sme's and new ventures as a key driver - latest

8/3/2019 SME's AND NEW VENTURES AS A KEY DRIVER - latest

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SMEs & NEW VENTURES AS A KEY

DRIVER OF INNOVATION

What policies and policy instrumentsare required to nurture innovativeSMEs and promote new venture

creation ?

GROUP 4Barjoyai Bardai, UNIRAZAK

Mr. Hazizi Omar, Nuclear MalaysiaMdm. Razita Abd Razak, MRM

Ms. Amelia Lee Sze Chui, MOHE

Mdm. Norhayati Husin, EPU


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Formal definition

The term innovation was derived from the Latin word innovatus,from the the noun innovare which mean"to renew or change,"stemming fromin"into" +novus"new".The term is broadly usedto generally refers to the creation of better or moreeffective products, processes, technologies, orideas that are acceptedby markets, governments, and society . ( Wikepedia )

Innovation, at the level of an individual firm, might be defined as theapplication of ideas that are new to the firm, whether the newideas are embodied in products, processes, services or in workorganisation, management or marketing systems (DIST, 1996, p.2,and credited to Gibbons et al. 1994)

In businesee, innovation is something that is new or significantlyimproved, done by an enterprise to create added value eitherdirectly for the enterprise or indirectly for it customers ( BusinessCouncil of Australia, 1993, p3).
http://en.wikipedia.org/wiki/Product_(business)http://en.wikipedia.org/wiki/Procedure_(term)http://en.wikipedia.org/wiki/Technologieshttp://en.wikipedia.org/wiki/Ideahttp://en.wikipedia.org/wiki/Markethttp://en.wikipedia.org/wiki/Governmenthttp://en.wikipedia.org/wiki/Societyhttp://en.wikipedia.org/wiki/Societyhttp://en.wikipedia.org/wiki/Governmenthttp://en.wikipedia.org/wiki/Markethttp://en.wikipedia.org/wiki/Ideahttp://en.wikipedia.org/wiki/Technologieshttp://en.wikipedia.org/wiki/Procedure_(term)http://en.wikipedia.org/wiki/Product_(business)


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Definition ofINNOVATION

Initiating and implementing changes at allspectrum of life with the view of improving

the quality of life. Innovation is about culture and attitude

of human capital and not only aboutstrategies, initiatives and system.

Hence innovation must start with thehumanbeingas the most important agentand catalyst of change.


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THE ROLE OF SMES IN MALAYSIA

Scanning the currentsituation/ performances of

SMEs in Malaysia


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Defining Small and Medium Enterprise

SME

Micro

Small

Medium

Source : SMECorp


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Numbers of

SMEs in MalaysiaSector Micro Small Medium Total SMEs % Large firms Total

Manufacturing 21,516 15,796 2,061 39,373 7.2 1,420 40,793Services 381,585 83,037 10,084 474,706 86.6 2,819 477,525

Agriculture 31,838 1,775 575 34,188 6.2 343 34,531

Total SMEs 434,939 100,608 12,720 548,267 100.0 4,582 552,849


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Comparative achievement of the

Malaysian SMEs

Small businesses Big businesses

Employment per business 5.8 workers 450 workers

Total value added per business RM 297,956 RM17,158,140

Total output per business RM 783,585 RM68,062,500

Total export RM 375,000 RM45,600,000

Source : SMIDEC, 2005.


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Performances of Malaysian SMEs

Employment :

Over 3 million workers (51.5 percent of the totalemployment),

Value Added :

RM154 billion (47.3 percent) of the total value added,

Total output :

RM405 billion (32 percent) of the countrys total outputs

Export :

19 percent outputs for export

Source : SMIDEC, 2005.


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Performances of

SMEsValue added contributionYEAR 2001 2002 2003 2004 2005 2006 2007 2008 2009

Growth R ate (%)

Agriculture 3.8 2.1 3.4 8.5 3.6 7.4 -1.4 7.3 2.0

Mining &

Quarrying -0.3 4.1 1.1 -3.6 -1.1 0.9 9.5 1.4 6.1

Construction 4.6 5.9 5.2 1.0 4.7 3.2 13.2 3.7 4.3

Manufacturing -6.4 3.1 9.9 10.3 5.7 8.3 6.3 -0.6 -8.6Services 2.2 5.1 2.9 6.8 8.0 7.8 12.8 8.6 2.2

Total Value

Added -0.4 4.6 5.2 8.3 6.9 7.4 10.0 6.0 -0.4


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Performances of

SMEs% of share to GDPYEAR 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Agriculture 2.4 2.5 2.4 2.4 2.4 2.4 2.4 2.2 2.3 2.4

