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DRAFT MALAYSIAN SDU16ISCO001R0 STANDARD STAGE: PUBLIC COMMENT (40.20) DATE: 01/02/2018 02/04/2018 Incubator management - Guidelines on establishing and operating incubation centre ICS: 03.100.99 Descriptors: incubator, management, guidelines, establishing, operating, incubation centre © Copyright 2018 DEPARTMENT OF STANDARDS MALAYSIA

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DRAFT MALAYSIAN SDU16ISCO001R0

STANDARD

STAGE: PUBLIC COMMENT (40.20) DATE: 01/02/2018 – 02/04/2018

Incubator management - Guidelines on establishing and operating incubation centre

ICS: 03.100.99 Descriptors: incubator, management, guidelines, establishing, operating, incubation centre

© Copyright 2018

DEPARTMENT OF STANDARDS MALAYSIA

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Contents

Page Committee representatives ......................................................................................................... ii Foreword .................................................................................................................................... iii Introduction ................................................................................................................................ iv 1 Scope ............................................................................................................................. 1 2 Terms and definitions .................................................................................................... 1 3 Overview of incubation centres ..................................................................................... 6 4 Incubator guidelines ...................................................................................................... 8 5 Support services .......................................................................................................... 18 6 Infrastructure and facilities ........................................................................................... 22 7 Quality aspects/internal process and safety aspects, and occupational safety and

health ........................................................................................................................... 24 Annex A Assess incubators requirements .......................................................................... 26 Bibliography .............................................................................................................................. 27

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Committee representation The Industry Standards Committee on Organisation Management (ISC O) under whose authority this Malaysian Standard was developed comprises representatives from the following organisations: Department of Standards Malaysia Federation of Public Listed Companies Berhad Department of Social Welfare Malaysian Association of Standards Users (Secretariat) Malaysian Employers Federation Malaysian Institute of Corporate Governance Malaysian International Chamber of Commerce and Industry Ministry of Domestic Trade, Co-operatives and Consumerism Ministry of International Trade and Industry National Archives of Malaysia Telekom Malaysia Berhad The Technical Committee on Incubator Management which developed this Malaysian Standard consists of representatives from the following organisations: Dewan Perniagaan Usahawan Kecil Malaysia Malaysian Agricultural Research and Development Institute Malaysian Association of Standards Users (Secretariat) Malaysian Handicraft Development Corporation Malaysian Technology Development Corporation Ministry of Science, Technology and Innovation Prime Minister Department (Economic Planning Unit) SIRIM Berhad SME Association of Malaysia SME Corporation Malaysia Technology Park Malaysia Corporation Sdn Bhd (Innovation Incubation Centre) Y Us Sdn Bhd Co-opted members: Department of Occupational Health and Safety Kulim Technology Park Corporation Sdn Bhd Universiti Teknologi Malaysia

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Foreword This Malaysian Standard was developed by the Technical Committee on Incubator Management under the authority of the Industry Standard Committee on Organisation Management. Compliance with a Malaysian Standard does not of itself confer immunity from legal obligations.

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Introduction This Malaysian Standard provides guidance on incubator management engaging stakeholders, the core subjects and issues pertaining to support, operations, strategy, policy and structure and staffing. It emphasises the importance of structured management of incubation centres and how the incubation centres will be able to provide better services to their incubatees. This standard is intended to be useful to both public and private incubation centres as well as any entrepreneur development organisations (EDO) with intention to provide handholding services to their incubatees as well as small and medium enterprises (SMEs) in general. While not all parts of this standard will be of equal use to all types of organisation, all core subjects are relevant to every organisation. All core subjects comprise a number of issues, and it is an individual organisation's responsibility to identify which issues are relevant and significant for the organisation to address, through its own considerations and through dialogue with stakeholders. This standard is not intended to replace, alter or in any way change the obligations of the federal and local government. This standard provides guidance to incubators and their incubatees and is neither intended nor appropriate for certification purposes. Any offer to certify to this MS or any claim to be certified to this standard would be a misrepresentation of the intent and purpose this standard. This standard is intended to be used to standardise operations, management and support services offered by incubation centres. Through standardised operations, incubation centres can collectively develop high-impact programmes and produce competitive and sustainable entrepreneurs that are able to contribute towards high income economy. Societal well-being and wealth creation would be among the result achieved. Entrepreneurs development, job creation, product and services offering are the clear benefits to the community.

Table 0. Outline of this standard

Clause title Clause number Description of clause contents

Scope Clause 1 Defines the scope of this standard and identifies certain limitations and exclusions.

Terms and definitions Clause 2

Identifies and provides the definition of key terms that are of fundamental importance for understanding incubator management and for using this standard.

Overview of incubation centres

Clause 3

Outlines the current situation of incubation centres in Malaysia, its definitions and categorisation of services provided.

Incubator guidelines Clause 4

Provides recommended guidelines in establishing incubation centre, including policies, governance and services offered.

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Table 0. Outline of this standard (continued)

Clause title Clause number Description of clause contents

Support services Clause 5 Details out the recommended types of support to be provided by incubation centres.

Infrastructure and facilities Clause 6 Details out guidelines for shared services and facilities to be offered to incubatees.

Specific requirements by sectors

Clause 7 Details out offerings in term of infrastructure for incubators to consider based on sectors.

Quality aspects/internal process and safety aspects and occupational safety and health

Clause 8

Provides requirements that needed by incubation centres in terms of occupational safety and health.

Process flow on to audit/assess incubator requirements

Annex A

Helps new users to determine their level of services to be offered and existing users to self-evaluate their progress and standing.

Bibliography -

Includes references to authoritative international instruments and ISO Standards that are referenced in the body of this standard as source material.

