INNOVATION ACTIVITIES
CHAPTER 5: INNOVATION ACTIVITIES
5.7 Rating on Performance of Innovation Activities
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Box 7: Process and Organisational Innovations - Sawipac Sdn. Bhd.
Sawipac Sdn. Bhd. was established in 1996 and is an ISO 9001:2008 certi�ied company based in Kluang, Johor, Malaysia. The company provides related technologies and process solutions for palm oil industry. The company is involved in designing and manufacturing complete solutions for the process industry. It concentrates on palm oil processing mills and systems, including sub-units.
From the dimensions of , the company is now
concentrating on adopting lean manufacturing techniques, whereby the application of laser cutting, plasma welding, and other manufacturing innovations including staff rotations are implemented to achieve products of higher ef�iciencies and lower costs. In addition, the company has adopted computerised system in all departments to be competitive and ef�icient in terms of business operations. For example, most important machinery in the company are now computer controlled systems. These machines are now integrated with the computers in the design of�ice, allowing the design to be transferred directly to the manufacturing machines. The company also emphasises by providing training to its employees for up-skilling purpose. The company prioritises the recruitment of local talents, thus reducing dependency on foreign labour. This is because the company aims to create and maintain a creative, innovative and quality culture amongst its workers
In terms of R&D activities, the company has been granted with a few patents due to its inno- vativeness, whereby these activities are important for the company to offer superior prod- ucts or solutions than its competitors at competitive prices to the customers. For example, the company’s kernel plant - Patented Air Separator® is one of the products and systems that is well accepted by the industry.
In addition the company has been collaborating closely with local universities in order to increase and enhance its knowledge. For example, the company collaborates with Universiti Teknologi Malaysia (UTM) and Universiti Putra Malaysia (UPM) to improve its manufacturing techniques and processes as well as agriculture post processing techniques.
Due to the company’s innovativeness, it has been awarded the ISO 9001:2008, SME Innovation award, Enterprise Transformation Rating (2012) Award and the Innocert Award with an accompanying RM500,000 cash prize.
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Figure 5.17 Rating on Importance of Innovation Activities Based on Business Sectors
Note: Mean indicator: 1 = Poor, 2 = Good, 3 = Excellent
Table 5.11 and Figure 5.18 illustrate the data on innovation activities by business sectors i.e. by manufacturing and services companies, and as indicated, the manufacturing sector is largely more aggressive in their quest for innovation than the services sector. The only activity that manufacturing did not give utmost priority is on organisational innovation. This may be due to the conventional organisational set-up of the manufacturing company that has bigger employee population to the extent that priority is more on products and services innovations.
Training of staff and employees on innovations is the top priority for both manufacturing and services sectors. The assumption is that a well-trained employee will be able to contribute more effectively in the development of new inventions that will enhance products or services quality and productivity, and spur continuous progress economically.
Table 5.11 also indicated a big percentage of in-house R&D activities by the manufacturing sector.
Most major manufacturing companies have their own internal Research and Development Department that focused on new product inventions as well as improved products. This is particularly critical for manufacturing sector to continue to innovate, in meeting the current and future needs of customers in the changing world. Other factors that may influence manufacturing sector to venture into in-house R&D as well as the acquisition of machinery, equipment and other software in support of in-house R&D activities instead of pursuing innovation through third party is largely economical.
For some unknown reason, the percentage of acquisition of R&D in the services sector is lowest among other innovation activities.
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Figure 5.17 Rating on Importance of Innovation Activities Based on Business Sectors
Note: Mean indicator: 1 = Poor, 2 = Good, 3 = Excellent
Table 5.11 and Figure 5.18 illustrate the data on innovation activities by business sectors i.e. by manufacturing and services companies, and as indicated, the manufacturing sector is largely more aggressive in their quest for innovation than the services sector. The only activity that manufacturing did not give utmost priority is on organisational innovation. This may be due to the conventional organisational set-up of the manufacturing company that has bigger employee population to the extent that priority is more on products and services innovations.
