Presentation at World Association for Small and Medium Enterprises (WASME) 2005 Conference in Bucharest, Romania, 16-18

1. Facilitating knowledge based sustainability of economic growthby applying UNIDO methodology, IT tools and developing of best continuous improvement practices in Training & Upgrading Programmes for Entrepreneurs Measuring and Improving Business Results

2. Presentation at World Association for Small and Medium Enterprises (WASME)2005 Conference in Bucharest, Romania, 16-18 May 2005 by Serge Golovanov, PhD, Dipl.Eng., UNIDO International Consultant Director, Enterprise Performance Improvement Centre, GOLEM IMS GMBH,Vienna, Austria in partnership with United Nations Industrial Development Organization (UNIDO), Vienna, Austria www.win2biz.com www.golem.at

3. Focus on Small and Medium Enterprise performance and innovation management capacity: • Do entrepreneurs manage businesses with high efficiency and min losses? NO! • Do they have & use IT tools to measure business results and simulate decisions? NO! • Can innovation, technology transfer be managed effectively in such cases? NO!

4. Definition of Small and Medium-sized Enterprises

5. Estimations of lost gross profit (GP) due to various inefficiencies, per annum Enterprise Group 1 (GP € 400,000): 54,900 € Enterprise Group 2 (GP € 3,000,000): 215,500 € The price of ignorance(UK case studies, CoVE and MII, food industry):

6. Overall Productivity Increase (or value Added/person) + 9% Improved Efficiency + 18% Improved Gross Profit + 25% Reduction in Labour cost - 15% Overall Effective Efficiency increase + 5% Acceleration of business development - 6 years Average enterprise improvement results benchmarked after the Programme implementations

7. Challenges facing entrepreneurs: • Businesses are run with relatively high losses and inefficiencies without knowing actual figures! • Major decisions are not prepared and evaluated in necessary detail, compared by consequences, optimized and monitored in implementation • The potential is underutilized, developments are risky, results may be unpredictable and unexpected!

8. Businiess Navigation:Measuring & Monitoring & Planning of Business Performance Results

9. Sailing to target destination Target (Promised Land) Ideal path Initial position

10. Sailing with navigation

11. Sailing without navigation New technologies do not help reaching the target but can make failure impact more costly and severe! (e.g. new engine, design or construction of the ship do not change the outcome )

12. ? SME mortality rate after successful start-up is high due to premature death of SMEs caused by uncontrollable losses and non- efficiencies unknown to management Actual data by San Paulo Department of Statistics, Brazil: 5 billion dollars lost and 530 thousands jobs in the medium and low range of manpower are lost within one year in San Paulo State only. 1,000,000 businesses closed between 1990-2002 just in the State of San Paulo worth of 62 billion dollars in invoicing and consequent losses in taxes. (Source: Newspaper “O Estado de San Paulo”, Economy and Business Section, 4th December 2003) Similar situation exists in other developing countries lacking of official statistics. Result:Most of SMEs are running life time experiment “W i n or D i e” !

13. Common issue: What are the practical solutions for enterprises?

14. Continuously improvingbusiness based on its measurement

15. Basic principles of continuous improvement in business • Measuring business results (UNIDO Software) • Identifying problematic areas having measurements data • Formulating optional solutions which can potentially solve problems and bring improvements (new machine, production profile, production team change & control, etc) • Evaluating impact of uncertainties and risks by simulating the major outcomes (scenarios) • Selecting the best (e.g. most profitable & sustainavle) option • Implementing the decision in practice • Returning to Step 1

16. Pharos – Business Navigator Produce Plus Financial Improvement Toolkit Components of UNIDO’s Enterprise Business Performance Management Solution Client Support & Consulting on-site Software Suite Training Course Certification Software Installation Data collection & entry, Biz target setup Reports, Export-import Enterprise Vienna or any European location Professionals Benchmarking In country – regional industrial center Measuring & Improving Business: Developing best practices

17. The Programme Content & Budget • Awareness seminars, selecting of enterprises • Training courses for SME management (5 days, < 24 persons per group)

18. The Programme Budget Components 3. UNIDO Business Performance Measurement & Management Software tools (at least 2 licenses per enterprise for general and production managers)

19. Phase 2 option: On-site consulting & support • Training and certification of client’s support team • Transfer of know-how, methodology to Enterprise Management, setting best continuous improvement practices (up to 12 months, 1 consultant support up to 10 enterprises, installing software, data collection, business targets, decision support, results’ measurement, etc). • Final results evaluation and reporting, conference

20. UNIDO Performance measurement tools:Business Benchmarking Report

21. Improvements by KBI summary graph at a glance

22. Key Business Indicators (KBI) in bench-marking module

23. UNIDO Performance Measurement tools:Pharos Business Navigator (main menu)

24. UNIDO Performance Measurement tools:Produce Plus (main menu) Produce Plus

25. Some practical outcomes • Pre & Post Programme enterprise benchmarking, • diagnostics, performance measuring, production efficiency analysis provided for each participating enterprise (customers, suppliers, non-conformances, planning, production resources' utilization, etc.) • UNIDO Certificates of “Enterprise Business Performance Excellence“ for enterprises and “Business Performance Management Excellence” for entrepreneurs and managers based on benchmarked improvements. • Training of SME managers in presentation of the enterprise performance results to investors and credit institutions

