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A PRELIMINARY STUDY ON IOT READINESS OF SMES IN MALAYSIA

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IR4.0 is the fourth industrial revolution that has started to take effects on the current domain of production systems. It was caused by the advancement of digitalization systems and integration with IoT, and smart objects. Due to changing nature of technology, the new source of capabilities has emerged, while the existing one will become irrelevant for sustaining competitive advantage. For this reason, firms worldwide including SMEs have left without many options, but to prepare and get ready with the change. As one of the main pillars of technological advancement, this preliminary study investigates the IoT readiness of SMEs in Malaysia focusing on four dimensions of optimism, innovativeness, discomfort, and insecurity. The findings have found that the respondents are quite optimism with the benefits of IoT, but lacking of innovativeness to pioneer the introduction. Although the respondents do not feel discomfort with IoT, they do seem undecided either to trust it or not. It was also found that top managements feel more optimism with IoT, while at the same time also feel more insecure with it. In conclusion, SMEs in Malaysia need more exposure and training as to improve their readiness level towards IoT adoption.
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Proceeding: 2nd International Conference on
Economy, Social and Technology (ICEST 2019)
(eISBN:978-967-15620-7-9)
Copthorne Hotel Cameron Highlands, Pahang, Malaysia
3
A PRELIMINARY STUDY ON IOT READINESS OF SMES IN
MALAYSIA
Mohamad Faizal Ahmad Zaidi1, H.M. Belal2
1School of Technology Management & Logistics, College of Business, Universiti Utara Malaysia
2Liverpool Business School, Liverpool John Moores University, UK
__________________________________________________________________________________________
Abstract : IR4.0 is the fourth industrial revolution that has started to take effects on the
current domain of production systems. It was caused by the advancement of digitalization
systems and integration with IoT, and smart objects. Due to changing nature of technology,
the new source of capabilities has emerged, while the existing one will become irrelevant for
sustaining competitive advantage. For this reason, firms worldwide including SMEs have left
without many options, but to prepare and get ready with the change. As one of the main
pillars of technological advancement, this preliminary study investigates the IoT readiness of
SMEs in Malaysia focusing on four dimensions of optimism, innovativeness, discomfort, and
insecurity. The findings have found that the respondents are quite optimism with the benefits
of IoT, but lacking of innovativeness to pioneer the introduction. Although the respondents do
not feel discomfort with IoT, they do seem undecided either to trust it or not. It was also
found that top managements feel more optimism with IoT, while at the same time also feel
more insecure with it. In conclusion, SMEs in Malaysia need more exposure and training as
to improve their readiness level towards IoT adoption.
Keywords: Internet of Things, Industry 4.0, Small and Medium Enterprises, Technology
Adoption, Technology Readiness
___________________________________________________________________________
Introduction
The introduction of Industry 4.0 (IR4.0) is synonymous with the fourth industrial revolution
in the domain of production systems (Schröder, 2016). This current industrial revolution is
being observed through the paradigm shift from widespread digitalization of production, e.g.,
programmable logic controller (which is characterizing Industry 3.0) to advanced
digitalization systems integration with the Internet of Things (IoT) and smart objects,
enabling the products to determine their own production processes (Lasi, Fettke, Kemper,
Feld, & Hoffmann, 2014). Since IR4.0 is revolutionary in nature, so what exactly does this
means? According to Merriam-Webster online dictionary, revolution refers to “a sudden,
radical, or complete change” or “a changeover in use or preference especially in technology”.
In a similar fashion, Cambridge Dictionary defines revolution as “a very important change in
the way that people do things”. Meanwhile, Oxford Dictionaries defines revolution as “a
dramatic and wide-reaching change in conditions, attitudes, or operation”. One thing similar
about these definitions is that revolution connotes change. In the context of industrial
production, this means firms must adapt to the change and the way they produce products.
The foundation of IR4.0 is based on nine pillars of technological advancement, such as
autonomous robots, big data analytics, cybersecurity, cloud computing, simulation,
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augmented reality, and IoT (Rüßmann, et. al., 2015). As a small step to understand IR4.0, this
study will focus on the IoT readiness of small and medium enterprises (SMEs) in Malaysia.
This topic is selected because although IoT has many benefits, such as increasing revenue
from the supply chain (Wagenaar, 2012), firms must first dealing with the fundamental
challenges on the issues of connectivity, power management, security, complexity, and rapid
evolution of the IoT technologies (Chase, 2013). With this in mind, it becomes obvious that
IoT readiness is among the first issues the SMEs must address in Malaysia (Zaidi, 2017). For
a start, a preliminary survey will be organized as to understand the basic readiness issues.