Mining &

Quarrying 0.05 0.05 0.05 0.05 0.05 0.04 0.04 0.04 0.04 0.04Construction 0.8 0.9 0.9 0.8 0.8 0.8 0.8 0.8 0.8 0.9

Manufacturing 9.2 8.5 8.3 8.7 9.0 9.0 9.2 9.2 8.7 8.1

Services 17.1 17.4 17.3 16.9 16.9 17.3 17.6 18.7 19.4 20.1

Less: Undistributed

FISIM 0.9 0.9 0.8 0.8 0.8 0.7 0.8 0.7 0.7 0.6Plus: Import duties 0.1 0.1 0.1 0.1 0.2 0.2 0.2 0.2 0.3 0.3

Total Value

Added 28.8 28.5 28.3 28.2 28.6 29.0 29.4 30.4 30.8 31.2

Source: Department of Statistics, Malaysia


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List of SME Development

Programmes in 20101. Ministry of Agriculture and Agro-Based Industry (MOA) 27 programs

2. Ministry of Plantation Industries and Commodities (MPIC) 20 programs

3. Ministry of Domestic Trade, Co-operatives and Consumerism (MDTCC) 6 programs

4. Ministry of Energy, Green Technology and Water (MEGTW) 3 programs

5. Ministry of Finance (MOF) 13 programs6. Ministry of Higher Education (MOHE) 1 program

7. Ministry of Human Resources (MOHR) 10 programs

8. Ministry of Housing and Local Government (MHLG) 4 programs

9. Ministry of Tourism (MOTOUR) 2 programs

10. Ministry of Science, Technology and Innovation (MOSTI) 8 programs

11. Ministry of Rural and Regional Development (MRRD) 26 programs

12. Ministry of International Trade and Industry (MITI) 47 programs

13. Ministry of Women, Family and Community Development (MWFCD) 7 programs

14. Ministry of Industrial Development Sabah (MID Sabah) 13 programs

15. Ministry of Industrial Development Sarawak (MID Sarawak) 18 programs

16. Prime Ministers Department (JPM) 4 programs

17. Bank Negara Malaysia (BNM) 6 programs

18. Perbadanan Usahawan Nasional Berhad (PUNB) 2 programs

TOTAL PROGRAMS 217 PROGRAMS


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Programs for SMEs

Halal parks, incubator, technology parks, list ofbusiness properties, licencing for premises and kiosks

Access for Infrastructure

Source of financing, findings, financial tools, financialfairs

Access for Financing

Business plan, marketing plan, one referral center,micro enterprises, woman entrepreneurs

Access for AdvisoryServices & Information

Marketing plan, branding & packaging, halal,networking, export promotion, investment promotion,showcase, marketing & promotion activities

Access for Market

Innovation and creativity, green technology, biotechnology, agro technology, certification, IPR

Access for Technology

Skill upgrading, occupational safety and health,international linkages and entrepreneurship

Access for Human Capital

Source : SMECorp


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Funding for the Malaysian SMEs

Loans provided to the SMEs and the micro businesses in Malaysia

Year Loan Amount Loan Outstanding Number of Percentage of

Small businesses Tot. Buss. Loan

RM' billion RM' billion

2000 70.5 33.1

2005 35.8 96.0 85,018 42.6

2006 39.6 104.6 84,000 44.5

2007 107.3 44.9

The micro finance market in Malaysia is in the region of Ringgit Malaysia RM 1.7 billion as at 2008.

Annual growth rates of the market were stated to be about 35% between 2000 and 2008.

Source: SMIDEC 2006


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Types Primary Agriculture Manufacturing

(incl. Agro) and MRS

Service Sector

(incl. ICT)

Micro Less than 5 employees Less than 5 employees Less than 5 employees

Small 5 19 employees 5 50 employees 5 19 employees

Medium 20 50 employees 51 150 employees 20 50 employees

I. Number of Employees

II. Annual Sales Turnover

Types Primary Agriculture Manufacturing

(incl. agro) and MRS

Service Sector

(incl. ICT)

Micro Less than RM200,000 Less than RM250,000 Less than RM200,000Small RM200,000 and less

than RM1 million

RM250,000 and less

than RM1 million

RM200,000 and less

than RM1 million

Medium RM1 million - RM5

million

RM10 million RM25

million

RM1 million - RM5

million

Groupings are decided based on either :

Source : SMECorp


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Are Malaysian SMEs innovative?

Records of achievement ?

Latest successful innovation ?

Current program in Malaysian to promoteinnovation ?

Malaysian Innovation model :

What is the program about ?

How successful ?

What can be done to improve ?