Training of staff and employees on innovations is the top priority for both manufacturing and services sectors. The assumption is that a well-trained employee will be able to contribute more effectively in the development of new inventions that will enhance products or services quality and productivity, and spur continuous progress economically.
Table 5.11 also indicated a big percentage of in-house R&D activities by the manufacturing sector.
Most major manufacturing companies have their own internal Research and Development Department that focused on new product inventions as well as improved products. This is particularly critical for manufacturing sector to continue to innovate, in meeting the current and future needs of customers in the changing world. Other factors that may influence manufacturing sector to venture into in-house R&D as well as the acquisition of machinery, equipment and other software in support of in-house R&D activities instead of pursuing innovation through third party is largely economical.
For some unknown reason, the percentage of acquisition of R&D in the services sector is lowest among other innovation activities.
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Table 5.11 Innovation Activities Based on Business Sectors
Types of Innovation Activities Manufacturing Services
Yes % Yes %
In-house R&D 209 13.52 76 6.08
Acquisition of R&D 107 6.92 47 3.77
Acquisition of machinery, equipment and software 245 15.85 191 15.29
Acquisition of external knowledge 108 6.99 104 8.33
Training 228 14.75 211 16.89
Market introduction of innovations 197 12.74 183 14.65
All forms of design 135 8.73 101 8.09
Preparation for marketing innovation 180 11.64 179 14.33
Preparation for organisational innovation 137 8.86 157 12.57
Figure 5.18 Innovation Activities Based on Business Sectors
The most important objective of innovation activities for both manufacturing and services sectors is on enhancing their products and services quality as illustrated in Table 5.12 and Figure 5.19. The higher mean of responses from both sectors i.e. 2.61 for manufacturing and 2.37 for services indicated their focused objective. This is concurrent with the need to fulfill customers demand for quality. On the other hand, the least focused objective is the activity to reduce environmental damage i.e. 0.34 and 0.22 for manufacturing and services sectors respectively.
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Other objectives of importance for both sectors include extending product range; opening up of new market or increasing market share; fulfilling the required regulations and standards;
reducing labour cost, material and energy consumption (particularly obvious in manufacturing sector); and to fully utilise incentives provided by the government and other agencies. Some degree of importance to phase out existing products and services and replace them with new inventions for both sectors is also a priority. The mean score for both sectors is equal i.e. 1.74.
Table 5.12 Degree of Importance of Objectives on Innovation Activities
Objectives Mean
Manufacturing Services
To replace products being phased out 1.74 1.74
To improve product quality 2.61 2.37
To extend product range 2.30 2.20
To open up new markets or increase market share 2.27 2.13
To fulfill regulation and standard 2.40 2.21
To reduce labour costs 2.10 1.87
To reduce materials consumption 2.07 1.76
To reduce energy consumption 2.07 1.85
To reduce environmental damage 0.34 0.22
To utilise incentives, grants, loan, etc. 1.62 1.42
Note: Mean indicator: 0 = Not relevant, 1= Least important, 2= Moderately important, 3 = Highly important
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Other objectives of importance for both sectors include extending product range; opening up of new market or increasing market share; fulfilling the required regulations and standards;
reducing labour cost, material and energy consumption (particularly obvious in manufacturing sector); and to fully utilise incentives provided by the government and other agencies. Some degree of importance to phase out existing products and services and replace them with new inventions for both sectors is also a priority. The mean score for both sectors is equal i.e. 1.74.
