New strategy for new circumstances


Well positioned: The company had invested heavily in R&D last year.

AS a technology solutions provider, Nanopac (M) Sdn Bhd has mainly spent the last seven years working behind the scenes.

Chief executive officer Datuk Cheng Kok Leong was contented with producing nanomaterials for other manufacturers to incorporate into their products. Business was doing well and the company enjoyed a portfolio of big customers like Toshiba and Hitachi.

That is, until Covid happened.

“Because our business model was to develop technology for our partners, we were behind the scenes and we couldn’t go forward. In March, when the pandemic struck, we had problems with the supply chain and business was tough.

“To pivot into a new business model, we have to think strategically. It has to be very fast for short-term survival, and at the same time, you need to look at the long-term resilience.”    Datuk Cheng Kok Leong“To pivot into a new business model, we have to think strategically. It has to be very fast for short-term survival, and at the same time, you need to look at the long-term resilience.” Datuk Cheng Kok Leong

“That forced us to relook our business model. And in a short period, we created a different ecosystem using the resources that we had to go into the consumer market, ” shares Cheng.

Nanopac started producing its own nano-coated face masks and personal protective equipment (PPE) for the local market to ensure that the company did not go bust during the pandemic.

But while they had the nano technology for the new products, getting them manufactured was not so straight forward as they did not have the right equipment.

“We had to rely on other face mask makers and at that time, no manufacturer wanted to give us any face mask.

“So we couldn’t supply our customers. It was almost impossible to secure any raw materials and machines at that time, ” he says.

Fortunately, they found a way to bring in a machine from China to make new face masks.

However, there were also other areas to look into like relevant skills and manpower needed for the new production line.

Branding opportunity: The pandemic pushed Nanopac to build their presence in the consumer market.Branding opportunity: The pandemic pushed Nanopac to build their presence in the consumer market.

“We were lucky. We managed to strike a deal with our partner whose business was affected. So we placed the machine at their site and used their labour. And we managed to start producing our own face masks in May.”

That pivot not only kept them busy in the last few months, it also gave them more visibility with consumers as they could now sell products under their own brand. And Cheng sees this as a valuable opportunity to build their presence in the consumer market.

Plus, margins are better for consumer products.

“Previously, we were so comfortable in our business-to-business (B2B) model. We were just busy meeting our contracts. But our orders started dropping because our clients experienced a drop in consumer demand. So we had to move on from there.

“Building a brand for the consumer market requires a lot of resources and time. It is not easy. But with this pandemic, we saw an opportunity that gave us a shortcut. We chose products that could leverage our technology and give us an edge. For example, our face mask is not just an ordinary face mask. It has all the certifications to prove that it filters and kills 99.9% of bacteria.

“So now, we are looking at the business-to-consumer (B2C) segment to see how we can move our products into these consumer networks. Covid has taught us a good lesson, ” he says.

The B2C business helped fill the gap that Nanopac lost in the B2B segment and Cheng is optimistic of maintaining its sales for this year.

Nanopac turned in sales of about RM15mil in 2019.

Additionally, with all the restrictions on movement, Cheng has found another revenue stream in the licensing of its technology, which he hopes will help to build the company’s resilience in the long run. “We initially thought of selling our products to Macau, but we couldn’t. So instead, we licensed the technology to them. And that’s another change in our business model. And I think for the long-term, we can look into licensing our technology rather than supplying the technology, which reduces our production cost.

“So to pivot into a new business model, we have to think strategically. It has to be very fast for short-term survival, and at the same time, you need to look at the long-term resilience, ” he says.

Like many other SMEs, Cheng is hopeful that next year will be better for businesses. But given the uncertainty in the market and the need to conserve its cash flow, he is reviewing their plans for the next five years to see how else they can remodel the business.

One of the factors that he thinks will help the company is that they had invested heavily into R&D last year. This will give them a pipeline of projects and new technologies to build on for the coming year.

They have kick-started some projects back to life and are in the midst of negotiating with overseas parties to license these technologies. Cheng says nanotechnology is largely an underappreciated technology in Malaysia and local companies have been reluctant to adopt new solutions. However, he notes that nanotechnology can be used to enhance the effectiveness of many products.

An edge: Home appliances producers had promoted the use of nanotechnology in their products a few years ago. — filepicAn edge: Home appliances producers had promoted the use of nanotechnology in their products a few years ago. — filepic

Note that in the early 2000s, many of the home appliances producers had promoted the use of nanotechnology in their products and marketed them as a premium range.

“It is a very disruptive technology, but a lot of people are not aware of it. Companies are always thinking about cost. But nanotechnology can create a lot of value for your product with just a minor incremental cost, ” he says.

While there is quite a bit of local research carried out in nanotechnology, the rate of commercialisation in this area is still low.

“If we can bridge the gap between academia and the industry, I think Malaysia can be successful in this field. But we need a lot of policy support. And research grants in this field should be relooked. Rather than just giving them to universities, it should be given to the industries as well. “This will have a bigger impact on the industry and generate more income, ” says Cheng.

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nano technology , SME , Nanopac Sdn Bhd

   

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