Workshop on Knowledge Management for SME Leaders

Country Paper: Malaysia

By RJ. Liow (AYS) &Hafizah Sith (MPC)

Contents 1. SMEs’ contribution to the economy in Malaysia.2. Level of KM understanding and implementation in SMEs

in Malaysia.3. Are there any national-level initiatives by the

government in Malaysia, e.g., financial incentives, technical assistance, or other help, to propagate KM implementation directly and indirectly?

4. KM opportunities for SMEs in Malaysia5. Possible challenges in implementing KM in SMEs

CATEGORY MICRO SMALL MEDIUM

Manufacturing Sales turnover of less than RM300,000 OR

employees of less than 5

Sales turnover from RM300,000 to less than RM15 milOR

employees from 5 to less than 75

Sales turnover from RM15 mil to not exceeding RM50 mil OR

employees from 75 to not exceeding 200

Services and Other Sectors

Sales turnover of

less than RM300,000 OR

employees of less than 5

Sales turnover from RM300,000 to less than RM3 milOR

employees from 5 to less than 30

Sales turnover from RM3 mil to not exceeding RM20 mil OR

employees from 30 to not exceeding 75

Definition of SME w.e.f January 1, 2014The share of SMEs to total establishments is expected to increase from 97.3% currently,

to 98.5%.

SMEs’ contribution to Malaysian economy

• SMEs would need to contribute more to economic growth for Malaysia to achieve its target to become a high-income nation.

• The government is targeting for SMEs to contribute 40% to the country’s GDP by 2015 via more dynamic entrepreneurs. Current contribution from SMEs stands at 33%. This is largely attributed by the services and construction sector.

• Targets by 2020 for SMEs:– Contribution to employment from 59% of the workforce to 61%– Exports contribution from 19% to 25% – Number of registered firms from 69% to 85% of all firms in

Malaysia

Source: The Star Online, Business News, August 15, 2013

Level of KM understanding and implementation in SMEs in Malaysia

Efforts to support SME in new growth areas and innovative industries in Mlaaysia have been enhanced, including innovative financing products, enhanced credit assessment, business facilitation and capacity building.

The new definition of SME which will be effective on January 1, 2014 is timely, given the changes that have taken place in the economy such as price inflation, structural shifts in the economy and changing business trends.

Level of KM understanding and implementation in SMEs in Malaysia (con’t)

From the Survey on SMEs in 2012 highlighted the key factors influencing the respondent’s business prospects were : High cost of doing business Positive business sentiment Positive consumer confidence Strong consumer spending

In order to increase efficiency, productivity and move up the value chain, respondents indicated that they undertook a variety of measures. The three main measures they undertook were as follows: Product or service improvement (69%) Process improvement (47%) Increase in usage of machinery and equipment (36%)

Level of KM understanding and implementation in SMEs in Malaysia (con’t)

On the usage of technology in the daily operations of SMEs, the Survey findings indicated that only three-quarters of the respondents (77%) used desktop and laptop, while a smaller number (55%) used Internet services for their business operations.

However, it was found that other modern IT tools which are becoming a necessity these days, such as social media, official website and intranet are not widely adopted by the respondents.

Advancement of technology become enablers to SMEs to manage their knowledge better and efficiently.

Level of KM understanding and implementation in SMEs in Malaysia (con’t)

The SME Survey showed that generally respondents did not give much emphasis on human capital development.

About 49% did not identify the training needs of employees to upgrade their skills and competencies and as high as 63% of the respondents did not institute any career development plans for their employees.

Also, more than a quarter of them (26%) were still dependent on foreign workers, particularly those in the medium-sized firms.

As learning and innovation helps to build individual and organisational capability, SMEs should constantly train the employees and build the knowledge environment in the oganisation.

Are there any national-level initiatives by the government in Malaysia, e.g., financial incentives, technical assistance, or other help, to propagate KM implementation directly and indirectly?

In the SME Masterplan, altogether, there are 154 programmes in the SME Development Programme amounting to RM18.4 billion planned throughout 2013 which will influence implementation of KM in SMEs.

Source : SME Annual Report 2012/2013

Innovation & Techology Adoption

Pre-Commercialisation Fund

Assist entrepreneurs in developing new or improving the existing processes, technologies or products to be commercialised.