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Benchmarking the Innovative

performances

The percentage contribution of SMEs to GDP/total

value added :

- 50% in Korea,

- 55.3% in Japan,

- 57.0% in Germany,

- 60% in China

compared to- 47.3% attained by Malaysia.

Gap analysis Malaysia vs the rest of the world ?


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Visionary and Projection

What should we pitch as the vision of Malaysian SMEs at 2020 ?

Numbers 2011 2020 Large firms 5,000 100,000 Medium firms 120,000 500,000

Micro businesses 440,000 2,000,000

Size : Employment 3.5 millions 15,000,000

(51.5%) ( 70%)

Performances Total output RM405 billions RM1,800 b

(32 %) ( 65%)Value added

Value Added RM154 billion RM1,500 b

(47.3%) ( 70%)

Export 19 % outputs 70%


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NEW PARADIGM INPROMOTING INNOVATION

The new policies andinitiatives


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What new policies to initiate ?

To build a strong foundation for innovation on thenationwide basis.

To focus on the soft approachthe human capital

development

To look at innovation as a cultural , behavioural andattitudinal development.

To expose all potential human capital with the

culture of innovation.

To build and harness innovation culture as a way oflife at all level of the population

To create the support institutions and mechanism to

promote innovation effort among the new and

existing entrepreneurs.


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What policies to initiate ?

The need for solid foundation program

Policy 1 :

Appreciation and Inculcation of Innovative culture

Objective : To harness the innovative culture and developcreative and innovative attitude at all strata level of human

capital in the society.

Target group :

-primary, secondary, upper secondary, colleges and higher

institutions.- workers at all level

- potential and existing micro businesses and SMEs

operators

- Familiesparents and children in the rural and urban

areas


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Harnessing Innovative culture

The actors :

Mobilise volunteers among graduates that have beenexposed to Creativity and Innovation skills to start theTraining for trainers program for volunteers to create a largepool of Catalyst that will promote the innovative cultureamong all level of the society.

The program : Short exposure programphysical and through various form of

media including the internet such as Facebook.

Initiating Innovative Clubs at schools and education institutionsand at communities centre

Promote innovative activities including competition and rewards

programin terms of recognition etc. Create workshops that allow everyone to experiment with their

ideas in the process of idea generation and innovation.


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Harnessing Innovative Culture

Creating open environment for innovation :

Media support for exposure of innovative activities and

achievements

Small funding arrangement for innovative activities.

Creating a community of Angels that will promote thedevelopment and commercialisation of innovative ideas and

proposals.

Expected outcome :

Within 24 monthseveryone in the society will get

exposed to innovation and innovative culture.

Within 5 yearseveryone in the society will begin to adopt

innovative culture and attitude in their life activities.

Within 10 years - innovative culture and attitude will get

translated into productive activities in the economy


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Policy 2 :

Creating multiple of User friendly incubator centers on nationwidebasis as the centre for innovation programs

To convert and modify community centers as user friendly incubatorsto allow new and potential entrepreneurs to experiment on theirideas and new design to come up with solid prototypes.

Incubators centers will have basic laboratories and workshops thatoffer services to these young and new entrepreneurs.

Friendly Angels will be based at the incubators to select and fundsinnovation projects from scratch as seeds funders.

Institutions like SIRIM, NPC, MARDI, CIAST and academic institutionsto station their technical staff to council and assist the youngentrepreneneurs in realising their dream invention.

Policies to nurture innovation

among SMEs


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Policy 3 :

Create a more tolerable and forgiving environment,market, consumers and societies.

To create retail outlets and market arena for imperfect goods and services similarlike the Reject Shops in the established shopping complexes.

- SMEs shops

- SMEs streets similar to Petaling street and Junkers street.

- SMEs carnival - Car boot sales style continuous expos

- 1 Malaysia shops with extensive SMEs section- SMEs expo centers like the one in Shin Zhen ( China ) and The markets in Seoul.

- Web pages and e-commerce centers similar to Lelong.com and Ali Baba.com

To have quality improvement institutions like SIRIM and NPC to continuouslycouncil and assist SMEs in their products and services improvement


among SMEs


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Policy 4 :

To create and promote the market and outlets for Intellectualproperties trade

To nurture a new habit and tradition of trading in intellectualpropertiesin the form of :

- Brand names and trade marks

- Project proposal and business plan- Angels financing market

This intellectual properties market will be created in physicalform an investment banks like institution and in virtual

form through an official web page of the SMEs Ministry.


among SMEs


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OTHER POSSIBLE

PROGRAMS

OTHER PROGRAMS TO

SUPPORT THE INNOVATIVEENVIRONMENT


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Centre for Reverse Engineering

The strategy is to continuously source as many of newinvention in the marketproducts, services andprocess.