Literature Review
IoT and SMEs in Malaysia
As mentioned before, IoT is one of the nine pillars of technological advancement that enabled
the formation of IR4.0 (Rüßmann, et. al., 2015). IoT “comprises an evolving array of
technologies that extend the idea of instantaneous connectivity beyond computers,
smartphones, and tablets to everyday objects, such as home appliances, cars, and medical
devices” (Poudel, 2016, p. 997). Hence, IoT enables “intelligent interactivity between human
and things to exchange information and knowledge for new value creation” (MIMOS, 2014,
p. 2-01). The need to study IoT on SMEs is crucial since a research has found 70% of the
SMEs in develop countries utilizing IoT for improving current products, 52% for developing
new service-based business models, 42% for reducing operational cost or increase efficiency,
and 32% for improving the firm’s image (Lueth, Glienke, & Williams, 2017). Furthermore, a
recent study has proposed that IoT can improve value co-creation, while at the same time
reduce value co-destruction on firm performance (Zaidi & Belal, 2018). In Malaysia, the
SMEs (representing 97.3% of total business establishments) are no exception from the
implications of IR4.0. With fewer options in hand, they must also transform themselves
towards IR4.0. This must be done since the existing source of capabilities will become
obsolete and insufficient to sustain competitive advantage. In fact, the government of
Malaysia is aware of the potential effects of IR4.0. The government has recently committed
to allocate MYR 245 million in term of matching grant to improve smart manufacturing. The
initiative was announced during 2018 budget presentation by the former Minister of Finance
Malaysia. Prior to that, IoT was given special attention by the government of Malaysia by
introducing the National IoT Strategic Roadmap in 2014. The roadmap is crucial since
Malaysia was claimed to be slow in responding to IR4.0. As the SMEs may be hesitated to
invest, equip, and transform themselves with the relevant IoT technologies for the reason that
Malaysia is a technology-follower (Nordin & Omar, 2012), it is worthwhile to investigate the
IoT readiness of SMEs due to the current development in Malaysia (Zaidi, 2017).
Technology Readiness Index
Technology readiness is originally defined as the “people’s propensity to embrace and use
new technologies for accomplishing goals in home life and at work” (Parasuraman, 2000, p.
308). For the purpose of this study, technology readiness is defined as the SMEs’ propensity
to embrace and use IoT for accomplishing goals at work, which is measured with the
Technology Readiness Index (TRI). TRI is treated as an alternative version of Technology
Acceptance Model (TAM) that is originally designed to explain user acceptance on new
technology. TRI has also been integrated with TAM, where both are important to understand
technology adoption (e.g., Hallikainen & Laukkanen, 2016). Despite of the integration, this
study will focus on TRI as the readiness is the prerequisite of technology acceptance. In
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addition, knowing the level of readiness is the first critical step to understand users’
acceptance on new technology (e.g., Lin & Chang, 2011). In principles, TRI enables
researchers to identify a set of motivators and inhibitors to embrace and use new
technologies. TRI allows the analysis to be further classified into four dimensions, namely
optimism and innovativeness (as motivators), and discomfort and insecurity (as inhibitors).
TRI also enables the respondents on each dimension to be grouped into five useful segments
related to technology skeptics, explorers (early adaptor), avoiders (laggard), pioneers, and
hesitators. As such, TRI will produce very rich information on the level of technology
readiness. Due to several revolutionary technologies in the recent years, such as high-speed
internet connectivity, mobile commerce, and cloud computing, TRI 2.0 was introduced with
more improvement (Parasuraman & Colby, 2015). In the context of IR4.0, the application of
TRI 2.0 to investigate the IoT readiness of SMEs in Malaysia is timely relevant. The
summary of TRI 2.0 for studying IoT readiness is shown in Table 1.
Table 1: IoT readiness with TRI 2.0
Nature
Dimension
Definition
Measurement
Motivators
Optimism
A positive view of
IoT and a belief
that it offers people
increased control,
flexibility, and
efficiency in their
working lives.
In my opinion, IoT will contribute to a better
quality of working life.
In my opinion, IoT will give me more freedom of
mobility at work.
In my opinion, IoT will give me more control
over my daily activities at work.
In my opinion, IoT will make me more
productive in my working life.
Innovativeness
A tendency to be
an IoT pioneer and
thought leader.
In my opinion, other people will come to me for
advice on IoT at work.