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Incubator management - Guidelines on establishing and operating incubation centre

1 Scope This Malaysian Standard provides guidance to all types of organisations, regardless their size or location. This standard is intended to provide organisations with guidance concerning to incubator management and can be used as part of public or organisation guideline activities. This standard was developed taking into consideration the local context:

a) integrating, implementing and promoting incubator management within its sphere of influence;

b) policies, strategy, support, operations and processes, structure and staffing, monitoring and tracking, sustainability, safety, health and environment, concepts, terms and definitions related to incubator management;

c) the background, characteristics and benchmarking incubator management; principles and practices relating to incubator management; and

d) the core subjects and issues of incubator management.

This standard is intended to assist incubators in contributing to sustainable development of incubator management. It is intended to promote common understanding in the field of incubator management, and to complement other instruments and initiatives for good incubator management.

2 Terms and definitions For the purposes of this standard, the following terms and definitions apply. 2.1 access to funding The activities/initiatives conducted by incubation centres to facilitate incubatees in securing external funding for company/business/product development and/or expansion. 2.2 access to intellectual property (IP) Establishing connection to bodies/agencies/relevant experts to facilitate IP-related matters, from mining to filing as well as seek knowledge/information on IP. 2.3 access to market Activities conducted by incubation centres to facilitate entry to market for incubates.

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2.4 access to technology/experts The connection or linkages to a particular technology/expertise/knowledge required for product/services development. 2.5 benchmarking Assessment of effectiveness of an incubation centre through surveys, interviews, literature study and audits. 2.6 business incubation centres Incubator that focuses on nurturing start-up companies. Typically, business incubators have well-developed programmes for nurturing businesses and are not bound to any specific cluster or business niche. 2.7 co-incubation A concept which incubation centres/technology park/universities locally and internationally share their resources to contribute towards development of a start-up. Resources may include physical and virtual infrastructure, currently-available network, databases, technologies, market information and fund, among others. 2.8 co-venturing Investment made by incubation centres to their incubatees in return for equity or sales profits. Investment may be made in kind or in monetary value. 2.9 coaching The process of engaging incubatees (particularly the founder/owner) in regular, structured conversation. The goal is to enhance the incubatees’/founders’ awareness and behaviour so as to achieve business objectives and reach to its full potential. 2.10 coaching, mentoring, training, consultancy (CMTC) The four methodologies of providing intervention in handholding incubatees. 2.11 consultancy Provision of expert advice on a particular field. 2.12 commercialisation Process by which new products/services is introduced to the market. Successful commercialisation is when the product/services is able to gain revenue traction. 2.13 community development Empower individuals and groups of people with the skills they need to effect change within their communities. These skills are often created through the formation of social groups working for a common agenda.

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2.14 exit The point when an incubatee leaves the incubation centre after fulfilling exit criteria set by the incubation centres. 2.15 exit criteria A set of criteria by which an incubatee should be considered to leave the incubation centre. Samples of the criteria include value of sales, duration of incubation and number of staff. 2.16 fund raising The process of gathering contributions of money or other resources, by requesting contribution from relevant stakeholders, including individuals, businesses, charitable foundations, or governmental agencies. The funds are to be used in the management/operation of incubation centres. 2.17 government-owned incubation centres Incubation centres with seed funding/operation expenses from the government. 2.18 graduate Incubatees that have relocated out from the incubation centre, with or without further engagement from the incubation centre. 2.19 handholding The approach of providing support for incubatees by way of establishing personalised action plan to cater to the different growth stage and requirement. 2.20 incubatee Start-up/company residing/virtual incubatee in the incubation centre, undertakes the structured incubation programme and/or engages contractual usage of the shared facilities. 2.21 incubation programme Structured support services/interventions for incubates that are directly related to the stage of business development and business needs. 2.22 incubator/incubation centre Offers business support process that accelerates the successful development of start-up entities/companies by providing entrepreneurs with an array of targeted resources and services. 2.23 IP monetisation Process of converting IP assets into cash/obtain ready cash from IP assets. The process is also called securitising IP assets - process of aggregating individual assets which are difficult to sell and have unclear value and using them to back securities that can be sold.

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2.24 job and skill incubation centre The incubation centre provides interventions/programmes with the sole aim to develop specialised skills and knowledge needed for a particular sector. 2.25 joint venture A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task. 2.26 mentoring A professional relationship in which an experienced person (the mentor) assists another (the mentee) in developing specific skills and knowledge that will enhance the less-experienced person’s professional and personal growth. Usually conducted in a one-to-one manner. 2.27 outcome Way of measuring the effectiveness of an incubation programme. Components of measurements are defined by incubation centres based on their capabilities and stakeholder requirements. 2.28 output The quantitative result of the incubation centres e.g. number of programmes conducted; number of incubatees developed, etc. 2.29 physical incubatee Companies/incubatees receiving incubation programmes and occupy physical space in the incubation centre and/or engages contractual usage of the shared facilities. 2.30 policies The guiding principles of an incubation centres that shapes the design of an incubation centre. 2.31 private incubation centres Incubation centres with opened/established/operated by the private sector with no intervention from the public sector. 2.32 royalty Royalty is a payment made by one party, the licensee or franchisee to another that owns a particular asset, the licensor or franchisor for the right to ongoing use of that asset. 2.33 shared facilities Resources/facilities i.e. meeting rooms, equipment (photocopy machine, faxing machine, printer, etc.), lounge, pantry that are used among tenants/occupants of an incubation centre.

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2.34 small medium enterprise (SME) Companies/business entities that fulfil the definitions of SMEs as per defined by SME Corporation Malaysia. 2.35 structure and staffing An aspect of incubation management - where incubation centres determine their staffing structures and skillsets required to serve their clients. 2.36 support services Services offered by the incubation centres, provided/administered by the incubator staff to the incubatees to facilitate and grow their businesses. Details out the recommended types of business support to be provided by incubation centres. It also looks at the access to the available shared infrastructure services rendered by the incubation centre to incubates. 2.37 sustainability of incubate Ability of the incubatee (physical or virtual) to remain in the business upon five years graduating from the incubation centre. 2.38 sustainability of incubator The financial sustainability of the incubation centres, i.e. ability of the incubation centres to generate own revenue to self-sustain operations, reducing and/or eliminating dependency on external source of funding. 2.39 technology licensing The licensor authorises the licensee to use the technology under certain agreed terms and conditions. It is, therefore, a contract freely entered into between two parties and contains terms and conditions so agreed. 2.40 technology-based incubation centres A technology-oriented incubator that aims to support commercialisation of technology transferred from institutes of higher learning/research institutes. 2.41 tracking and monitoring The periodic monitoring of incubatees by the incubation centres to enable the incubation centres to assess the effectiveness of their incubation programmes as well the progress of the incubatees. 2.42 training Organised activity aimed at imparting information and/or instructions to improve the recipient's performance or to help him or her attain a required level of knowledge or skill. Usually done in a group setting, focused at addressing a specific skill.

