Its that time of the year again

We are at another end of an eventful year, again. For people in professional services industry, this is the period that they hope does not exist. Most key clients are either on holiday, overseas or other sound reasons why they should not be in the office. Most will defer any new contracts or engagements until the new year or worst, after the Chinese new year. Even to collect your fees may be tough as cheque signatories may not be around although the cheques are ready for signing for a while already.

What am I mumbling about?

I am discussing about the period where most people do nothing. However, when the new year starts, most will be singing new plans, ambitions and targets. How do they suddenly pull out the rabbit from the hat, just like other business people?

Some people are serious about planning for the future, some just feel they need something new while others couldn't be bothered to look ahead at all. This is a free world, people are entitled to do what they like. Off course, the consequences of their attitude and behaviour would not be the same.The one who take planning and execute their plans have better chance to be successful. Those that run their business as usual may not necessarily going to go bust just because of that, but may have higher chance to be so or simply would fail to capture new opportunities appearing in the market place.

So, what is in store for us in Malaysia for 2008? Wait, I am taking out my crystal ball!

I see few trends that are worth to be considered.

On the political front, we may be going for general election again. I am not going to speculate on the outcome. However, once the general election is over, the government (I am assuming no significant change from the present) will be able to make tougher decisions on issues that require strong actions. The issues like petroleum subsidy, implementation of the Ninth Malaysian Plan (we will be halfway of the plan by then) require strong commitment from the government. I am not also surprised if the long awaited Goods and Services Tax (GST) will be announced as soon as the election is over to enable enough implementation period and enough time for people to adjust so that it would not be an issue in the next election.

Economically, the growth trend would continue especially with further spending from the Ninth Malaysian Plan projects which will mitigate whatever effects arising from reduction of export abroad which is expected as the consequences of higher petroleum prices globally and the financial chaos due to the sub-prime debacle which is hitting the US and other capital markets globally. The challenge for the small and medium enterprises in Malaysia, which make up around 95% of businesses, is how to capture the economic opportunities. Those that rely solely on handouts from the government would have to compete more with their own kind and their number grows. I suppose looking at the larger market and being more competitive would be the only way to sustain your business. They should start to take seriously the intent of the Malaysian government in encouraging Malaysian businesses to move up the value chain and be part of the global business supply chain.

Our society will continue to learn how to live in a more global and networked world, hopefully. The push for enterprises to be more socially responsible would create further interest in this area. I hope companies are not only concern about CSR after they make profits but in how the profits are made and how their behavior affects the society. The demand for accountability would be more visible, especially from those who got their power from the public (read politicians, especially those who are in the government) and the civil servants. This is where enterprises could play their role by not involving with practices that compromise public interest. Knowledge based business would be growing, as Malaysia as a whole invests further in human capital development to have more people to drive the economy forward.

Technology will continue to influence our live next year. With new technology based business solutions and tools, businesses could improve their competitive edge by venturing into new business, improve production and work processes as well as extending their market through new delivery channels. Its would be interesting to observe the rolling out of the WIMAX services by the companies that were awarded with the license. Further growth in broadband panetration would certainly create more opportunities to businesses to use the web to capture new markets.

With the recent summit on environment over in Bali, I expect the Malaysian government and Malaysians generally would be more concern on how we could enjoy development and growth without further demaging whatever that is left from our environment. I suppose companies which could make themselves visible as "environmental friendly companies" would be given favourable preference in contracts and tenders, other things being equal. Let's watch this space as well. There would also be a lot of business opportunities in saving the environment!

I suppose the above trends would only be meaningful to businesses which look at them and try to identify business opportunities or threat that come together. Further, they need to work out plans and initiatives to capture the opportunities. This has to go to the level where specific people is given responsibility to ensure specific outcome to happen and this has to be tracked on a continuous basis. If not, you will get the old year overhang and your new year will not bring much different.

Happy New Year 2008!

A Week On Innovation

I was fortunate to be in Penang again, this time to do few things in my capacity as the President of the Malaysian Institute of Accountants. Interestingly, all the events that I attended had to do with "innovation", the catchy word that is gaining more significant in today's world which is full of uncertainty. First, I attended a discussion session with the faculty members of the School of Management at the Universiti Sains Malaysia (USM). I shared my thought on issues relating to the accountancy profession and what the future would be. The faculty members did not disappoint me as they post me with questions ranging from PCAOB to how a more sustainable business governance could be shaped, by focusing on the heart of people rather than creating more rules. Significant portion of the discussion was also on Islamic Finance, which is gaining popularity and where Malaysia aspire to lead the world.

