Assessing Appropriate Technology for SMEs in the changed business perspectives

Saleh Ahmed Choudhury :
Today the process of globalization has encouraged the Multinational companies to spread their branches and offices all over the world. Globalization has inevitably kindled keen competition in the operations of all business. This competition has generated a need among all the enterprise ranging from SMEs to large entities to adjust their strategies for their survival A large number of multinationals have reached the limits of the traditional model for generating growth by just inventing new products and selling them out worldwide. These products therefore, saturate many global markets.
Taking advantage of their size and strength, most multinational companies are developing critical sets of competitive intelligence tools. They have fundamental and applied research units and have specific departments dedicated to gathering and analyzing new trend and technologies in commercial and marketing intelligence. SMEs, on the other hand, for their small size and lack of skill in technology development arc inherently in a disadvantageous position to compete with the large firms in the global arena.
Inspite of all these adversities, the governments of many countries, particularly in the Asia including Bangladesh after the financial crisis in the Continent in mid 90’s, have placed emphasis on SMEs. They believe SMEs will be the new driving forces for economic growth in the future. There is also a general belief that the future accelerated growth and sustainability of SMEs will largely depend on the use of appropriate technology and acquire and absorption of knowledge by them.
Successful SMEs will be those, which would be able to acquire, integrate and apply these technologies in their overall strategies for their survival in the global competition. This article also discusses suggestions for appropriate technology suitable for SMEs in Bangladesh in the changed business perspectives.
Bangladesh has been showing keen interest to promote SMEs in the country. It has already set up SME Foundation in early 2000s, devoted to this end. Even before the creation of SME Foundation, Bangladesh Small and Cottage Industries Corporation (BSCIC) has been serving the purpose of promoting Small Industries in the country since 1957. Of course, BSCIC needs revitalization and strengthening to suit the needs for the new challenges of modern technology and globalization. Even SME Foundation has to be strengthened to support the SMEs in the light of the challenges of technologies and investment supports. Bangladesh has established. High-tech Parks, Industrial Estates by BSCIC, EPZ, and 100 other Special Economic Zones (now 12 in operation) spread around the county for local and foreign investment. It is expected that large number of foreign investors will be coming to take advantage of cheap labour and recent government incentives. Most of this investment will be in the area of SMEs. Bangladesh therefore needs proper agencies and statutory bodies with adequate knowledge to deal with this changed context, globalization and free economy.
Appropriate Technology : What and why
Technology first of all is a process by which certain resources such as land, material, manpower skill etc. are utilized to obtain some desired products like food grains, clothing, household goods etc. The word technology tends to conjure up picture of large factories, huge automobile plants, gleaming jets etc. These, of course, represent the icons or modern technology. But technology encompasses a great deal more. The small sawmill, tiny bakery or handlooms of a weaver is also integral part of mosaic of technology. Technology can thus be defined as the method or technique for converting inputs to outputs in accomplishing a specific task.
Appropriate technology is that set or technology that is appropriate to meet the needs and the development goals of country. For a developing country like Bangladesh appropriate technology may be a mix of modern, intermediate and simple technologies. Appropriate technology aims at a better balance of the three levels of technology that is modern, intermediate and simple or traditional in order that (a) effective and sustainable development and (b) accelerated growth can be achieved and (c) firms use them can stay competitive with their products.
It has been seen that the appropriate technology helps to accelerate the process of :
* Building indigenous skill innovativeness and entrepreneurial attitude. It tends to release greater creative potential of the people ; and
* Utilizing a great deal more human and material resources available within the county.
It is worth emphasizing that appropriate technology does not imply rejection of modern and sophisticated technology. For example fertilizer plants represent modern technology and they are appropriate for Bangladesh. Also appropriate are such sophisticated technologies as satellite imagery and remote sensing techniques for determining crop production and natural resources and for forecasting cyclone or floods. In fact, modern technology can bring success in many ways. For example, the miracle rice irrigation dependent IRRI was successfully modified into high yielding varieties of Aman (BRRI 4.10.11 etc.)-a major variety of rice crop in the country by the local research technologists. This technology helped to achieve a break-through in the food production of Bangladesh and as such is successful specimen of appropriate technology in this area in the country.