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2.43 virtual incubatee Start-up entity/company that only participates in the structured development programme. 2.44 virtual incubation centre/virtual incubation programme Provision of standard incubator services except for physical space whereby their target incubatees are not required to be located in the incubators’ premises.

3 Overview of incubation centres 3.1 Main incubation sectors Based on the study conducted by SME Corporation Malaysia in 2012, there are 103 active incubation centres under the government’s purview, with an over 20 Multimedia Super Corridor (MSC) certified privately-managed incubation centres. The government-owned incubation centres are mainly catered to three main sectors as follows: NOTE. Incubation centres are not necessarily having the sectors as specifies below, they can be established across all industries.

3.1.1 Manufacturing Manufacturing refers to physical or chemical transformation of materials or components into new products. 3.1.2 Services and others All services including distributive trade; hotels and restaurants; business, professional and ICT services; private education and health; entertainment; financial intermediation; and manufacturing related services such as research and development (R&D), logistics, warehouse, engineering, construction etc. 3.1.3 Agriculture Agriculture refers to primary agriculture as follows: a) perennial crops (e.g. rubber, oil palm, cocoa, pepper, etc.) and cash crops (e.g.

vegetables, fruits, etc.); b) livestock; c) forestry and logging; d) marine fishing; and e) aquaculture.

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3.1.4 Craft Craft is categorised as follows: a) textile (e.g. batik, songket, weaving, embroidery, tekatan, sewing, etc.); b) forest based (e.g. wood, bamboo, rattan, rinago, bemban, mengkuang, etc.); c) metal (e.g. silver, brass, pewter, iron, aluminium, etc.); d) earthen based (e.g. ceramic, stone, crystal, glass, etc.); and e) various craft (e.g. pearl, shell, newspaper, polyurethane (PU) leather, leather, beads,

etc.). 3.2 Types of incubators 3.2.1 Technology-based incubation centres A technology-oriented incubator that aims to support commercialisation of technology transferred from institutes of higher learning/research institutes. 3.2.2 Business incubation centres Incubator that focuses on nurturing start-up companies. Typically, business incubators have well-developed programmes for nurturing businesses and are not bound to any specific cluster or business niche. 3.2.3 Virtual incubation centre Provision of standard incubator services except for physical space whereby their target incubatees are not required to be located in the incubators’ premises. 3.2.4 Jobs/skills To boost the rate of employment by creating new jobs that require special skills. The focus is to develop specialised skills and knowledge needed for the target sector e.g. handicraft. 3.3 Categorisation of incubation centres It is recommended to categorise incubation centres in Malaysia by the level of services provided to the incubatees. This standard will introduce the categorisation as “Generation” - From Generation 1 to Generation 4. The incubator centre categorisation was first introduced by the International Business Innovation Association (InBIA) - formerly known as National Incubation Business Association (NBIA). According to the categorisation, all incubation centres will be classed based on the types of services provided to incubatees as follows: 3.3.1 First (1

st) Generation

An incubation centre at the 1

st Generation provides the following:

a) real estate; b) shared facilities; and

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c) reactive support. 3.3.2 Second (2

nd) Generation

An incubation centre at the 2

nd Generation provides the following:

a) all services offered by a 1

st generation incubation centre;

b) advisory services; and c) proactive support. 3.3.3 Third (3

rd) Generation

An incubation centre at the 3

rd Generation provides the following:

a) all the services offered by a 2

nd generation incubation centre;

b) access to funding; c) accelerator; d) mentoring; e) technology labs; and f) market access. 3.3.4 Fourth (4

th) Generation

An incubation centre at the 4

th Generation provides the following:

a) all the services offered by a 3

rd generation incubation centre;

b) soft landing zones; c) internationalisation; and d) co-venturing. Prior to establishing an incubation centre, it is recommended that a full incubator feasibility study be conducted to determine which of the above category it would fit into. A suggested assessment process is shown in Annex A.

4 Incubator guidelines To achieve maximum impact, incubation centres shall be planned as part of an innovation and entrepreneurship ecosystem comprised of all factors that impact on the businesses’ abilities to start and grow their businesses. This eco-system includes academia, financiers, industry and government; it may also include other organisations such as non-governmental organisations (NGOs) and business development service providers (BDSP) who may take the initiative of planning an incubator.

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Thus, prior to establishing an incubation centre, it is important to reach out to this broad set of stakeholders to map out entrepreneurial opportunities, understand the barriers to the growth of innovative enterprises, understand what services are currently available to start-up, to get buy-in for the business incubator concept, and to explore potential partnerships. At this stage, it is important to determine what the incubation centre would mean to each stakeholder in the system. For example, incubators can be a source of: pooled lower risk start-up investment opportunities for funders, clients for technology parks, innovative products/services for larger companies and information for policymakers on barriers to entrepreneurship and SMEs’ growth. 4.1 Strategic directions of incubation centres A sound business model and strategic direction of the incubation centres shall be established. The strategic plan sets out the missions, visions and keys strategic objectives of the incubation centre. The business plan addresses how to achieve these objectives. This subclause will provide insights into important aspects of planning an incubation centre. 4.1.1 Objectives of setting up incubation centres The chance of success is higher when an incubation centre is operating within a clear set of policy. Strong consistency with overall goals then needs to be combined with a long-term approach to ensure proper functioning of the overall environment. For government-owned/public-owned incubation centres, the main reasons behind the setting up of incubation centres are closely related to current economic initiatives and aspirations. For others, example of existing goals of establishment can be: a) to create and nurture high-impact SMEs; b) to encourage development of new technologies/products/services; c) to spur local economic activities (usually sector-based and geographic-based, i.e. craft

sector, agriculture sector. Example of this include Satu Daerah Satu Industri (SDSI)/One District One Industry);

d) creation of new jobs; e) launch and scale of local businesses; f) growth in tax revenues; g) increase economic diversification; h) promotion of indigenous technologies; and i) providing employment opportunities for skilled manpower and knowledge workers. The goals of setting up incubation centres will be the overarching principle from which other supporting policies of the incubation centres will be derived.