In my opinion, I will be among the first in my
circle of friends to acquire IoT when it appears.
In my opinion, I can figure out IoT products and
services without help from others.
In my opinion, I can keep up with the latest IoT
developments in my areas of interest.
Inhibitors
Discomfort
A perceived lack of
control over IoT
and a feeling of
being
overwhelmed by it.
In my opinion, if I get technical support from a
provider of an IoT product or service, I will
sometimes feel as if I am being taken advantage
of by someone who knows more than I do.
In my opinion, technical support lines will not be
helpful to explain IoT in terms that I understand.
Sometimes, I think that IoT systems are not
designed for use by ordinary people like me.
In my opinion, there is no such thing as a manual
for IoT product or service that’s written in plain
language.
Insecurity
A feeling of
distrust of IoT,
stemming from
skepticism about
its ability to work
properly and
concerns about its
potential harmful
consequences.
In my opinion, I will be too dependent on IoT to
do things for me at work.
In my opinion, too much IoT will distract me to a
point that is harmful.
In my opinion, IoT will lower the quality of
relationships by reducing personal interaction.
In my opinion, I will not feel confident doing
business with a place that can only be reached by
IoT.
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Research Methodology and Findings
Using the measurement from Table 1, a questionnaire comprising of two items on the
respondent backgrounds and 16 items on the IoT readiness with a 5-point Likert-scale from
[1] for “strongly disagree” to [5] for “strongly agree” was developed. To ensure respondents
understanding of the questions, the survey forms were attached together with a full page of
information on IoT and its connection to IR4.0. As a starting point, this study has collected
preliminary data from a single two-day SMEs workshop in Kuala Lumpur in November
2017. All data were recorded and descriptively analyzed with SPSS.
Respondent Background
The survey has received 41.7% responses from directors, and 27.8% from managers. This
study also responded by executives (16.7%), engineers (2.8%), and the others, e.g.,
consultant, trainer, etc. (11.1%). In term of ICT usage, 89.2% of respondents are using email
(e.g., Gmail) and mobile messages (e.g., WhatsApp), 86.5% using computer and software,
73% using social media (e.g., Facebook), and 45.9% with online business (e.g., Lazada) for
working purposes. In general, the statistics have suggested that although the respondents are
quite familiar with the ICT tools, some of them are still not using any internet webpages to
communicate and socialize with the customers. Meanwhile, no less than half of the
respondents are yet to adopt the current trends of doing business with online sales. Since IoT
is more advanced than ICT, the results have justified the relevance of investigating the IoT
readiness of SMEs in Malaysia.
Motivator 1: Optimism
Optimism refers to a positive view of IoT and a belief that it offers people increased control,
flexibility, and efficiency in their working lives. The results on optimism have shown that the
respondents were believed that IoT will contribute to a better quality of working life (4.46),
give them more freedom of mobility at work (4.41), more control over daily activities at work
(4.32), and more productive working life (4.35). Therefore, with the average mean of 4.39
(between “agree” and “strongly agree”), it can be generally concluded that the respondents
have a positive view on the IoT and belief that it will offer them increased control, flexibility,
and efficiency over their working lives. With this level of optimism, this implies that the
respondents are quite motivated and ready to accept IoT with its potentials.
Motivator 2: Innovativeness
Innovativeness refers to a tendency to be an IoT pioneer and thought leader. The statistics
have suggested the respondents are somehow “agree” that the others will come to them for
advice on IoT at work (3.63), they will be among the first to acquire IoT when it appears
(3.41), they can figure out IoT products/services without help from others (3.11), and they
can keep up with the latest IoT developments in their areas of interest (3.56). However, with
the average mean of just 3.40 (between “neutral” and “agree”), it can be generally concluded
that the respondents motivation still need to be improved in order to become more innovative
since their tendency to be the IoT pioneers and thought leaders are still low.
Inhibitor 1: Discomfort
Discomfort refers to a perceived lack of control over IoT and a feeling of being overwhelmed
by it. Based on the findings, the respondents are somehow “disagree” that they will be taken
advantage by the IoT service providers when they get technical supports from them (2.89).
The respondents also seem to “disagree” that the technical supports will not be helpful to
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make them understand the IoT better (2.89). Furthermore, they also “disagree” that IoT
systems are not designed for the ordinary people like them (2.51). In addition, the
respondents also more inclined towards “disagree” on the statement that suggests there is no
manual for IoT products/services that is easy to read (2.76). With the average mean of just
2.76 (between “disagree” and “neutral”), it can be generally concluded that the respondents
do not necessarily perceived lacking of control over IoT and feeling being overwhelmed by
it, which suggest that they do not seem to be discomfort with IoT. However, there is no
guarantee that their readiness to adopt IoT will not be inhibited by this feeling.