Table 5.12 Degree of Importance of Objectives on Innovation Activities
Objectives Mean
Manufacturing Services
To replace products being phased out 1.74 1.74
To improve product quality 2.61 2.37
To extend product range 2.30 2.20
To open up new markets or increase market share 2.27 2.13
To fulfill regulation and standard 2.40 2.21
To reduce labour costs 2.10 1.87
To reduce materials consumption 2.07 1.76
To reduce energy consumption 2.07 1.85
To reduce environmental damage 0.34 0.22
To utilise incentives, grants, loan, etc. 1.62 1.42
Note: Mean indicator: 0 = Not relevant, 1= Least important, 2= Moderately important, 3 = Highly important
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Figure 5.19 Degree of Importance of Objectives on Innovation Activities Based on Business Sectors
Note: Mean indicator: 0 = Not relevant, 1= Least important, 2= Moderately important, 3 = Highly important
As portrayed by the illustration in Figure 5.20, the most important factor that influences and will give greater impact on marketing and organisational activities for all company sizes is on improving quality of products and services i.e. 35.06%, 33.97% and 34.53% for large, medium and small business enterprises respectively. The impact on improved products and services quality is obvious as that is exactly what customer needed and will buy.
The least favored factor and not of major interest to any business entity of all company sizes is the impact on employee work satisfaction or reduced rates of turnover. On the other hand, factors such as reducing the time to handle customers’ needs and cost of output or services are significantly of higher importance that influences innovation for all size of companies.
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Figure 5.20 The Impact of Marketing and Organisational Innovation Activities Based on Company Size
Because of innovation activities by both business sectors, namely manufacturing and services companies, the effect on most expectations are supportive. As a result, productivity increases, quality of products and services have also improved significantly.
As shown in Table 5.13 and Figure 5.21, the mean of every aspect has tremendously enhanced and the effect for manufacturing in particular stays above 2.20. This indicates greater impact or effect that brings about greater changes in terms of methods or approaches in their pursuit of innovation. That includes increase range of products for customers’ selection; increase market share; improve products and services quality; improve production flexibility and capacity;
increase value added; reduce material usage and energy consumption; and importantly reduce the impact on environment. In addition, the most respectable effect of innovation are the innovation activities that met the regulatory or standards as required.
It may seem that the impact on services sector innovations is less than the average mean of 2.00 for all areas, but that does not mean no positive effects takes place. The average indicator for services sector of the effect is well above the mean of 1.90, which illustrate a strong impact.
The most glittering effect for the services sector is the quality of goods and services that they provide i.e. mean of 2.26.
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Table 5.13 Effects of Product and Process Innovation
Effects of Product and Process Innovation Mean
Manufacturing Services
Increased range of products 2.19 2.09
Entered new market or increased market share 2.23 2.01
Improved quality of goods or services 2.49 2.26
Improved flexibility of production or service provision 2.28 1.98 Increased capacity for production or service provision 2.32 1.98 Reduced labour costs per unit produced or provided 2.13 1.68 Reduced material and energy per unit produced or provided 2.09 1.62 Reduced environmental impacts or improved health and safety 2.08 1.74
Met regulations and / or standards 2.19 1.94
Increased value added 2.20 1.98
Total Average Mean 2.22 1.93
Note: Mean indicator: 0 = Not relevant, 1= Least important, 2= Moderately important, 3 = Highly important
Figure 5.21 Effects of Product and Process Innovation Based on Business Sectors
Note: Mean indicator: 0 = Not relevant, 1= Least important, 2= Moderately important, 3 = Highly important
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Table 5.13 Effects of Product and Process Innovation
Effects of Product and Process Innovation Mean
Manufacturing Services
Increased range of products 2.19 2.09
Entered new market or increased market share 2.23 2.01
Improved quality of goods or services 2.49 2.26
Improved flexibility of production or service provision 2.28 1.98 Increased capacity for production or service provision 2.32 1.98 Reduced labour costs per unit produced or provided 2.13 1.68 Reduced material and energy per unit produced or provided 2.09 1.62 Reduced environmental impacts or improved health and safety 2.08 1.74
Met regulations and / or standards 2.19 1.94
Increased value added 2.20 1.98
Total Average Mean 2.22 1.93
Note: Mean indicator: 0 = Not relevant, 1= Least important, 2= Moderately important, 3 = Highly important
Figure 5.21 Effects of Product and Process Innovation Based on Business Sectors
Note: Mean indicator: 0 = Not relevant, 1= Least important, 2= Moderately important, 3 = Highly important
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Table 5.14 Effects of Marketing and Organisational Innovation Based on Business Sectors
Effect of Marketing and Organisational Innovation Mean
Manufacturing Services Reduced time to respond to customer or supplier needs 2.32 2.22
Improved quality of goods or services 2.46 2.42
Reduced cost per unit of output or services 2.08 1.95
Improved employee satisfaction and / or reduced rates of
employee turnover 0.41 0.29
Total Average Mean 1.82 1.72
Note: Mean indicator: 0 = Not relevant, 1= Least important, 2= Moderately important, 3 = Highly important
On the perspective of the effect on marketing and organisational innovation both manufacturing and services sectors indicate almost similar trend of responses (Table 5.14 and Figure 5.22).