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4.1.2 Targeted sectors Focusing on a particular industry/sector will also help shape the content as well as the branding of an incubation centre. The following components need to be aligned to the focus sectors of incubation centre: a) types companies to be developed; b) skills required from the incubator managers; c) facilities and machineries to be offered; and d) types of programmes to be offered. 4.1.3 Match available national initiatives and policy on incubator program Prior to establishing an incubation centre, particularly government-owned incubation centres, the relevant stakeholders are to decide which national initiatives and inspirations that it is supporting. Success is best achieved when there is a strong alignment between the incubation centre programmes and the overall economic development strategy of the region, institution or ecosystem within which the incubation centre operates e.g.: national initiatives include the Malaysia Plan, National Commercialisation Policy, SME Masterplan and Transformasi Nasional 2050 (TN50). 4.2 Governance It is very crucial for an incubation centre to define its policies and operate within these parameters as adherence to policies as focus in operation yields higher chances of incubatee’s success. 4.2.1 Board of Directors (BOD) The board’s key purpose is to ensure the incubator’s sustainability by collectively directing the incubator’s affairs, whilst meeting the appropriate interests of its shareholders and stakeholders. Roles of Board of Directors are as follows: a) establish vision, mission and values; b) set strategy and structure; c) delegate to management; and d) exercise accountability to shareholders and be responsible to relevant stakeholders. Appointment of Board of Directors advisable to consider the following factors: a) To appoint BOD to represent the incubator’s stakeholders. e.g. the member of BOD

should represent each stakeholder involved in the incubator’s network and contributing to the incubator’s operations.

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b) The ability of BOD to provide business knowledge and networks to the incubator

manager and clients is crucial. c) BOD members should also possess the appropriate skills to cover incubator on related

topics, such as finance, law and marketing. 4.2.2 Incubator Director/President/Chief Executive Officer (CEO) Regardless the size of the incubator team and staff, the head shall ensure the focus is on clients i.e. incubatees. A manager shall prioritise staff time to place greatest emphasis on client assistance, including proactive advising and guidance that results in company success and wealth creation. In between incubator management tasks and client engagement, 60 % management time spent with clients is a good benchmark. It is recommended that the incubation centre be led by incubator manager with the following attributes: a) possess private sector orientation and the ability to manage business incubator with

entrepreneurial mindset. Previous business experience is a plus; b) leadership abilities; c) credibility particularly with potential clients, investors, the board and stakeholders; d) early stage investment knowledge; e) excellent interpersonal and networking skills; and f) excellent business coaching and facilitation skills. 4.3 Operations and administration A solid operation structure is needed to implement the incubator’s policies and governance guidelines within its internal organisational framework and it is particularly important to manage the operations of the incubator as well as the staffing structures of an incubation centre. 4.3.1 Staffing structures 4.3.1.1 Ratio The number of staff required depends on the type, scale, resources and intensity of the business incubation offered. Incubation centres may need to outsource some services - depending on professional skills and experience of the incubator management team, the needs of the incubatees and type of resources available. Incubator manager vs incubatee ratio (1:3.2 to 1:5.0) based on European benchmarking study. 4.3.1.2 Recommended skills A recommended ability and capacity acquired through adaptively carry out complex activities or job functions involving ideas (cognitive skills), things (technical skills), and/or people (interpersonal skills). Figure 1 shows example of skills required from an incubator manager. The skills can be contributed by more than one incubator manager. However, it is necessary that the incubation centre be staffed with executives/incubator managers whom can fulfil the following skills:

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4.3.1.2.1 Management skills To manage the operations of the centre, including overseeing workplace issues, staff management, day-to-day operations, budget utilisation, facilities administration and programme implementation to ensure that the centre achieves its business objectives. 4.3.1.2.2 Business knowledge This is especially important for incubator managers as having entrepreneurial skills will greatly increase ability of an incubator manager to understand their incubatees and assist them effectively. 4.3.1.2.3 Handholding skills To allow the incubator manager to communicate with incubatees effectively and harness their full potential. Among skills recommended are interpersonal skills such as listening, coaching, communication and networking. 4.3.1.2.4 Technical skills Especially important for incubator managers running a technology-based incubation centres as knowing the technology ecosystem in a particular industry. An incubator manager need not necessarily have the technical skills. Figure 1 shows example of skills required from an incubator manager. The skills can be contributed by more than one incubator manager.

Figure 1. Recommended incubator manager skills

Pre-Ideation

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4.3.1.3 Job descriptions Incubation centre needs to establish a clear job description for each incubator manager and keep records of the job description. A good job description describes the expected deliverables from each incubator manager with regard to the area of facilitation as well as achievement of their respective incubatees. For a comprehensive support, it is recommended that the incubation centre be staffed with incubator managers that are skilled in providing support in the following area: business management, SME funding, market penetration and IP. A sample of organisation structure (see Figure 2) as reference.