Inhibitor 2: Insecurity
Insecurity refers to a feeling of distrust of IoT, stemming from skepticism about its ability to
work properly and concerns about its potential harmful consequences. Based on the results,
the respondents are somehow “agree” that they will become too dependent on IoT to do
things at work (3.30), and will lower the quality of relationships by reducing personal
interaction (3.27). In contrast, the respondents are somehow “disagree” that IoT will distract
them to a point that is harmful (2.81). Meanwhile, the respondents are not quite sure either to
feel confident or not to do business that can only be reached by IoT (2.97). In overall, with
the average mean of 3.09 (very close to “neutral”), it can be generally concluded that the
respondents are neither feeling distrust nor trust of IoT, stemming from skepticism about its
ability to work properly and concerns about its potential harmful consequences (insecurity).
IoT Readiness at Management Levels
When comparing between directors (comprising 41.7% of all responses) with the other
respondents group; it appears that the average means of directors on optimism (4.60) and
innovativeness (3.46) are relatively higher than the average means of the other group of
respondents. Ironically, the directors are also feeling insecure with IoT (3.22), while the other
respondents do not necessarily feel insecure (2.90). In addition, the other respondents also do
not feel discomfort (2.56) with IoT as compared to what the directors feel (2.90).
Discussions
In general, the findings have found the average mean score for optimism (first dimension of
motivators) is the highest among all four dimensions of IoT readiness, which is suggesting
that the respondents do realize and acknowledge the potential benefits of IoT, and are
informed on the possible effects on their businesses. This also implies that the initiatives
driven by the National IoT Strategic Roadmap are positive on SMEs’ optimism towards IoT
adoption. In addition to optimism, the respondents also possess some elements of
innovativeness (second dimension of motivators) to increase their motivation towards IoT
adoption. However, with the overall mean score of innovativeness betweenneutral” and
“agree”, the respondents are more likely to be a technology follower. This is supported by the
findings showing that the respondents are less capable to figure out IoT products/services
without seeking help from others. Since IoT is still new among SMEs in Malaysia, their
knowledge on IoT needs to be continuously enhanced in order to become pioneers and
thought leaders. In contrast, the findings on discomfort (first dimension of inhibitors) have
suggested the respondents are not thinking that they will lose control and being overwhelmed
by IoT, which means they do not feel discomfort with it. However, the SMEs still need to be
trained on how to control and make good use of IoT. Meanwhile, the results on insecurity
(second dimension of inhibitors) are a bit on the mixed side. Even though the respondents are
neither feeling too distracted nor unconfident with IoT, they do worries that IoT will make
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them becoming too dependent and will reduce the quality of relationships at works. It is also
worth noting that the group of directors has achieved higher level of optimism and
innovativeness than the rest of respondents. Since IoT is a new technology, top management
support and initiative to introduce IoT in firms is very important. In fact, top management’s
optimism on IoT will increase the confidence level of employees and provide support to
implement the change. However, the directors are somehow inhibited with the feeling of
distrust of IoT, stemming from skepticism about its ability to work properly and concerns
about its potential harmful consequences. To reduce this feeling, security issues should be
given priority where the facilities and infrastructures for its improvement need to be properly
designed and developed.
Conclusion
IoT is one of important enablers of IR4.0 that will redefine the domain of production systems.
IoT will affect the current competitive advantage of firms worldwide including the SMEs in
Malaysia. Due to its newness, the IoT readiness of SMEs in Malaysia is yet to be fully
understood. In general, this preliminary findings have suggested the respondents are quite
optimism with IoT that will increase their control, flexibility, and efficiency of the works.
However, the overall mean score of innovativeness is not quite sufficient to suggest that they
are ready to be the pioneers and thought leaders of IoT. Meanwhile, the respondents do not
feeling discomfort with IoT, but undecided either it can be trusted or not for doing business.
