfied that the service was cheap - at US$29.95 per trade - but were discontented that they were unable to contact the call centres whenever they wished. The Charles Schwab customers were happy about the access to call centres but thought the service was too expensive.

"This is when we decided to start listening to customers and take a risk. We merged the two at the beginning of 1998 – we provided the service of Charles Schwab but at the price of e.Schwab," he said.

The result was an initial US$150 million reduction in profit and a consequent hammering of the stock price, but that did not last long - at the end of 1998 the stock price doubled and doubled again in 1999. Before the merger of the e.Schwab and Charles Schwab the company had US$60 billion worth of client assets now it has US$600 billion with 76.1 million hits a day on its Web site.

Mr Pottruck applauded Hong Kong in its efforts to foster innovation.

"The commitment Mr Tung Chee-hwa has made to encouraging innovation is excellent. When I heard him speak in San Francisco recently he said technology investment was an important ingredient of his vision - but not the only one - investment in human capital was essential in realising Hong Kong’s aim of becoming a hi-tech hub," he said.

Mr Pottruck said that besides utilising technology to its full capability it was essential to consider the human factor.

"One of the major factors in our success is the talented people we have in our organisation. These people like innovation and technology and are willing to combine the two and initiate change for the good of the company. The difficulty encountered is retaining these people - as the unemployment rate for technologists in California is minus three per cent," he said.

Mr Pottruck sees his Hong Kong branch of Charles Schwab which opened in 1997 as an important stepping stone to expand into the rest of Asia.

"Hong Kong is an appropriate place for us to build a foundation for Asian expansion, where the greatest growth opportunities lie," he said.

Charles Schwab will launch an online trading package on local stocks early next year.

"We want to be a substantial player here. At the moment we have US$300 billion of Hong Kong client assets and there is no reason why we should not double that next year," he said.

On China, Mr Pottruck said that the Mainland was in the early stages of becoming a market-based economy.