Thus appropriate technology should be understood as a dynamic technological concept and not just a policy of manufacturing low cost traditional items. It should have the following characteristic :
* It should stimulate or contribute to economic progress by making use of the local resources, manpower and material.
* It should represent technical progress by raising technological levels of existing methods.
* It should have an evolutionary capacity, so that progressive transformation of technology can occur.
* It should represent social progress by enhancing the process of productive employment generation.
Appropriate Technology for SMEs
The globalization has made SMEs to operate in a very competitive world. They usually fill in gaps that large enterprises currently cannot serve, though there is a tendency still exists with the large firms to enter into such niche markets. They occasionally do it by spinning off small departments or by purchasing small firms. SMEs must therefore be creative and innovative and keep on improving their technology and operation techniques. In fact, due to their limited resources it is difficult for SMEs to directly invest in or invent any new technology. But this can be done comparatively cheaply through technology and knowledge transfer.
The present trend of globalization of trade defies the classical notion of appropriate technology. Now it imparts a dynamic growth pattern instead of static one, a characteristic that originates from its classical definition. The present market trend demands structural changes at the enterprise level and a shift from traditional to better production techniques. This generally requires higher capitalization to manufacture acceptable products for the competitive market though this capacity is beyond the reach of most SMEs. Thus appropriate technology for SMEs has to be seen as the most suitable package of production techniques covering related production sectors and in the context of dynamics of production in the sectors over time.
Science and technology (S&T) cuts across national boundaries. Industry a major beneficiary of S&T has therefore can gain by integrating with the international S&T community. All countries seek to ensure that they derive maximum benefit from the globalization of Science and Technology. SMEs can also benefit from new process, techniques or new idea of production, improved marketing and management or accounting procedures that are developing around the world. SMEs with new technology may be able to overcome diseconomies of scale so as to compete with large enterprises. Many companies transfer technology to make their processes more global and diverse. Technology transfer has exhibited a positive effect on the exchange of information between companies and enhances their ability to adapt. However these benefits will be best achieved only if the companies select the right technology and right strategy and understand the process of technology transfer and technology assessment.
To survive in this keenly competitive market SMEs must learn to monitor technological development actively. They must react quickly to relevant changes and renew and improve their products and processes regularly in order to compete and prosper. But before getting involved in technology transfer or adaptation they need to determine which technology they would like to receive from or jointly create with their partners or which technology they are willing to share with them to minimize the risk of adaptation. The task is very complicated and difficult and needs fine skills and judgment. It is difficult to determine the appropriate technology for one’s company. This becomes more difficult because most of the parent companies seldom offer to share any core technology for strategic reason. Before any negotiation on technology transfer or adaptation, one must bear in mind that the appropriate technologies are those that match the needs of the receiving company or individual in terms of the transferee’s level of knowledge, commitments, financial constraints, etc. Appropriate technologies are compatible with one’s need for creativity.
Technology transfer/diffusion and its growth and fall
Technology spreads out across industries or countries through the process of technology transfer and technology diffusion. Technology transfer refers to the development of a technology in one setting before being transferred to another setting. But technology diffusion is used to describe the spreading or use of a technology within a society, country organization or group of individuals.
Thus, technology transfer tends to refer the producer of the technology while diffusion focuses principally on the end user of the technology.
Technology is man-made and is mostly produced in the research and development (R&D) organizations (within an enterprise or independent), mostly in the form of hardware or software. But out-put of R&D organizations become technology only when they are used. Technology that exhibits a relative improvement in performance or cost over older (established or conventional product or technology) eventually substitutes for the product or technology of lesser performance or higher cost. Diffusion refers to the acceptance, over time, of some specific technology (product or know-how) by individual, group or organization. Since new technology is better and economically more viable, after it has gained a small market share, it continues to grow its market share from the older one till eventually it takes over the major part of the available market.
Both use and efficiency of technology is growing exponentially. Many reasons can be cited for this. Some of these are :
* Innovations breed innovation;
* Innovations all over the world are more and more pooled together as the barriers to communication are gradually reduced ; and
* Methods of problem solving are improved at an accelerated pace.