At the end of the session, as what we normally do in Malaysia, I was handed a souvenir. In line with the institution that I was visiting, I was handed a book. This is where I got excited. It is about what sort of university USM is going to be in the future. USM is considering a number of models such as virtual university, industry lead university, government lead university and a number of other models that would make USM significantly different from where it is now.

Hey! They are also concerned about the future after all and dare to consider models that are totally different from what USM is used to be! It gives me confort that our institution of higher learnings are innovating themsleves. What would be interesting is whether they are allowed to be different, since being different means they may need to be lead by different group of people who perhaps, would be more confortable of being challenged, at least intellectually.

Next, I attended the MIA Business Forum 2007 with the theme "Driving Innovation". The highlight of the conference was round table discussion attended by CEOs of Malaysian and global companies. All of them talked about competitive edge, competing globally and the need to nurture quality human capital. Innovation is not limited to scientific discovery only but covers a wider areas including business process, supply chain management, distribution and a host of other areas. The message is very simple, without innovation there wouldn't be competitive edge. Without competitive edge your business is not going to survive! Period.

The MIA Penang annual dinner was held in the evening. What has got dinner to do with innovation? I noted few things. One was the theme of the dinner, Baba and Nyonya Night. The theme allows people to be innovative in choosing their attire. The dinner hall was also innovatively decorated in such a beautiful way in line with the theme. Second was the violin performance. The lady performer was energatic and dancing around in line with the tune of the songs, no longer a violinist stands still! Well, at least for me, violin performer will never be seen in the traditional light again.

So, over two days, I observed professors, lecturers, CEOs, diners, event managers and performers displayed the concept of innovation. Everybody wanted to achieve differentiation and attain competitive edge. I trust this would be pursued by all Malaysians, so that Malaysia will continue to be a great country for a very long time.

What Happened to the Teotihuacán?

I had the opportunity to visit Mexico recently to attend the International Federation of Accountants Council meeting. It was held in Mexico City, a city with around 20 million population. Besides spending my time in meetings and seminars (I shared Malaysian Institute of Accountants experience in having a mutual recognition agreement with the Ikatan Akuntan Indonesia), I went to visit one of the most visited site outside Mexico City on the last day of my stay, the Teotihuacán pyramids.

Like many of the archaeological sites in Mexico, Teotihuacán guards secrets we have yet to unravel. The origins of Teotihuacán are uncertain, although it is thought some of the inhabitants arrived from the Valley of Mexico to the south, refugees from an eruption of the Xitle volcano, which caused major devastation and forced the survivors in the region to seek a new place to settle. Construction of the city probably started in the first two centuries BC, and the civilization reached its high point between 350 and 650 AD.

One of the greatest mysteries of Teotihuacán is that no one knows where the huge population that lived here eventually ended up. It is as if they vanished without a trace. What happened? Building pyramids was never easy. So I supposed they should be a group of people with high intelligence and at least, with superb design and project management capabilities. Reflecting this on business, I am sure you could recall brands or companies that were dominant in the past but are no longer in existence. This is meant to suggest that no matter how successful you are now, the future depends on how you seek opportunities from the dynamic business environment and how successful you are in managing the ever changing risks. You simply cannot be in a standstill position!

Many people in business tend to be complacent upon reaching certain level of success. However, as what I always preach, what worked yesterday may not be so tomorrow. It's all about looking forward, undertanding trends, identifying and capturing opportunities and ensuring your business remain competitive against major competitors, which could also change in nature and number. Competing as a contender is definately different than competing as a defender.

So, if you feel that your business is quite successful, please remember of what happened to the Teotihuacans!

Management Lessons From Golf

I just came back from Kota Kinabalu attending some official functions. Somehow, I managed to have a golf game at the Sutera Harbour Golf and Country Club with few friends. One may wonder what is the relationship between golf and management matters? Baharuddin, my buggy mate really assisted me to improve my game that day, in fact I played my best game ever on the second nine! Did I changed my swing to drive longer? No! I played my normal game but with a slight twist, I managed my game.

