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The Importance of Aligning SMEs to Megatrends and Industrial Revolution 4.0

Megatrends are global, sustained and macroeconomic forces of development that impacts business, economy, society, cultures and personal lives thereby defining our future world and its increasing pace of change. Goods, capital and labour are now travelling globally at an ever faster pace and not in the usual patterns. Technological innovation is re-shaping commerce and industry across all sectors, as well as the work and lifestyle of the people. These changes are imminent at the national level and will reshape businesses through the way they think and operate.

Identified as one of the key Megatrends, the potential benefits of Industrial Revolution (IR 4.0) are massive for the business sector which can go beyond digitising processes and value chains. Adoption of IR4.0 can lead to higher level of products and services differentiation by leveraging on software and superior sensor technology, connectivity and generation of data. In automotive industry, for example, customary brake systems have been turned into modern anti-block systems with the help of electronic control units. While in manufacturing and engineering industry, the use of appropriate sensors and their connectivity allow optimal, preventive maintenance of machines and systems, which in turn enhance operational management. Therefore, SMEs that seize the opportunities arising from the Megatrends, and in particular the IR4.0, stand to gain significantly.  

However, aligning SMEs to Megatrends and IR 4.0 with a view to accelerate their businesses, are not without challenges. Generally, cost pressure and cash flow are the main key issues facing SMEs. These findings are echoed in SME Corp. Malaysia Q1 2017 survey which highlighted a total of 66.1% of SMEs faced an increase in operating cost, 63.6% are concerned on high cost of doing business, 34.7% faced cash flow problem and the remaining 10.3% faced payment problem. Some SMEs are also faced challenges in access to financing with regard to the new growth areas, eg: greentech, cleantech and Internet of Things (IOT). Meanwhile, based on FMM’s study on its SME members in 2016 done by Monash University, a whopping 40% of SMEs are of the view that they do not need the internet to run their businesses.  This finding certainly does not bode well with the growing importance of IOT in businesses.

The phases of manufacturing sector in Malaysia as a whole vary in terms of where they are currently, ranging between 2.0 (mass production) and 3.0 (automation). Of smaller proportion, there are industry leads already in the process of moving towards IR 4.0 or becoming IR 4.0 compliant on their own. Realising this, the RMK11 (2016-2020) has identified three catalytic (E&E, M&E and Chemical) plus two new growth (Aerospace and Medical Devices) sectors as game changers for the manufacturing sector. These sectors will continue as the focus sectors together with other sectors such as automotive, petrochemicals, textiles and services.

Adopting new technology to ensure companies are more efficient and productive will be in tandem with the global trends. In view of this, the Government is committed in moving away from low-skilled/foreign workers dependency particularly in the manufacturing sector as it is an unsustainable practice and prone to human errors which will inadvertently reduce the quality of products. The adoption of IR 4.0 in turn will increase efficiency, productivity and promote zero-defect output.

Although it has been globally recognised, the awareness on the fact that embracing IR 4.0 could usher in tangible benefits for various industries still eludes businesses and SMEs at large. Therefore, in order to promote IR 4.0, the Government is currently formulating a national framework and tasked the Ministry of International Trade and Industry (MITI) to lead this initiative. A High Level Task Force (HLTF) led by MITI with members from relevant Ministries and Agencies has been established since March 2017 to spearhead the development of the whole of Government strategies for IR 4.0 with strong stakeholders’ feedback including from the industry.

The roles of these committees are to identify challenges, analyse existing gaps and propose action to be taken accordingly. Recommendations will be included in the overall National Policy on IR 4.0. MITI and its agencies in collaboration with relevant Ministries and Agencies are also undertaking various outreach programmes to increase the awareness of public/industry/academia/training institute on IR 4.0. Two major outreach programmes were done nationally on 2 May 2017 and 15 June 2017. More outreach programmes are in the planning stage including at the state and regional levels.

Embarking on digital transformation should be the way forward for Malaysian SMEs given it is evident globally that companies which are not confined to the traditional way of doing things and utilise technology to their advantage have a higher chance of remaining relevant and successful in the long run.

Source: MITI website, SME Corp. Malaysia 2017 survey and PwCLast modified on Wednesday, 19 September 2018 09:28