Challenges and trends in the agrifood industry related to inter-organisational innovation processes
by Maren Bruns
Problem description and objectives
Consumer demand orientation and more effective value chain coordination mechanisms are essential for the competitiveness of the agrifood industry. This requires a complex mixture of innovations: like new products, redesign of production processes, new or improved chain coordination mechanisms and new market approaches. Single companies are not able to deal with all the needed innovations on their own (like for example an industry wide orientation shift, value chain or network oriented innovations etc.). But the fact is that innovation processes involving a multiplicity of actors (multi-actor innovation) can be particularly complicated especially in the meat industry. Since the meat industry is structured by numerous small and medium sized enterprises (SMEs) in various stages of the value chain but also by a few large (multi-)national companies. Furthermore, the meat value chain is based on the division of labour (often across national borders) (Theuvsen, 2004).
Innovations in the agrifood industry
The term innovation is used in many different technical disciplines. One can find a very wide range of definitions. All of these definitions contain the aspect of something new. The Latin origin of the word innovation is “innovatio”, which means renewal and change (Baer and Wermke, 2000). Schumpeter (1934) defined innovation as “the creation of new combinations”. “These innovations can be new products, new methods of production, new sources of supply, the exploitation of new markets, or new ways to organise business“ (Batterink et al., 2006). A result of the process of introducing new ideas to the firm is to increase its performance2 (Rogers, 1998). It should be noted that an innovative idea, an innovative concept or an invention is no innovation until the idea has been productively incorporated into the enterprise’s activities. Subsequently, it has to be introduced to the market (European Commission, 2004; Hauschildt, 2004; Rogers, 1998). That means that specific organisational, financial and commercial steps (which are intended to lead to the implementation of innovations) are as crucial for the innovation process as is the result of successful R&D. This implies that an innovation can only be finally evaluated after it has been put into action, which is a difficult task. The success of an innovation can be measured by using criteria defined by different interest groups (Gärtner, 2007). It might be easier to measure the return on innovation investment for a single company by comparing the profits due to new products or services with the research, development and other direct expenditure related to the innovation (with a time dimension of three, five or ten years). In contrast, it is more difficult to measure the success of an innovation being for example the result of public funded research projects. A public financing and development fund provider need to compare the profits of a whole sector based on innovations with the research and development (R&D) investments. This is additionally more difficult since a public fund provider has the tasks to support in addition basic research (beside applied research) as the foundation for future long-term innovations. But often basic research is an expensive activity and the return on investment (if any) will take place at an indeterminate future date (see below).
- Figure 6
The process of generating innovation
The best way to exploit the potential of different innovation activities is through structured planning and control of innovation activities from the initial idea to successful market entry. Based on experiences in innovation consulting, A.T. Kearney developed the “House of Innovation”. In Figure 6 the slightly modified model of successful innovation management including important elements in shown. Although the “House of Innovation” primarily concentrates on the individual operational level, the components can be used for any type of innovation process (also for network management on the network level).
Networks as a nucleus for inter-organisational innovation processes
Innovations can be implemented in-house (by a single enterprise). This can be done if the enterprise has the necessary resources and competences available internally and if the topic of the innovation activity concerns only this single company (e.g. food product development). Another strategy for increasing innovation levels is to use external resources (Chesbrough, 2003). Like it is done in the R&D project Q-PorkChains. In this case, an enterprise makes use of an innovation system which involves the interaction between actors that is needed in order to turn an idea into something new that is to be introduced on the market. This is often necessary if the topic of the innovation activity has a value chain or a value network perspective. These are innovations with an impact on the organisation of these systems. In this case, more than one actor is needed).
The need for inter-organisational innovation activities in the agrifood industry
- Figure 7
If one shifts focus from innovations in the agrifood industry and the generation of innovations and looks at the innovation demand of the future, various factors can be observed which influence the agrifood industry and thereby the meat industry as well.
The European Foundation for the Improvement of Living and Working Conditions (2004) summarises future trends under the factors listed in Figure 7. With the help of trend analysis based on the individual factors, new and future demands on companies and production chains can be identified. Such an approach is labelled “foresight and diagnostics” (Howells, 2006). Early detection of changing conditions and with it the detection of the demand for innovation is a very essential step for competitiveness.
Barriers related to the innovation process
Unlike large-scale enterprises, SMEs are not usually equipped with to implement innovation management processes due to scarcity of resources (e.g. lack of project management staff and experiences). Instead, SMEs frequently have unsystematic and ad-hoc innovation processes. For example innovation activities in SMEs normally lack long-term strategic thinking. It is often quite the opposite as often innovation activities take place as immediate responses to short-term customer demands. Or sometimes without integrating customers in the innovation process at all, as the most important external innovation source (Aslesen et al, 1999; Buhl, 2009; Fortuin et al., 2007; Rammer et al., 2006). Furthermore, SMEs lack detailed market information (including information on technological trends and new technological possibilities) during the innovation initiation phase (Rammer et al., 2006). Without market information it is difficult to implement an innovation to satisfy market demand. Furthermore, they lack experiences to identify and codify currently existing internal technical, organisational or strategic problems (Klerkx, 2008; Klerkx and Leeuwis, 2008a; Aslesen et al., 1999). A clear demand articulation is of great importance for finding a knowledge provider and cooperation partners as part of the problem-solving process.