OF late, innovation has become a buzzword in the private and government sector in an effort to help the country achieve a high income nation status by 2020.

There are many reasons why companies including small and medium enterprises (SMEs) need to innovate. This is partly due to advancement of technology, evolving society and customer needs, environmental changes and competitive pressure to improve products, services and processes to boost business bottomlines.

Innovation is a process by which an idea or invention is translated into a product or service for which people will pay.

Tan Sri Soong Siew Hoong says Malaysia has several SMEs which have attained world standards.

Federation of Malaysian Manufacturers (FMM) chairman for small and medium-size industries committee Tan Sri Soong Siew Hoong says that by becoming innovative companies will secure more sales and higher profits and will also enable Malaysian companies to become globally competitive.

He says the message to become innovative is being actively promoted by the Government, FMM, trade bodies and institutions of higher learning.

He says several local SMEs have made it big in world markets through their niche products and technologies.

For example, he says a tyre mould maker in Kuala Lumpur produces the best mould in South-East Asia and its mould is used by the four leading tyre manufacturers in the country and even exported to Japan, China, Germany and Italy.

A furniture manufacturer in Johor, he adds, currently exports 400 containers monthly to the United States every month and expects to export even more next year.

Similarly, he says Malaysia has several SMEs which have niche technology and have attained world standards but prefer to keep a low profile.

Soong says manufacturers of plastic parts under original equipment manufacturer (OEM) arrangements have also done well for themselves.

FMM currently has 2,548 member companies and associations, of which 60% are small and medium industries (SMIs) and the rest are larger companies. SMIs constitute 96.5% of the manufacturing sector in the country.

SMI Association of Malaysia national president Chua Tiam Wee says technology and innovation are the new growth drivers and wealth creators and SMEs should embrace innovation intensely as they are the backbone of the economy.

He says being innovative or coming out with new and different ways of doing things can propel SMEs to be globally competitive.

“Innovation can help SMEs to come up with new products, improve product/service quality and enhanced their features. This can create new sources of revenue, demand and wealth. Innovations in business processes can also result in cost reduction, speedier processes, reduction in wastage, improvement in productivity, and hence help SMEs become more competitive in the global arena,'' Chua says.

Although local SMEs are certainly capable of innovation and some have excelled to become world-class renowned names, nevertheless he says many may not have realised their full potential of being innovative enterprises.

In developed countries like the US, SMEs are major sources of innovation as they are better-placed for such activity than large firms and about half of inventions originated from SMEs, such as the ApplePC, polaroid camera and others.

There are a number of barriers that local SMEs face in adopting innovation. One of these, Chua says, is that they are often entrenched in businesses where they are suppliers to big companies of OEM parts where SMEs have to make products according to their OEM design and specifications.

Therefore, there is no or little scope for product innovation, but instead they can adopt innovations in their other business processes or can move up the value chain to make products of their own designs.

Another hurdle is the lack of adoption of information and communications technology (ICT) among SMEs which result in less speedier adoption of innovation, he adds.

Access to funding, failing or being unaware of the importance to register intellectual property rights for products and services, lack of global business creative thinking are other obstacles preventing SMEs in their drive to become innovative.

To adopt innovation in their business processes, Chua says SMEs can do so by encouraging and giving incentives to employees for creativity and innovativeness, investing in research and development, visiting industry exhibitions and conferences for ideas and trends, use ICT and Internet for sources of information and ideas from customers, suppliers and industry players.

SMEs can also approach the Unit Innovasi Khas or UNIK under the Prime Minister's Office for assistance to help them to turn innovative ideas into commercial and wealth-generating ones, he says.