Having seen how badly I performed on the first few holes, Baharuddin started to coach me, in the most diplomatic way. He started by encouraging me to accept that a golf game is not about me competing with other players but its about me competing against myself and the golf course. "Just play within your capabilities" he told me.
Next was about course management. "You don't have to overdrive your playing mates, just place the ball where it is easy for you to hit your next shot" he added. When I started to play to my capabilities, my game totally changed. The ball started to remain on the fairways instead of going into the roughs, as what would normally happen during my previous games. It took me less shorts to reach the green.
"Don't overestimate your self and underestimate the course" was his next advice. I was using higher clubs as I thought that I could make the distance. My using lower clubs, my ball started to be closer to the targets, instead of falling short as what I usually manage. As my game improved, so was my confident. In fact I managed to score three pars in a row.
After the game, I felt very pleased and did not feel the normal pain that I used to experience as I was fairly relaxed during the game. Reflecting what had transpired on the golf course, there are a few lessons that I learned which could also be used in managing business.

First is about knowing yourself, your capabilities and weaknesses. This is important so that as managers of business, we do not venture into areas where we are not capable. If we fail to acknowledge where we are week, we may expose our business to unnecessary risks.

Second in about planning and executing your plan well. "Failing to plan is planning to fail" is a saying that we are often reminded of. However, we have to execute the plan, based on the capabilities that we have. We cannot compete with a competitor on the same ground if our capabilities and strengths are different. Fine our niche and play our strength.

Off course, sometimes we have to change plan. In golf, if the ball falls away from our target, we have to change direction to reach the pin. This principle is also the same in business, except in business we are not that sure where "our business pin is" if we do not have a plan.
Finally, not necessarily exhaustive, is about being coached by somebody that is sincere in wanting you to be successful. Every manager or entrepreneur may have areas that require improvements and with somebody who have the skills to guide, the future could be better for those who are willing to be coached.

I suppose its time for me to head towards my next game of golf!

Taking On Problems Head On

In running a business,in most cases, things may not happen as planned. A new competitor could suddenly appear, sudden shift in customers' preference or events that happen thousands of miles away could create chaos in the market such as SARS and the latest, the sub-prime loan debacle in the US.

While some may feel the sense of hopelessness due to circumstances which may not be in their control, an entrepreneur has to move on and make things work. Otherwise, all his investment may flow down the drain. We have to take on problems head on and not to bury our heads in the sand. Doing nothing may not solve anything, in fact, could worsen the problems.

What are the steps that we need to do to resolve the problems we face?

First, one has to accept the reality that he has a problem that need to be resolved. This acceptance would trigger the mind to figure out the solutions. The longer we deny reality, situation could deteriorate to a point where solutions no more solutions could be found.

Second, we have to identify the "ideal position", how would it be when the problem is resolved. This would provide us with a frame of mind as to what the possible outcome would be. If we worry too much about the issues and not considering what the end would be, we may get sucked further into the issues.

At this stage your would be able to see how far you are from the end of the tunnel. As a third step, this is when you would consider the options that is possible and the chances of them to be successful. Once you have the sense of their achievability, you could decide to pursue a number of options simultaneously, as what others would say, to keep the options open. How far this is practical depends on the resources available at your disposal. If would not hurt if you seek views from people who you trust and could provide valuable advice.

The forth step is where you have to really put your effort in following through with what you have decided. A long the way, you would find that some of your assumptions may not be valid and new options may need to be considered. Circumstances could also change that what was possible may not be so. As we are in the real world, this has to be accepted as well. The only constant in the world now is change. Time could be important in most cases since most window of opportunities may not be available forever.

Finally, after all the thinking and hard work, hopefully the problems are resolved, not all the time though. If some of the steps have to be repeated, so be it. That how the world works.

Good luck.

Accepting the Need to be Competitive

To most small businesses, competition is very scary term. Most would prefer to insulate their businesses from this evil and sail smoothly alone. What a wishful thinking! Like it or not, competition is something like air to business and no matter what business you are in and the size of your business, being competitive is the only safeguard that would ensure you will continue to be in business tomorrow.

So, how does a business is managed in order to be competitive?

First, an entrepreneur must accept that competition is a fact of business and he or she needs to put all necessary effort to attain competitiveness in the market the business is in. Acceptance is the key. Otherwise, the entreprenuer would continue operating by ignoring the key factor to sustain its business.

The second step is perhaps for the entrepreneur to figure out the value proposition it is offering to the market it is serving. This would require the "market" to be defined. If you are operating a burger stall by the road side, who are your intended customers? People living in the serrounding housing estates, students, office workers? By knowing the market, the business has to decide what would make it special to the people it intends to sell. Tasty food? Average food at low prices? Convenient? A combination of all these offerings? In figuring out the value proposition, one has to understand what the market wants and not just the business wants to sell. If the later is the case, effort in making the market to understand the value offered is critical.