Figure 2. Organisation structure (sample)

4.3.2 Source of operating expenses At the onset, a public-owned incubation centre will operate differently from a privately-owned incubation centres as they obtain their operating expenses from different sources. The former receives their operational expenditure (OPEX) from the government, while the latter generate their own revenue through monetisation of facilities and services. The above determines the business model of incubation centres and the way they generate their revenue (or if there is a requirement of revenue generation for sustainability). Some of the different business models that can be adopted by incubation centres include: a) monetisation of support services and facilities; b) co-venturing/investment in incubatee companies; c) monetisation of expertise; and

Head of incubation centre

Incubatee relations

Incubator Manager 1

Funding

Infrastructure

Incubator Manager 2

Technology

IP

Incubator Manager n*

Market

Administration

Funding for incubator

Tracking and monitoring

Marketing of incubation centre

Facilities management

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d) public-owned incubation centres mostly receive their operating expenses from the government. However, most of the times, the operating expenses is meant for the incubation centres to sustain operations. 4.4 Incubation policies Business incubators can have a wide variety of overall objectives; thus, the incubator policies shall be designed in such a way that they enable the incubation centre to achieve the goals. This Clause aims to demonstrate what key considerations should be taken into account when setting major policies, such as how to decide entry criteria, how to assess applicants, how to develop incubatees and at what stage the incubatees should exit the incubation programme. 4.4.1 Entry criteria As incubation is about guiding incubatees from the idea stage to the graduation stage, incubatees should be selected with clear intent, understanding and believing that their business will grow and flourish as a result of incubation and ultimately graduate from the incubator and support the objectives of the incubator. Therefore, it is important to define an initial road map towards successful graduation and to select those start-ups willing and able, with the incubator’s support, to reach this goal. The incubation process should be tailor-made for each client, taking into account the different sectors and markets in which these companies operate, since companies in different areas of business are likely to have different growth rates. It is advisable that entry criteria should take into account: a) quality of founders(s) in terms of their level of commitment, entrepreneurial profile and

capability; b) team diversity; c) market opportunity demonstrated through knowledge and understanding of the market; d) potential financial viability, demonstrated through business model; e) investment potential; f) industry/industry focus of the incubate; g) business viability; h) product viability; i) team diversity; and j) business capacity and capability.

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4.4.2 Selection panel It is important to decide who makes the decisions, whether or not applicants satisfy the entry criteria set by the incubation centres. It is recommended that the decision is made collectively by a selection committee comprised of experts whom can assess the potential of the business as well as legitimacy of the applicants. Members should represent the diverse expertise required, such as business management experience and capabilities (including financial, human resource (HR), marketing, etc.), relevant technical skills as well as representatives from the Legal and Finance Department to conduct due diligence on the applicants and verify submission of documents. 4.4.3 Incubation duration Typically, incubatees graduate on average three to five years after entry. However, this depends on the industry as some industries need longer gestation period than others. 4.4.3.1 Standard practice Maximum of five years graduation period, which is comparable with the international best practice. 4.4.3.2 Exceptions However, exceptions for biotech incubation centres, whereby the graduation period may extend to 10 years. 4.4.3.3 Consideration for extension Extension period should only be considered on case-by-case basis.

Box article: Entrance criteria set forth by Technology Park Malaysia

Innovation Incubation Centre of Technology Park Malaysia Corporation Sdn Bhd is an incubation centre focused on developing technology-based companies. Their strengths are in delivering tailored handholding support services to their incubatees with high success rate. This is partly due to their comprehensive selection criteria, in which they will only handhold companies with specific requirements and needs for assistance. Their requirements for assistance are established through the following methods: a) Questionnaire: Among the questions asked include stage of business, stage of

product development, financial capabilities, paid up capital, team capabilities/qualification.

b) Interview sessions: To verify information provided through questionnaire, and to

create rapport with potential incubatee. c) Psychometric tests: To gauge the entrepreneurship inclination and competencies of

the founders.

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4.4.4 Exit criteria Exit criteria are commonly linked to the factors that relate to the ability of the incubatee to survive outside the incubation centres. Some of the commonly-used criteria are: a) performance:

i) turnover;

ii) profit;

iii) number of staffs;

iv) exporting percentages; b) number of years: Maximum of five years graduation period, which is comparable with the

international best practice; and c) other consideration factors include the incubatee no longer needing incubation services, or space requirements exceeding incubator’s capacity. 4.4.5 Monitoring (during and post-incubation period) Monitoring incubatee’s performances helps incubation centres to keep track of their incubatee’s progresses and identify areas that needed more intervention to increase chances of success. 4.4.5.1 During incubation period monitoring During incubation period monitoring includes: a) frequency of reporting (twice a year at least); b) who should monitor (incubation centre incubator managers); c) how to monitor (report card/monitoring software/monthly engagement); and d) what to monitor:

i) output:

number of incubatees developed; or

number of programmes conducted; ii) outcome:

number of products launched to the market;

number of countries penetrated;

employment opportunities provided;

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amount of sales generated (domestic and export);

IP filed; and

amount of funding secured from various external sources (e.g. grants/loans/equity investments).

4.4.5.2 Post-incubation period monitoring Post-incubation period monitoring provides for possible opportunities for future cooperation, such as mentoring, support of spin-off businesses as and more importantly to evaluate performance of incubatees post-incubation period. Post-incubation period monitoring includes: a) period to be monitored; b) up to five years after graduation/exit point from incubation centre; c) what to be monitored:

i) number of products launched to the market;

ii) employment opportunities provided;

iii) amount of sales generated (domestic and export);

iv) IP filed;

v) amount of funding secured from various external sources (e.g. grants/loans/equity

investments);

vi) Innovation and productivity; and d) Frequency of monitoring: At least twice a year. Monitoring does not only serve to improve the incubatees, but also serves as important feedback to measure the success of incubation centres. The feedback is crucial to be reported to: a) the incubator’s staff, in order to motivate and retail the team; b) current and potential client to attract and retain clients; and c) stakeholders and community to attract support, particularly funding, for incubation programme. Positive feedback from incubatees will be beneficial for incubation centres in various ways, particularly in raising funds and gathering networks. Examples of KPIs to be monitored can be found in Table 2.