When comparing the IoT readiness of the directors’ group with the others, it was found that
while the directors are relatively more motivated towards IoT adoption, they are however also
feel more insecure with it. In contrast, the other group of respondents may not as motivated as
the group of directors, but they do not feel discomfort with IoT. As to improve the level of
IoT readiness, more incentives and supports should be provided to SMEs as a payback for
their optimism on IoT. In addition, more training should be given to SMEs as to improve
their knowledge on IoT products/services. Meanwhile, although the respondents are generally
do not feeling discomfort with IoT, they should be educated on how to control and make
good use of it. Besides that, long term planning is necessary to avoid becoming too dependent
with IoT, and also to maintain human interactions and relationships. Lastly, the directors
feeling of distrust of IoT needs to be managed as their support is the most critical to introduce
IoT in SMEs. Besides that, the respondents’ knowledge on IoT should be increased with
relevant programs. In summary, the results of this preliminary study have provided some
basic information on the IoT readiness of SMEs in Malaysia, particularly on the dimensions
of optimism, innovativeness, discomfort, and insecurity.
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The country also has substantial technical knowhow with regard to numerous Industry 4.0 technologies and a well educated and trained workforce. The framework conditions have improved in the past year as a result of state promotion of Industry 4.0 technologies and cross-cutting issues, as well as support measures for implementation and awareness-raising. However, there is a need for action in expanding the broadband infrastructure on the basis of fibre optic cables and technologies that provide consistently high transfer rates. If it also proves possible to establish uniform, secure and open standards for data transfer the Mittelstand will have every chance of overcoming the challenges accompanying Industry 4.0.
Article
The Technology Readiness Index (TRI), a 36-item scale to measure people’s propensity to embrace and use cutting-edge technologies, was published in the Journal of Service Research over a decade ago. Researchers have since used it in a variety of contexts in over two dozen countries. Meanwhile, several revolutionary technologies (mobile commerce, social media, and cloud computing) that were in their infancy just a decade ago are now pervasive and significantly impacting people’s lives. Based on insights from extensive experience with the TRI and given the significant changes in the technology landscape, the authors undertook a two-phase research project to update and streamline the TRI. After providing a brief overview of technology readiness and the original TRI, this article (a) describes the multiple research stages and analyses that produced TRI 2.0, a 16-item scale; (b) compares TRI 2.0 with the original TRI in terms of content, structure, and psychometric properties; and (c) demonstrates TRI 2.0’s reliability, validity, and usefulness as a customer segmentation tool. The article concludes with potential applications of TRI 2.0 and directions for future research.
Article
The role of technology in customer-company interactions and the number of technology-based products and services have been growing rapidly. Although these developments have benefited customers, there is also evidence of increasing customer frustration in dealing with technology-based systems. Drawing on insights from the extant literature and extensive qualitative research on customer reactions to technology, this article first proposes the construct of technology readiness of people and discusses its conceptualization. It then describes a program of research that was undertaken to operationalize the construct, develop and refine a multiple-item scale to measure it, and assess the scale’s psychometric properties. The article concludes with a discussion of potential practical applications of the scale and an agenda for additional research aimed at deepening our understanding of technology’s role in marketing to and serving customers.
Article
Purpose – Notwithstanding a significant amount of literature on the technology acceptance model (TAM), past research has overlooked the role consumers' technology readiness (TR) plays in adoption of self-service technologies (SSTs). This study aims to fill this research gap by developing and testing a model that integrates the role of TR into the TAM. Design/methodology/approach – The study proposes a research framework to suggest the direct and moderating roles of TR in the TAM. Extant research from various research streams is reviewed, resulting in 13 hypotheses. Data collected from customers with SST experiences are examined through structural equation modeling (SEM) and hierarchical moderated regression analysis. Findings – Results indicate that customer TR enhances perceived usefulness, perceived ease of use, attitude toward use, and intention to use. Results also show that TR attenuates the positive relationship between perceived ease of use and attitude toward using SSTs. Research limitations/implications – This research represents an early attempt to explain the role of TR in the TAM in the context of SSTs. Future research directions are discussed, with emphasis on incorporating customer differences and situational factors to better understand this model in various service settings. Practical implications – Findings show that TR influences perceived usefulness, perceived ease of use, attitude toward using SSTs, and behavioral intentions. Therefore, to achieve better SST service outcomes firms implementing SSTs should give increased attention to customer TR. Firms should stimulate the use of technological services by strengthening positive TR drivers (the optimism and innovativeness dimensions) to encourage use of technological services and positive attitudes toward technology, while also reducing TR inhibitors (the discomfort and insecurity dimensions) to lower reluctance to use technology. Originality/value – This study is the first to integrate the role of TR into the TAM in the context of SSTs.
The evolution of the Internet of Things
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How technology readiness explains acceptance and satisfaction of digital services in B2B healthcare sector?
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