New and effective technologies are pouring in every day as a result of stepped-up pace of innovation, substitution and diffusion. This in turn is accelerating the whole process of technological changes even more. New machines and technologies are not merely products, but sources of fresh creative ideas. Each new hardware and software, in a sense, changes all existing technologies by permitting to put them together into new combinations.
Usually the growth of any particular technology conforms to an S-shaped curve, known as S-curve (fig-l) which, indicates the technology life cycle. Fig-1 shows each technology passes through an incubation phase where many ideas are reduced to one successful idea for introduction into the market. In the introduction phase the number of application of the new technology increases very slowly in the beginning. Later when it starts increasing rapidly the technology is in its growth phase. After some time, its growth is reduced and some stability can be observed in the maturity phase. Finally an improved substitute makes the technology obsolete in its decline phase. Therefore in any assessment for selection of technology, computation of its life cycle always comes into consideration to avoid risk of premature obsolescence.
Technology Life Cycle
Advanced technologies : When they are appropriate for SMEs
The world is now passing through an exciting stage of technological progress. It is demonstrating an unprecedented potential. ranging from computer that think like human beings to nuclear fusion plants that produces electricity from ubiquitous substances extracted from sea water and recombinant DNA or genetic engineering leading to the birth of an entirely new industry in bio-technology that goes up to DNA biochips. Nano-technology, ICT and even Micro Electro Mechanical Systems (MEMs) are also very lucrative technological opportunities at the moment. These are emerging technologies, though very disruptive are beginning to facilitate new product development in many different industries. Now not a day goes by without news of some seeming break-though in these areas of science and technology.
Advanced technologies have brought about changes in the manner of production. The mechanical engineering industry has been strongly revivified by the age of electronics to mechatronics which now conditions the entire industrial system. The transition from mechanical engineering to mechanics is reflected by in-depth modification of the product, which is produced by this branch. Instead of offering machines it now delivers workshops or system of machines. The product-complex, which the mechatronics industry provides, is an assembly of four types of elements. These are :
* A system/or informatics for control, management and monitoring of the whole complex ;
* An assembly of machining centers consisting of machine tools with a wide range of tools and able to work on parts with different characteristics ;
* A system for conveying the parts from the entrance of the workshop, from machining centers to machining centers and thence to the exit from the workshop ; and
* An assembly of handling units for loading and unloading that is to say the interfaces between the conveying system and to machining centers and to the entry, exit or intermediate storage areas.
These machines are numerically controlled machine tools (NCMT). They act when they receive their instructions from computers, which programme and monitor their work. These machines have opened up a new manner of production system.
This remarkable trend in production process has not occurred without affecting the industry worldwide. It has caused a considerable impact on the organization of enterprises. The developing countries are affected by this trend in two ways, both as users and as producers. Since these are faster and more accurate, any enterprise should be willing to purchase them. But it is more likely that the enterprises in most of the developing countries may find themselves unable to purchase the electronic know-how locally in its effort to proceed from machines to mechatronics.
The production of these numerically controlled machines or rather workshops is a qualitative leap from the production of discrete machines. Such workshop shows hourly productivities of factories multiplied by many units whilst the productivity per worker increases by a factor of more than ten. The lathe and machining center manufacturing plant (all numerically controlled), which Yamazaki has installed at Minokamo Japan is one of the finest contribution of the ‘Mechatronics Valley’. that prefigures the system or present day industrial strategy. Today robots. CAD/CAM, etc. are available from various sources, but it does not imply that automation in discrete engineering is easy.
The recent development in metallurgy and material science also has a profound impact on industrial and product development. New alloy and composite materials with amazing physical and electrical features and Nano-tubes and cylinders having wide range of use in industry are innovated every day. Man is now able to manipulate the atomic configuration of metals and compounds to produce his desired objects to achieve results for their desired use.
Box No-1
Apart from this, microelectronics is yet another means, which is having a profound impact on practically all sectors of industry and economy.
Advances in IT, bio-technology and nano-technology can he expected to create an unprecedented wealth and opportunities for innovation. It is not only advances in within these triad technologies, but their combination that are significant. The challenges for technology policy makers are to faster the exploitation of the emerging opportunities. Small and medium-sized enterprises (SMEs) have a special role as engine of societal change. That is why technology policy will have to create favourable conditions for innovation-driven SMEs specializing in high technology. Nations that will be able to foster the creation of SMEs that specialize in the triad technologies will have a strong competitive position.