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Table 2. Sample of KPIs per type of incubator

Type of incubator KPIs

For all incubators

a) number of incubator graduates remaining in the incubator service area;

b) number of firms that either failed in the incubator or that did not meet graduation criteria; and

c) square footage (or metre) of commercial space leased or owned by indicator graduates in the community.

For incubators with a specific focus

a) number of women employed by clients and graduates; b) number of minorities employed by clients and graduates; c) number of low-income residents employed by clients and graduates;

and d) value of local goods and services purchased in the community by

incubator clients and graduates.

For technology or university-affiliated incubators

a) number of technologies commercialised into new products or services by client and graduate firms;

b) number of student, faculty, and staff-initiated businesses; c) number of students employed by incubator clients and graduates; d) number of students securing internships at client and graduate firms; e) number of university graduates permanently employed in client and

graduate firms; f) equity investment returns gained by sponsor from client and graduate

firms.

5 Support services This clause provides incubation centres’ management team with a clear outline on the minimum requirements for support services to be offered by incubation centres to their incubatees. Integrated, end-to-end support services is integral to the existence of an incubation centre as it increases the chance of achieving objectives of an incubation centre. 5.1 Methodologies of delivering support services There are four methodologies in which the support services can be delivered to incubatee. Methods chosen depends resources available at the incubation centre, including skills, network, field experts and programmes.

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5.1.1 Coaching The process of engaging incubatees (particularly the founder/owner) in regular, structured conversation. The goal is to enhance the incubatees’/founders’ awareness and behaviour so as to achieve business objectives and reach to its full potential. Coaching helps the entrepreneur develop specific behavioural skills required to complete a task. 5.1.2 Mentoring Mentoring is most often defined as a professional relationship in which an experienced person (the mentor) assists another (the mentee) in developing specific skills and knowledge that will enhance the less-experienced person’s professional and personal growth. Usually conducted in a one-to-one manner. A mentor may give information, encouragement and advice to mentees as they plan and grow their businesses. The mentor is typically a person of greater experience and seniority in the field the mentee is entering. 5.1.3 Training Organised activity aimed at imparting information and/or instructions to improve the recipient's performance or to help him or her attain a required level of knowledge or skill. Usually done in a group setting, focused at addressing a specific skill. It may be done on a one-to-one basis, but is often delivered to a group of trainees, helps entrepreneurs develop the knowledge and skills that will enable them to more effectively undertake a specific task. For example, entrepreneurs with extensive expertise in their products or services often have little or no experience in selling those products or services. A sales training programme can help the entrepreneur in the process of identifying and selecting prospective customers; presenting the product or service; resolving objections and closing the order. 5.1.4 Consultancy Consultation is about giving advice and recommending action on specific issues. For example, an entrepreneur may see the need to raise capital to support the company until it reaches cash breakeven. An outside expert can provide great value through counselling the entrepreneur about the various sources of debt and equity capital. An entrepreneur may need to identify, assess and recruit early adopters who can be engaged in prototype testing. A consultant can be very helpful in guiding the entrepreneur through this process, and if possible, making connections to people in the counsellor’s network who work in the target companies.

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5.2 Areas for interventions 5.2.1 Access to funding Interventions conducted/delivered are with the objectives to facilitate access to funding among incubatees for them to raise funds/capital for business growth. Interventions that can be conducted include: a) awareness programmes on availability of funding/types of funding available; b) funding mapping based on growth requirements; c) pitching to funding organisations/institutions; and d) networking events with funders. 5.2.2 Access to market There are different objectives that can be achieved in facilitating commercialisation of products/services: a) market validating: Validating incubatees’ solutions that they are required/needed by the

customer before actual product commercialisation; b) first customer acquisition: Acquiring early adopters of solutions offered by incubate; and c) market penetration and growth: Moving beyond early adopters and establishing market

presence. Among interventions that can be conducted for incubatees include: a) customer focus groups; b) industry consultation; c) market linkages; and d) internationalisation. 5.2.3 Access to infrastructure Good connectivity is fundamental to facilitate trade and business activity. Incubators shall determine the infrastructure required amenities and facilities to cater to needs of incubatees. 5.2.3.1 Access to technology and experts Among interventions that can be conducted for incubatees include: a) linkage to experts (institutes of higher learning/research institutions industry); and b) knowledge sharing through technology workshops/seminars.

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5.2.3.2 Access to intellectual property (IP) related matters Among interventions that can be conducted for incubatees include: a) linkage to IP experts; b) seminars on IP (e.g. IP commercialisation/IP protection/internationalisation through IP);

and c) IP auctions. 5.2.4 Enhancement of business and technical skills Enhancing both business and technical skills by improving the knowledge and skills could enhance the incubatees’ business capacity. This enhancement is to enable the incubatees cope with competition. 5.2.5 Intervention tools Intervention tools can be used to support business handholding process. They can be used to evaluate a company’s health as well as evaluate the entrepreneurship inclination and motivation of each entrepreneurs. These tools are to help incubator managers understand their incubatees quantitatively as well as qualitatively. There are various intervention tools that are available in the market. Some of the more commonly ones are: 5.2.5.1 Psychometric test A standard and scientific method used to measure individuals' mental capabilities and behavioural style. Psychometric tests are designed to measure candidates' suitability for a role based on the required personality characteristics and aptitude (or cognitive abilities). The user may consider referring to the following standards: a) MS ISO 10667-1, Assessment service delivery - Procedures and methods to assess

people in work and organizational settings - Part 1: Requirements for the client; and b) MS ISO 10667-2, Assessment service delivery - Procedures and methods to assess

people in work and organizational settings - Part 2: Requirements for service providers. 5.2.5.2 SME competitiveness rating for enhancement (SCORE) SCORE is a diagnostic tool developed by SME Corporation Malaysia to measure the strengths and weaknesses of SMEs in various industries. As at publication date, SME Corporation Malaysia has developed seven SCORE models i.e. construction, manufacturing and related services, manufacturing and maintenance, repair and overhaul (MRO), retail and distributive trade, information and communications technology (ICT) and professional services, and micro-enterprise competitiveness rating for enhancement (M-CORE).