The invention will be dismantled to examine each

components and parts with the view to improve them. Rather than trying to re-invent the wheel by starting

from scratch, we just proceed with the improvementstrategy.. and create better products, services andprocess to improve the quality of life.

The centre will support entrepreneurs effort to learnabout new technologiesto be improved as newbusiness opportunities.


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Reverse Expo

GLCs and MNCs should be encouraged to

participate in the national and regional

expo to expose all their supplies and

services requirement to operate in Malaysia. The idea is to create as many business

opportunities for SMEs and Micro

businesses to create products and services

that fit into the GLCs and MNCsrequirement to explore the possibility of

becoming their vendors teams.


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Barter Trade Expo

National and regional expos organise to expose all

product and services offered by large corporation,

SMEs and micro businesses

The objectives is to expose all new and existing

entrepreneurs on all product and services available

to allow them to benefit from them in their process

of continuous innovation.

To create networks and business link among allbusinesses to build association with the view to

avoid duplicating effort and work on the vendors

suppliers relationship.


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Creating a Community of Angels

Creating a legal and infrastructural base tocreate an active and effective angelscommunities.

To have mechanism for Micro/SMEsbusinesses to approach and source fundingfrom the angels.

To use angels as a way to promote

innovative initiatives among the SMEs andMicro businesses.

To promote seeds funding for projectsinitiated by micro / SMEs businesses.


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SOHO Businesses Development

To promote SOHO businesses to be developed

by each household on nationwide basis.

Create an assisted services in developing web

pages and hence making each of the businessas a global business almost instantly.

Create small business funding program for

SOHOs businesses.

Consulting and counseling program for familieswho have difficulties in starting SOHOs

businesses.


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Nurturing New Venture Creation

How to promote new venture ?


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New Venture Creation

Venture creation does not happen by accident. It requires directedeffort exerted over time. In other words, direction, effort, andpersistence over time are the three pillars of motivation'

(Spector, 1996).

New venture creation is a complex and multidimensionalphenomenon. Motivation theory argues that individuals are eitherpulled or pushed toward a career choice, such as becoming anentrepreneur, and that satisfaction is a central factor in motivatingbehavior

(Gartner, Bird, & Starr, 1992; Katzell & Thompson, 1990; Landy &Becker, 1987; Perry, 1993; Vroom, 1964; Wanous, Keon, & Latack,

1983).
http://www.icsb.org/wiki/index.php?title=Entrepreneurhttp://www.icsb.org/wiki/index.php?title=Entrepreneurhttp://www.icsb.org/wiki/index.php?title=Entrepreneur


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Policy to Promote


Support Programs Contents

Districts for promoting

venture enterprise

development

Designate areas for promoting venture

enterprise development as industrial

parks

Tax exemptions after building park

Location

Support

Deregulate restrictionson location

Give exceptions on state and public

land

Expand construction area and exempt

from getting permission for use diversion

Reduce expenses on

location

Acquisition and registration tax

exemption

Deregulate restrictions on large

companies investing on venture firms

Build technology R&D

park

Build techno-park

Deregulation on par with districts for

promoting new venture creation


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Policy to Promote



Financial

Support

Diversify funding source Allow pension funds to invest on

venture firms

Liberalize foreign companies to invest

on new venture creations

Ease the restriction on large companies

to invest funds on new venture creations

Vitalize venture capital Tax exemption

Vitalize angel capital

Found specialized

venture capital

Found venture capitals specializing on

specific industries


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Policy to Promote



Introduce support

systems by ministries

Allow pension funds to invest on

venture firms

Liberalize foreign companies to invest

on new venture creations

Ease the restriction on large companies

to invest funds on new venture creations

Technology

and Manpower

Support

Increase the manpower

working in new venture

firms

Allow researchers and professors to

take temporary leave to support nurture

new venture creations

Build connection

between technology

suppliers and demanders

Operate technology transfer agency

Construct database of venture related

technologies and businesses

Funding for technology

development

Use of technology as security for loans

or grants

Credit guarantee programmes


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Introduce Incubator Providing:

1. Space for working and growing it should be affordable,flexible and modular,

2. Shared facilities such as office equipment, receptionist,conference rooms,

3. Services for improving counselling on marketing/finance,information, promotion, (4) Skills development for tenants in

4. Skills development for tenants in business planning andmanagement development,

5. Support for accessing university faculty, facilities and

students, professional networking,6. Synergy to do cooperation-competition through tenantinteractions, clusters, and spin-offs, and

7. Seed capital such as in-house revolving fund, access tocredit, royalty, and risk capital.


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Thank you

Wallahu Alam

sme's and new ventures as a key driver - latest

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