The transition of high technology in traditional industries such as textile, metal, light engineering, etc, is undermining the competitiveness of the developing countries. The incorporation of functions previously performed by mechanical or electromechanical systems into electronic components are causing all increase in the packaging of technology into ‘black boxes’ making technology absorption and development more difficult for the knowledge have-nots. Therefore, the advanced technologies, though found appropriate for SME if they are to survive in the present global perspective, do not always find their usual place with SMEs in developing countries.
Assessing the right Technology
SMEs must be able to assess technology. They must also he able to make choice between alternative technological means in order to survive in the present global competition. This assessment and evolution of technology can be based on:
* The degree to which the technology will enable SME to meet or exceed the expectations of primary clients and customers;
* The ability of sufficient internal and/or external resources (financial/human) to acquire and implement the new technology ;
* The degree to which the technology will increase the capability of SMEs to accomplish its strategic objectives ;
* The degree to which the organizational culture will support the technology adoption and contribute to its success;
* The availability or either in-house or external expertise needed to integrate the technology with the existing technology;
* The SME’s level of control over the use of, and profit generated by technology (through patent protection or a license agreement); and,
* The degree to which SME is culpable for liability issues surrounding the application of the new technology.
But SMEs usually cannot catch-up the new and effective technologies due to :
* Financial constrains :
* Lack of capabilities to monitor technology development
* Lack of in-house R&D capability; and
* Unawareness of technology life cycle.
SMEs thus cannot obtain appropriate and correct information; even they cannot utilize the information they already have. SMEs often select the cheapest or obsolete technology and means of technology transfer.
Technology upgradation needs of SMEs
Almost all SMEs are characterized by traditional or indigenous technologies. In the present global business context it has been observed that their existing production techniques and processes are dragging them to become noncompetitive. Therefore, SMEs need to harness technology appropriate to them to enhance their national and international competitiveness. With technology based innovation playing an increasingly important role in developing global niche markets and opportunities, the old modes of technology transfer and diffusion have had to evolve in new and more effective ways. If the production process or technology is indigenous, imported technology or expertise may not support SMEs in achieving the desired results.
SMEs face serious constraints in acquiring new and appropriate technology. Thus many governments around the world arc taking up various programmes to support SMEs, particularly in the field of technology development or diffusion and in their efforts, to find out market opportunities and advantages. Many governments are also supporting their national R&D institutes and universities in conducting expanded activities to work with innovative SMEs and seeking international collaborations in necessary fields.
SMEs are facing many challenges in the age of market and trade globalization. They therefore, need to strengthen their technological base to make themselves competitive, so as to create a niche for themselves. The opportunities are immense if they can upgrade their capabilities to catch up the modern techniques or management. Production and marketing, SMEs occupy an important place in developing countries as they contribute significantly to their wealth and employment, as immediate and final producers and as consumers or goods and service. New entrepreneurs through their entry into SMEs continuously generate ideas, skill and innovation’, to enrich them further.
A strong SME Sector in a country can attract and enable foreign investors to establish and expand domestic linkages. SMEs can stimulate the growth or numerous indigenous enterprises with wide regional dispersal. But because of their size, however SMEs are less resilient to risk which prevent them from attaining economic scale. These limitations are particularly significant in the area of human resource development and access to technology and information.
SMEs face serious difficulties arising from the adjustments they have to undertake in the face of the liberalization and globalization of markets. They are also facing difficulties in their transition to high technology from traditional processes after the introduction or more precise, faster and less power-hungry technologies like numerically controlled machines, CAD CAM and other all-pervasive microelectronic devices. They therefore need enhanced supports both domestically and internationally. This support is essential in order to harness opportunities originating from the globalization of trade and investment and to cope up with the rapidly changing technologies.
In the present fast-changing business environment distinction between domestic and foreign markets is becoming irrelevant. The ‘level playing field’ offers opportunities as well as challenges to all in business and especially SMEs. This has brought opportunities to SMEs because they can sell and invest more even across the borders of their own country to earn more. This opportunity in turns brought competition for SMEs in their expanded markets. Apart from competition the changes in the customer needs and preferences are driving them to innovate of upgrade products and services to cater to the ever-changing taste and needs of the market.