The next step to deliver the product or services to the customers based on the value proposition that has been determined earlier. This is the complicated bit as it requires real performance. In the case of the burger stall, it has to be at the right location, the food must be tasty and clean, workers work fast enough based on the expectation of the customers and the price is both affordable to the customers and profitable to the business.

As in any other elements of life, the competitive factors keeps on changing and the entrepreneur has observe the changes in the market place to retain its competitiveness. For example, if business is good, a competitor may set up a similar business within the same vacinity. How do you respond to this? Lower prices? Offer new type of burgers? If your response is consistent with the value proposition that you offer, the chances of maintaining competitive edge is higher.

As described above, a business exist in a dynamic relationship with the market it serves. Therefore, an entrepreneur has to be clear of the value proposition it offers to the market as well as the competitors which may be focusing on the same space in the market. Understanding the dynamics and responsing fast enough to the changes in cirsumstances would provide a business a better chance of sustainability.

Opportunities for SMEs in Regional Development Approach

The Prime Minister has recently launched the Northern Corridor Economic Region (NCER) which covers the state of Perak, Penang, Kedah and Perlis. This is the second economic region after the Iskandar Development Region (IDR) which is principally in Johor but with focus on creating synergy with Singapore as well. The next development region which will be launched would be the Eastern Corridor Economic Region which will cover the east coast states.

Regional development concept is not new to Malaysia. The so called Klang Valley is an example of economic region which perhaps covers Kuala Lumpur, Petaling Jaya, Shah Alam and may be Nilai. The different between Klang Valley and the new economic regions is that Klang Valley is defined by the business needs and reality while the new economic regions are promoted by the government as a strategy to stimulate greater economic growth in those regional areas. Another regional concept that has been applied is the territorial development areas such as KADA, Ketengah etc. This approach focuses on smaller areas in states of Malaysia.

Why suddenly we are going the regional approach?

I suppose that Malaysia has reached a stage that we are mature enough to work on development beyond the "state" basis. The thinking now, perhaps, is that by linking growth centres across a defined region, the economic benefits would be greater than by allowing the centres to grow on their own. I am not surprised that the centres could also have policies which would neutralise the benefits of other centre, if left unchecked! It’s about the sum of the whole is greater than the sum of individual regions.

Where is the position of the SMEs in this regional developmental concept?

I suppose if we look at the details of the projects that have been identified; it provides the SMEs a clear understanding of the economic direction. The IDR for example is positioned as an international city, where there is lower barrier to trade and high level of competition. Whereas the NCER is focusing more on growing economic contribution from selected economic activities in which the region has the potential to excel, which covers, among others, agriculture, manufacturing, tourism and logistic services.

The regional approach also consolidates the market which SMEs could target. If, for example, at present the market is only targeted at a particular state, now it could be expended to cover the whole region by leveraging on the facilities that are introduced with the concept. The SMEs could start identifying their counterparts who they could work with within the economic regions who they could work with and compliment each other.

One of the message that I could deduce from the regional economic development approach is that the government wish to see Malaysian companies to perform and earn market respect, at least in those areas, before the greater challenges from globalisation become more adverse. For the SMEs, this is an opportunity to have another look at their business models and strategies so that they could sustain their competitive positions and survive.

This is another indicator that SMEs have to grow and play a different game to survive the competitive liberal world. So, let’s move on together and make Malaysia a pleasant country to live in.

Making SMEs Competitive

The Small Medium Enterprises (SMEs) sector is vital to any economy. In the so called "new economy", this sector has demonstrated its potential when big ideas from then "small" individuals ended up in creating amongst the world largest companies such as Microsoft, Google etc.

The challenges for entrepreneurs behind these SMEs are enormous. They include identifying opportunities in the ever changing business world, developing winning business models, manage the business to deliver their value proposition to the targeted markets and eventually generate values (economic or otherwise) to themselves. They have to get all these right or otherwise, they would be joining a long list of others who have failed ~ around 70% of startups would fail later!

I have been involved with entrepreneurs and the SMEs since my first employment in a chartered accountancy practice in Perth, Australia, in 1987. Since then, my career in public accountancy, my involvements with accountancy bodies in Malaysia and Australia and my appointments to govermental bodies which relate directly or indirectly with business and competitiveness have contributed to my passion in encouraging and facilitating SMEs to move up the value chain and attain sustainable competitiveness.

Through this medium, I intend to share my views and thoughts on issues relating to competitiveness of SMEs which I believe is very critical in making this world a better place for everybody.

Nik Hasyudeen