SMEs are evaluated across seven parameters, namely: business performance, financial capabilities, technical capabilities, production capability, innovation, quality systems, and management capabilities.

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5.2.6 Behavioural and competency tests A personality tests or behavioural assessments are used to determine the motivation behind a person’s actions. Results may be used to determine an individual’s entrepreneurial inclination. 5.2.7 Business health check A business health check is a measurable assessment tool which accurately identifies areas of improvement whilst at the same time providing suggestions of possible projects of improvement in these areas.

6 Infrastructure and facilities When designing an incubation centre, due consideration shall be given to the fact that the incubation centre is supposed to function like an office space for the incubatees (tenants), while at the same time supporting their needs to operate in a conducive environment. 6.1 Size There is no one-size-fits-all solution when it comes to determining the size of an incubation centre as it depends on several factors such as location, local population, purpose, type of industry, among others. a) The incubator design should allow for incubaee’s expansion by incorporating either

modular office designs or providing a mixture of office sizes for different company stages throughout the incubation period. For example, units offered could be categorised based on the number of maximum occupancy at one particular time, e.g. two-pax office room, four-pax office rooms and six-pax office rooms.

b) Incubation centre should also consider providing flexible furnishing arrangement (fully

furnished, partial-furnished or bare space) to cater for incubatees with different resources and requirements. This will also lessen the risk of debts from incubatees.

c) As a general rule of thumb, an incubator should be able to have 20 to 30 tenant

businesses to ensure incubation centre’s sustainability in the long run, especially for privately run centres. As one of the biggest value proposition of joining an incubation centre is the opportunity to be among like-minded entrepreneurs and network, having a good number of tenants will also ensure that this value can be offered to incubatees.

6.2 Type of office For virtual incubation centres/incubation centres offering virtual services, extra details and attention need to be given to provision of co-working spaces.

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6.3 Shared facilities The following are proposed shared facilities which can be utilised by incubatees. Having common areas or shared facilities would allow for greater interaction among incubatees and encourage conversations, exchanges of ideas and creation of network - the main benefits of joining an incubation centre. a) Reception area as first layer of security as well as to project good image to clients. b) Meeting rooms of various sizes to cater to different meeting types. The smaller

discussion rooms can be fitted with only basic furniture while the larger ones are preferably fitted with necessary equipment (projectors, AV equipment, writing boards, etc.).

c) Common area/lounge/break area/pantry/coffee area/room where informal

events/gatherings could also be held. d) Multipurpose event space of various sizes that could be utilised for trainings, events, etc. e) Laboratories/workshops for industry-focused incubation centres. Incubation centres may

establish certification requirements and policy related to their business, for example:

i) Halal; ii) Hazard Analysis and Critical Control Point (HACCP); iii) Good manufacturing practices (GMP); and iv) Makanan Selamat Tanggungjawab Industri (MeSTI), MS 692, Handcrafted

Malaysian batik - Specification and MS 1747-1, Textiles - Malaysian woven fabric - Part 1: Malaysian songket.

It is more common for incubation centres in universities to offer labs/workshops.

f) Document processing centre fitted with printers, photocopiers, faxing machine, etc. g) Kitchen/pantry area fitted with fridge, microwave, eating area, coffee making facilities,

water supply, etc. 6.4 Amenities/others The amenities/others include: a) Parking lot: Ample parking lot shall be considered if the incubation centre is not

accessible by public transportation. In bigger campuses, consider shuttle services to allow for movement within campus;

b) restaurants/food court catering to various dietary requirements; c) ATM machines (for larger buildings/campuses); d) gymnasium; and

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e) recreational area/games room, preferably at locations far from working space to avoid

creating disturbance to others. 6.5 Security Security system (automated system/hiring security personnel) are crucial as the incubation centres will be visited by both incubatees and non-incubates at all times. 6.6 Facilities for the disabled It is recommended that the incubator should ensure easy access for all to the facilities, including access ramps, doors wide enough for wheelchairs and special bathroom facilities. 6.7 Connectivity Infrastructure shall be in place to provide good telecommunications and broadband services. WiFi throughout the incubation centre is highly recommended.

7 Quality aspects/internal process and safety aspects, and occupational safety and health It is the duty of every organisation to ensure safety, health and welfare at work of all the staff. However, in carrying out this duty, the statement of ‘so far as is practicable’ has been used. Practicability shall take into account the severity of the risk in question, the knowledge about the risk and the ways to remove or reduce it, the availability and suitability of the ways as well as the costs to remove or reduce it. The level of knowledge that is to be expected of the organisation has to be reasonable. The cost shall commensurate with the expense and inconveniences which may be caused in the process of placing the safeguards in place and measured against the consequences of failing to do so. Common practice and knowledge throughout the industry is to be taken into account when making any judgment of whether a safeguard is ‘practicable’. Further guidance on ‘practicable’ standards and ways to achieve them can be obtained from applicable regulations, approved industry codes of practice and guidelines relevant to the particular work or industry. 7.1 Registration of factory and machinery Factories and machinery shall be registered as prescribed in the Factories and Machinery Act 1967 (Act 139) by using registration form JKJ 101 and JKJ 105 with the regional offices of the Department of Occupational Safety and Health (DOSH). Any machinery whether local or imported machinery such as lifts, escalators, dumbwaiters, lifting equipment, goods hoists, any types of cranes, pressurised fired or unfired tanks, boilers and gondolas, shall be submit to DOSH for design approval before Certificated of Fitness (CF) can be issued.

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7.2 Registration of competent firm and competent person No person shall manufacture, fabricate, test, install, maintain, dismantle or repair any machinery unless he has a written authority issued by the Chief Inspector of DOSH as a registered competent firm under Section 29A of the Factories and Machinery Act 1967 (Act 139). 7.3 Safe system of work A ‘safe system of work’ should be put in place by the organisation. The ‘safe system of work’ is a system or mode of work which under the circumstances make adequate provision for the safety of staff and which, if carried out with reasonable care, will protect the staff from foreseeable risks of injury. For example, before a new system is introduced, those whom they will affect should be instructed as to their purposes, trained as to their implementation and thereafter monitored to ensure that the systems put in place are actually employed in practice.