The most unfavorable effect is on employee satisfaction/reduced rates of employee turnover for both sectors with a mean of 0.41 and 0.29 for manufacturing and services respectively. Other effects considered favorable are reduced response time to customers and suppliers i.e. 2.32 and 2.22 for manufacturing and services respectively, improved quality of goods and services with a mean of 2.46 for manufacturing and 2.42 for services, and reduced cost per unit output with 2.08 for manufacturing and 1.95 for services.
Total average mean of the four aspects of effects of Marketing and Organisational Innovation is 1.82 for manufacturing and 1.72 for services with overall mean of 1.77. This data indicates the important influences that marketing and organisational innovations have on both business sectors.
Figure 5.22 Effects of Marketing and Organisational Innovation Based on Business Sectors
Note: Mean indicator: 0 = Not relevant, 1= Least important, 2= Moderately important, 3 = Highly important
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Table 5.14 Effects of Marketing and Organisational Innovation Based on Business Sectors
Effect of Marketing and Organisational Innovation Mean
Manufacturing Services Reduced time to respond to customer or supplier needs 2.32 2.22
Improved quality of goods or services 2.46 2.42
Reduced cost per unit of output or services 2.08 1.95
Improved employee satisfaction and / or reduced rates of
employee turnover 0.41 0.29
Total Average Mean 1.82 1.72
Note: Mean indicator: 0 = Not relevant, 1= Least important, 2= Moderately important, 3 = Highly important
On the perspective of the effect on marketing and organisational innovation both manufacturing and services sectors indicate almost similar trend of responses (Table 5.14 and Figure 5.22).
The most unfavorable effect is on employee satisfaction/reduced rates of employee turnover for both sectors with a mean of 0.41 and 0.29 for manufacturing and services respectively. Other effects considered favorable are reduced response time to customers and suppliers i.e. 2.32 and 2.22 for manufacturing and services respectively, improved quality of goods and services with a mean of 2.46 for manufacturing and 2.42 for services, and reduced cost per unit output with 2.08 for manufacturing and 1.95 for services.
Total average mean of the four aspects of effects of Marketing and Organisational Innovation is 1.82 for manufacturing and 1.72 for services with overall mean of 1.77. This data indicates the important influences that marketing and organisational innovations have on both business sectors.
Figure 5.22 Effects of Marketing and Organisational Innovation Based on Business Sectors
Note: Mean indicator: 0 = Not relevant, 1= Least important, 2= Moderately important, 3 = Highly important
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On comparison of the effects by marketing and organisational innovation on large, medium and small business enterprises for both sectors, the data did not reflect much difference with a mean average of between 1.88 to highest of 2.57 for first three effects. The exception was employee satisfaction with an average mean of between 0.25 and 0.48 (refer to Figure 5.23).
Figure 5.23 Comparison on Effects of Marketing and Organisational Innovation
Note: Mean indicator: 0 = Not relevant, 1= Least important, 2= Moderately important, 3 = Highly important