26. Expected Results • Improvement of Key Performance Indicators (KPI) ~ 10% in average, e.g. Gross Profits, Productivity (Added Value per Employee), etc. • Increase in taxation results • Benchmarking reports for each enterprise, • Documented Upgrading Programme results • Important benchmarking data for performance of industrial sectors • Investment environment improving due to increased transparency of businesses • Certificates for Enterprise and its Management • Improved culture in management of business performance and innovations, sustainability and competitiveness

27. Enterprise Model of Training Programme Efficiency (net profit only) • Average annual sales, USD - $632 000 • Net Profit average % (shoe production factory) - 5% • Increase of net profits, post programme % - 10%

28. Training Programme Results National Industry Model (limited by considerationnet profit factor only) • Number of enterprises in the sector of industry served - 1 000 • Net profit increase per sector, post-programme - $12 ,008,000 • Taxation (annual gross profit, example %) - 35% • Increase in taxation income for Government, annual - $ 4,202,800

29. Implementations • UNIDO integrated programme: the Republic of Komi, Russia Sustainable Industrial Development and Competitiveness, Oct. 1999 • Strengthening of Small and Medium automotive component suppliers to deliver export quality products in India, Nov. 1999, India, New Delhi, Pune, Bangalore, Mumbai, Baroda, Nashik, Ahmednagar. • Application of Quality Principles To The Food Processing Sector of 7 Sub-Sahara African Countries, July 2000 Kenya, Uganda, Tanzania, Zambia, Ethiopia, and Zimbabwe. • 4. Application of Quality Principles To The Leather Production Sector in Egypt, April 2001, Cairo, Egypt • 5. Integrated Programme for Columbia, 4 industrial sectors, Ibage, Pereira (Eje Cafetero), Barrancabermeja.

30. 6. The workshop "Strategic and production management of industrial enterprise: application of UNIDO benchmarking and business excellence tools Pharos + Produce-Plus", UNIDO ITPO/ARCEIT Manama, Bahrain. • 7. The workshops "Application of UNIDO benchmarking and business excellence tools for enterprise upgrading, strategic and production management of industrial enterprises, IMC/UNIDO workshops, Cairo – Alexandria - Borg El Arab, Egypt, February - April 2004. • Introducing UNIDO measurement tools for continuous improvements in quality, efficiency, productivity and competitiveness in manufacturing, Association of Lebanese Industrialists (ALI), Euro-Lebanese Center for Industrial Modernization (ELCIM), Lebanon, June – October 2004. • Improving Business Performance by Introducing Continuous Improvement Practices Based on UNIDO Business Performance Management Software, August – December 2004, UNIDO Programme for Palestine.

31. C o n c l u s i o n s: • The majority of entrepreneurs, industrialists does not have sufficient knowledge, performance management tools and practices to monitor and measure their businesses, optimize decisions, eliminate inefficiencies systematically and maximize use of available resources. • The Training and Upgrade Programmes for SMEs introduce best continuous improvement practices and UNIDO IT tools facilitating productivity, competitiveness, quality,sustainable growth in areas where real and tangible improvements can be made. • SMEs become much more transparent and better prepared for national and international investors, improving export potential. • The Training Programmes facilitate entrepreneurs capacity building in introduction and managing of innovations, new technologies.

32. C o n c l u s i o n s (cont) • The Training Programmes facilitate human resource developments, managerial capacity and potential, path to ISO 9000 standardization, meeting WTO requirements, decreasing SME mortality in the regions. • The Training Programmes deliver unique content and provide comprehensive package of services at acceptable cost level resulting in important Knowledge Capital Gain. • Governmental and international support of the Training Programs is an effective way to boost economic performance and sustainability of industrials sectors in regions. • The programme results are measured and documented providing vital economic and industrial statistics to organizers and donors .

33. Training Programme with or without on-site support <12 months • The practical instruments exist and proved: Training and Upgrade Programmes for SMEs • The costs of fundamental improvements are reasonable and realistic compared to any other existing options. • The results are measurable and documented. Input: < N, 000 EURO per enterprise Output: Measurable increase of major indicators including net profits, productivity, etc. The total enterprise service package price depends on the Programme duration, national consultants salaries in country, number of participating enterprises and some other factors

34. Representative functions: UNIDO Focal Point – National Enterprise Performance Improvement Center Innovative directions of working with SMEs Addressing key national priorities defined by Governments New projects and funding options by EU, UN, international and national donors Preparing SMEs for introducing innovations and new technologies in effective and controllable way Training of national consultants and entrepreneurs in country or/and in Austria Sharing national experiences and benchmarking results Distributing UNIDO methodology, software and best practices International Partnerships

35. We welcome associations with national counterparts supporting growing SMEs industries in countries by Deploying Training (in country and/or in Europe) Implementing Improving and Benchmarking with UNIDO Business Performance Management Solutions for entrepreneurs bringing up productivity, competitiveness, qualityand making industrial development more effective sustainable and prosperous! The Message

36. Contacts: Enterprise Performance Improvement Centre GOLEM IMS GMBH, Vienna, Austria www.win2biz.com e-mail: info@win2biz.com Development,Training and Support Center for UNIDO Business Performance Management products Member of INSME Association