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Annex A (informative)

Assess incubators requirements

Figure A.1. Process flow on how to assess incubators requirements

Mandate received

a) advisory services; and b) shared services.

a) access to funding; b) accelerator; c) mentoring; d) technology labs; and e) market access.

physical space no physical space

i) virtual space; and

ii) virtual address

1st Generation

Yes No

2nd

Generation No

a) access to funding; b) accelerator; c) mentoring; d) technology labs; and e) market access.

3rd

Generation

a) soft landing zones; b) internationalisation; and c) co-venturing.

4th

Generation

Yes

Yes

No

Yes

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Bibliography [1] MS 692, Handcrafted Malaysian batik - Specification [2] MS 1722, Occupational safety and health management system - Requirements [3] MS 1747-1, Textiles - Malaysian woven fabric - Part 1: Malaysian songket [4] MS ISO 9000, Quality management systems - Fundamentals and vocabulary [5] MS ISO 9001, Quality management systems - Requirements [6] MS ISO 9004, Managing for the sustained success of an organization - A quality

management approach [7] MS ISO 10001, Quality management - Customer satisfaction - Guidelines for codes

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- Guidelines

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[18] MS ISO 14064-2, Greenhouse gases - Part 2: Specification with guidance at the project level for quantification, monitoring and reporting of greenhouse gas emission reductions or removal enhancements

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[19] MS ISO 14065, Greenhouse gases - Requirements for greenhouse gas validation and verification bodies for use in accreditation or other forms of recognition

[20] ISO 14006, Environmental management systems - Guidelines for incorporating ecodesign

[21] ISO 14045, Environmental management - Eco-efficiency assessment of product systems - Principles, requirements and guidelines

[22] ISO 14051, Environmental management - Material flow cost accounting - General framework

[23] ISO/TR 14062, Environmental management - Integrating environmental aspects into product design and development

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[25] ISO 14066, Greenhouse gases - Competence requirements for greenhouse gas validation teams and verification teams

[26] ISO 14067-1, Carbon footprint of products - Part 1: Quantification

[27] ISO 14067-2†, Carbon footprint of products - Part 2: Communication

[28] ISO/TR 14069, GHG - Quantification and reporting of GHG emissions for organizations - Guidance for the application of ISO 14064-1

[29] ISO 22000, Food safety management systems - Requirements for any organization in the food chain

[30] ISO/IEC 27001, Information technology - Security techniques - Information security management systems – Requirements

[31] ISO 10993-2:2006, Biological evaluation of medical devices - Part 2: Animal welfare requirements

[32] ISO Guide 64, Guide for addressing environmental issues in product standards

[33] ISO/IEC Guide 2, Standardization and related activities - General vocabulary

[34] OHSAS 18001, Occupational health and safety management system –Requirements [35] ILO-OSH 2001, Guidelines on occupational safety and health management system

To be published.† To be published.

† To be published.

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[36] International Maritime Organization (IMO): Convention on the prevention of marine pollution by dumping of wastes and other matter (London convention), 1972

[37] Organization for Economic Co-operation and Development (OECD): OECD

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[39] Organization for Economic Co-operation and Development (OECD): OECD

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of corporate governance, 2004 [42] SME Masterplan, 2012 - 2020, SME Corporation Malaysia [43] Study on enhancing the effectiveness of incubation centres as a support mechanism

for SME development in Malaysia, December 2012, commissioned by SME Corporation Malaysia

[44] Global good practice in incubation policy development and implementation - Malaysia

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systems in emerging economies, Rustam Lalkaka, Number 3. Paper commissioned by the Small and Medium Industries Branch, November 1997

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[51] Business incubation and support system in Asia-Pacific: Establishing international

cooperation among Asian incubators, by Datuk Dr Annuar Mohd Saffar, 2008

© STANDARDS MALAYSIA 2018 - All rights reserved

Acknowledgements Members of Technical Committee on Incubator Management

Mr Azra'I Shu'ib (Chairman)

Technology Park Malaysia Corporation Sdn Bhd

Mr Mohd Ghazali Mohd Yunos (Vice Chairman)

SIRIM Berhad

Ms Saral James Maniam (Secretary) Malaysian Association of Standards Users Dato’ Seri Abu Hassan Mohd Nor/ Ms Iswati Akeir

Dewan Perniagaan Usahawan Kecil Malaysia

Dr Badaruzzaman Mohamad Noh/ Ms Siti Shurazizah Sukhur

Malaysian Agricultural Research and Development Institute

Ms Nur Asyikin Aminuddin Malaysian Association of Standards Users Ms Saadiah Mat Dahri/ Mr Khairul Anuar Ahmad Joki/ Mr Ahmad Said

Malaysian Handicraft Development Corporation

Ms Rosliza Zukkafli/ Ms Norzihana Abu Othman/ Ms Fazilah Osman

Malaysian Technical Development Corporation

Ms Nik Munerahanim Nik Muhammad

Ministry of Science, Technology and Innovation

Mr Roslan Ibrahim

Prime Minister Department (Economic Planning Unit)

Mr Ong Chee Tat/ Dato’ Sri Ricky Yaw Chan Choy

SME Association of Malaysia

Mr Roshaidi Rosli/ Ms Azwani Elias

SME Corporation Malaysia

Ms Izniza Afzan Mustafa Albakri

Technology Park Malaysia Corporation Sdn Bhd

Mr Yusno Yunos/ Ms Nur Hazwani

Y Us Sdn Bhd

Co-opted members

Mr Ahmad Syuhairi Abdullah Department of Occupational Safety and Health

Ms Alfa Sudinar Azudin/ Ms Ramya Ranee Konna Segaran

Kulim Technology Park Corporation Sdn Bhd

Ms Logaiswari Indiran PhD Scholar, Universiti Teknologi Malaysia