MOSTI

Technology Information Sharing and Engagement Programme

Provide local automotive players with a platform to gain insights and learn from regional and international industrial practitioners.

MITI

SME Masterplan has therefore highlighted innovation and technology adoption as the most important performance lever.

Human Capital Development

Exporters Training Programme

To equip potential SME exporters with necessary knowledge and skills.

MATRADE

SME Mentoring Programme

To enhance SMEs’ knowledge in production, sales & marketing, and Halal-related matters for the food & beverage industry, through the sharing of Nestlé’s best practices.

MITI & SMECORP

Youth Entrepreneurship Programme (Business and Agriculture Business)

Offers courses in basic entrepreneurship in labelling and packaging technology.

Ministry of Youth and Sports

SME Training Partners Programme (SMETAP)

Providing up-skilling programmes to SMEs registered under Human Resources Development Fund (HRDF).

PSMB

Inadequately educated and skilled workforce is considered as one of the major constraints to growth and productivity gains in Malaysia. The business community in Malaysia, especially the SMEs, face difficulty in recruiting and retaining skilled workers in the technical, supervisory and managerial levels.

Market Access

Industrial Linkages Programmes

Linking 90 SMEs to MNCs/GLCs and large corporations, and generating potential sales of RM170 million.

SME Corp

SME-Brand Development Programme

Aimed at creating awareness on branding among SMEs through seminars and workshops, and offer advisory services via the Branding Innovation Centre (BIC) and the Branding and Packaging Mobile Gallery.

SME Corp

Workshop on Business Opportunities for SMEs in Palm Oil Industry

Designed to provide information on commercialisation and business planning in the palm oil industry.

MalaysianPalm Oil Board (MPOB)

Programmes and policies that help reduce trade barriers and enhance the know-how of SMEs are essential to fostering their growth, especially those in industries most impacted by globalisation and increased competition resulting from on-going liberalisation.

Market Access & Infrastructure

Small Retailer Transformation Programme (TUKAR)

Identify opportunities that will strengthen the sector and equip smaller retailers in the retail segment with the right skills, positive mindsets, technology and equipment to innovate and compete effectively in the market.

Economic Transformation Programme (ETP)

Incubator Programme Start-up technopreneurs will be assisted through comprehensive and integrated handholding programme which include coaching, training, mentoring and consultancy, as well as physical intervention and virtual incubation services.

Technology Park Malaysia (TPM), MOSTI,

The development of business infrastructure has proven to be a vital tool in bringing about economic development across the region. Strategic infrastructure developments provide platforms for research & development that is essential to promote innovation, growth of emerging sectors, as well as inward investment opportunities.

KM opportunities for SMEs in Malaysia

• Growing realization that SMEs in Malaysia are in a unique situation because their most significant assets are intangibles comprised mainly of knowledge.

• SMEs that manage knowledge better will deal more successfully and effectively with the challenges of the new business environment.

• By working systematically with the development of the intangible assets and strategy, SMEs can increase their knowledge focus, which in turn can enhance their chances to remain on a growth path.

KM opportunities for SMEs in Malaysia (con’t)

• SMEs in Malaysia have an advantage over larger enterprises with regard to KM because they have a simpler, flatter and less complex structure. This kind of structure can comfortably facilitate change across the organization.

• The managers in SMEs in Malaysia, are in most cases the owners. Decision-making is centralized and that fewer layers of management exist.

• Decision-making processes are therefore shorter in SMEs than they are in large organizations, and therefore KM practices are easier to be implemented.

KM opportunities for SMEs in Malaysia (con’t)

• The owners of SMEs have the opportunity to become the key drivers of knowledge management implementations in their organizations.

• In terms of the culture of organization, SMEs tend to have a smaller number of people, usually united under common beliefs and values, which implies that it is easier for them to change and implement knowledge management. Generally, it is therefore easier to create a knowledge sharing culture in small-sized enterprises than it is in larger ones.

• KM is perceived to be a key factor in realizing and sustaining organizational success for improved efficiency and innovation. However, KM is only one supporting approach, and it cannot be argued that KM alone makes any company successful.

Possible challenges in implementing KM in SMEs

• The common obstacle in the assessment process was to find time for the development actions.

• The culture, motivation of staff, and ability of the management team to share ideas and discuss strategic issues.

• SMEs do not have sufficient manpower to lead and execute knowledge management throughout the organizations.

Thank you…