SMEs will therefore, have to improve their products and services evolve marketing strategies and develop new technologies in order to remain competitive and stay at the leading edge of technology. Thus, technology and its management have become the best way of ensuring a competitive advantage in the global business on a ‘level playing field’.
To face the new challenges, the developing countries have to drastically restructure their strategic plans, develop the skill needed and build new structures in order to survive and thrive. While each nation charts its own road map based on its resources and culture, there is now the imperative for all acquire, assimilate and apply proven technologies and move from imitation to innovation. In this difficult task all players’ governments, R&D institutions, universities organizations, other learning systems and businesses have clear responsibilities.
Bangladesh offers enough incentives and facilities for investment but in practice it is often alleged that these are constrained by many impediments. SMEs in Bangladesh face a number of severe constraints to grow. These are: Lack of modern /appropriate technology ; lack of access to technological information and consultancy service; isolation from technology hubs; emphasis merely on production but less conscious about productivity and impending challenges ; lack of adequate investment and desire to avoid risks; poor information about market opportunities ; lack of marketing facilities and market access; lack of skilled manpower ; lack of R&D facilities ; high rate of interest on bank loans ; inadequate Institutional support services. For a healthy growth of SMEs and industrial sector as a whole. Bangladesh needs very urgently to provide proper support services to address these problems effectively. SME Foundation, BSCIC. Business promotion Council, EPZ Authority, Bangladesh Investment Board, Export Promotion Bureau should be revitalized and strengthened with adequate technical manpower and logistics to be able to provide the entrepreneurs with knowledge and information for profitable and risk free investment. R&D organizations and Higher Education in science and technology should be encouraged and rearranged to be able to help the industries in their R&D efforts wherever necessary and even technology incubators may be encouraged in the Universities. To generate enough skilled manpower, the technical and vocational institutions should be provided with modern laboratories to produce need based manpower. With it’s cheap and abundant manpower, Bangladesh is the most likely country to offer the best opportunity for the development and growth of SMEs, and for any venture if these supports, FDI, can be provided with right earnest.

(Saleh Ahmed Choudhury was General Manager, Technology Division, Bangladesh Small & Cottage Industries, Dhaka. He has over 45 years, of experience in the field of Science, Technology and Industry. He wrote many articles on S&T, industry and SMEs published in both national and international journals. He worked as consultant for Government and international organizations. He also visited countries like, India, Korea, Japan, Hongkong, Malta etc representing the country for workshops, seminars, study-tour consultations etc. Sponsored by UNIDO, ILO, and Asia Electronics Union etc on topics like workshop on Industrial co-operation among selected Asian Developing countries, Seaul First consultation on Electronic Industry, Malta; Meeting of Study Group for revitalisation of Asia Electronics Union (AEU); Study Tour to India and Hongkong on Subcontracting and Anciliary Industries.
He worked as Counsellor, International Rescuers Committee founded by USAID (1972-1975) He was Curator, National Museum of Science and Technology, Dhaka (April 1975-January 1987), Project Director, Electronic Complex and Sub-contracting Project (a vertical monotype industrial estate), of BSCIC (1989- 1996)
Saleh Ahmed Choudhury prepared and presented an Economic Policy Paper on “Assessing Appropriate Technology for SMEs” sponsored by DCCI-CIPE/ERRA (an affiliate of US Chamber of Commerce, Washington DC, USA) in 2003. This document, in addition, contained sub-sector studies on (a) Light Engineering Industries (2) Electronics Industries (3) Software Industries and (4) Agro-processing Industries in the SME sector.
As SME sector expert, he studied the five sectors that BPC Ministry of Commerce has been working. Those were ICT, Fisheries, Herbal, Light Engineering and Leather.
He also prepared Training manual for Bankers as a Consultant to encourage financing of SMEs. He was Convener of a Committee and prospered a project for establishing ‘Common Facility centre to support SMEs with workshop facility, tasting lab and Technology for Ministry of Commerce.
Saleh Ahmed Choudhury is now a freelance Consultant in the field of Industry & Technology.)