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Govt-funded technology audit for local SMEs
Published on: Sunday, March 05, 2017

By Datuk Madius Tangau
“GEHT doch!” in German is a principle upheld by researchers at Fraunhofer, an application-oriented research organisation in Germany, the largest in Europe.

I admire their character of “Geht doch”, which stands for thinking out of the box, determination, focus, and the spirit of research.

The Fraunhofer Society for the Advancement of Applied Research comprised of 67 institutes distributed across Germany, each has a niche area of applied science, employing over a whopping 24,000 people, most of them being researchers in engineering and natural sciences. 70 per cent of the €2.1 billion annual research budget comes from contract research, whereas the remaining 30 per cent are funded by the federal government and the state.

The name of the institute, Fraunhofer, is a rather meaningful one. Joseph von Fraunhofer was a pioneer in the area of optical research. The influence of his work is still felt today, in light-based analysis and production techniques that have paved way for even more discoveries.

He also made the Optical Institute where he was working profitable by extending its product range.

They included telescopes, binoculars, microscopes, magnifying glasses and astronomical telescopes of then unprecedented quality and were sold throughout Europe.

123 years later in 1949, the institute was founded and named after this Munich researcher, inventor and entrepreneur, to adopt his working principle of carrying research of practical applications.

Today the Fraunhofer Society is an internationally recognised leader in applied research by collaborating very closely with the industry, to pursue research work based on industry demand. This model is so successful that seven such centers have been established in the U.S., with more centers in the pipeline.

In Malaysia’s Budget 2015, the Government introduced four initiatives to increase the productivity of Small and Medium Enterprises (SMEs), specifically through technology upgrading and innovation.

We set a goal to increase the share of SME contribution to the Gross Domestic Product (GDP) to 41 per cent by 2020. SMEs represent 97.3 per cent of total business establishments, providing over 59 per cent of employment, therefore, we see a significant potential for SMEs to grow further, especially in productivity.

One of the four initiatives is the SIRIM-Fraunhofer programme. SIRIM, an agency under the umbrella of the Ministry of Science, Technology and Innovation (MOSTI), signed an MOU with the Fraunhofer Society in December 2014 to adopt the German Innovation ecosystem. The SIRIM Industrial Research division offering one of the four core services in SIRIM, worked with their German counterparts from Fraunhofer Institute for Industrial Engineering IAO to bring the programme home.

Our SMEs can expect to benefit from the Technology Audit programme under the SIRIM-Fraunhofer initiative.

This programme looks at the technology management practices of SMEs specifically in the manufacturing sector by assessing individual companies.

The Technology Audit process is straightforward. Eligible SMEs are first invited by SIRIM to a briefing, after which interested companies would register for the programme. SIRIM would assign auditors to study preliminary information of the company, followed by a visit to the organisation. During this visit, the auditors would interview the management and its staff, and visit the production area to assess the production process.

The auditors would then produce a thorough action plan of technological intervention that would help the company to enhance its productivity, technological management capabilities and to move up the value chain.

Best news of all, this Technology Audit does not incur any cost to eligible SMEs! It is opened to companies that are SMEs as defined by the National SME Development Council, have to be Malaysian owned, have been in operation for at least two years and involved in manufacturing.

The next course of action for SMEs is to decide whether to take up the recommendations by SIRIM to address the technological gaps identified through the Technology Audit. Generally, although most SMEs were good in employee management, many were not mature in technology management practices.

For example, the Technology Audit carried out in 2015 tells us that little emphasis have been placed on energy efficiency, the use of sustainable materials, replacement of hazardous materials and efficient water treatment.

Product research and development activities were scarce, as reflected by the low number of SMEs producing their own products by remaining as an Original Equipment Manufacturer (OEM), and very rarely companies specialised in manufacturing high value, complex components for equipment.

This SIRIM-Fraunhofer programme has resulted in a list of success stories in just two years since its inception.

336 SMEs have participated in the Technology Audit so far, of which 211 have proceeded to the next step, that is, the intervention programmes, heavily subsidized by the Government.

Some of the completed and successful projects were presented to the National Innovation Council that I chaired on the 21st of February. The impact of this programme is significant, especially in this economic climate.

A company for example, diversified its business through the introduction of a new product with the support of SIRIM. They expect to see an increase in annual sales by 46 per cent. Other success stories resulted in a reduction of electricity charges by 30 to 50 per cent through the introduction of a solar thermal system, and improved packaging that complies with regulations for micro companies.

In Sabah, the level of participation of SMEs in the SIRIM-Fraunhofer programme is relatively low.

Participations are mainly from the food and beverage, construction material and furniture sectors.

Local SMEs in Sabah should leverage on the government funded Technology Audit programme, and subsequently benefit from the intervention programmes, which would be largely financed by the Government.

Our manufacturing industry is set to benefit from Germany’s Industrie 4.0 plan if our SMEs harness the potential of latest technologies such as Additive Manufacturing and the Internet of Things (IoT) that would move them up the value chain.

In the near future, Malaysian SMEs should look out for the Innovation Workshop that would train SMEs to manage technology from the ideation of a product to its commercialisation. They could also refer to the Technology Market Radar that would be developed by SIRIM and their German partners to guide their companies’ strategic direction.

During the incoming of the Fourth Industrial Revolution, SMEs need to embrace the spirit of “Geht doch!”, by working fearlessly towards innovative business models and technological solutions, starting from the manufacturing industry.

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