ICT IN THE MULTI-STAGE PROCESS OF
INNOVATION
A case of small traditional food and beverage manufacturers in the north of the
Netherlands
Author: Fedor Moltmaker Bos
Student number: S2978105
Educational Program: Pre-Master Business Administration: Change Management Educational institution: Rijksuniversiteit Groningen
Date: 07-06-2016
Word count: 5916
1. INTRODUCTION
The food industry is of great importance for the Dutch industry because it generates more than 20 percent of the total added value in the industry, which is more than five percent of the total added value of the Dutch economy (CBS Statline, 2016; Van der Wiel & Wijnstok, 2016). Murdoch and Miele (1999) separate the food industry into two main systems of production: on one hand, standardized, specialized production processes responding to economic standards of efficiency and competitiveness; on the other hand, localized, specialized production processes focused on environmental, nutritional, taste or health qualities. Among both systems of production are manufacturers of traditional food (traditional food firms). Traditional food firms produce food or beverage products of which (1) the key production steps are performed in a certain area at national, regional or local level, (2) which are authentic in their recipe origin of raw material, and/or production process, (3) which are commercially available for 50 years and (4) which are part of the gastronomic heritage (Gellynck and Kühne, 2008).
The Dutch food industry is the leader of R&D expenditures in the EU and has a relatively high R&D intensity compared to the other countries in the EU (FNLI, 2015; Van der Wiel & Wijnstok, 2016). However, Avermaete (2002) argues that R&D expenditures, patent data and statistical data are highly limited and are not a proper way to measure the innovativeness of food firms. Still he recognizes that all types of innovation are applicable in these firms. Baregheh et al. (2014) even states that innovation is one of the most important factors in the competitiveness of food firms. However, traditional food products cannot be changed too much in their production process, raw materials or recipe (Kühne et al., 2010). Therefore, traditional food firms have to consider a large amount of customer’ acceptance in the innovation of their products, and consumer led product development can be applied to a lesser extent than in regular food firms (Costa and Jongen, 2006; Kühne et al., 2010).
With these restrictions it should be even harder for traditional food firms to find ways to innovate compared to regular food firms which do not have these restrictions in such strength. But it is possible that these traditional food firms have developed new products or penetrated new markets. However it is unclear how traditional food firms innovate their business, and how new products and markets are aligned with traditional products. In turn, the question rises if this creates a risk for the production of traditional products.
ICT supports the access to and use of internal and external resources that is needed to innovate (Dyerson et al., 2013). ICT in SMEs primarily enhances cost reduction and efficiency improvements, but it can also support other innovation types, for instance enhancing new markets through website development, or creating an elaborate platform for customers (Higón, 2012). Hence, ICT can be used to support the innovation of both traditional, developed and new products. However, it is unclear how traditional food firms make use of ICT in certain innovation types.
Besides, the adoption of ICT has only been researched to a small extent in SMEs in general, and to a very small extent in relation to innovation (Àntlova, 2009; Schubert et al. 2007). However, the adoption of ICT in the support of innovation in traditional food firms has not been researched yet. The specific interest of the innovation activities and the adoption of ICT for the support of innovation results in the second research question: How does ICT influence innovation in these firms?
The relevance to answer the questions lies in the small extent of research that has been conducted in Dutch traditional food firms concerning innovation and ICT in general and supporting innovation. Therefore this paper tries to identify if there are similarities and differences in their approach.
2. LITERATURE REVIEW
This literature review gives an understanding of innovation and ICT to support innovation. In the first paragraph the terminology of innovation will be described. In paragraph two it is determined how (traditional) food firms can innovation, considering studies of both types of firms. Paragraph three describes the terminology of ICT and is followed by the last paragraph which describes how food firms can use ICT to support the use of internal and external resources in relation to innovation.
2.1 Innovation
Research of Baregheh et al. (2012;2014) shows that in food firms there is a positive relationship between engagements with the four types of innovation, where implementation of one type of innovation leads to another type of innovation. So it should be considered that there is interdependency between the innovation types, which causes that product innovation for one might be considered as a position innovation for another, and therefore innovation types should not be studied or adopted in isolation from one another (Baregheh et al. 2012). However to obtain a structured overview of innovation in traditional food firms this research applies the model of Francis and Bessant (2005). The consequence is that there will be overlap between the different types of innovation, but this overlap retains that these types are studied in isolation.
2.2 Innovation in (traditional) food firms
Innovation closely linked with product, process and position innovation is often the most important for the competitiveness of food firms (Grunert et al. 1997). The same goes for traditional food firms, which is confirmed by a study of Kühne et al. (2010). They found that innovation in product quality, packaging and marketing were commonly mentioned and appreciated by the sector and customers. However, because of the limited consumer acceptance of innovations of traditional food products, these innovations should not change the sensory properties of the products (Kühne et al. 2010). Therefore, according to Gellynck and Kühne (2008) it is not frequently observed that traditional food firms innovate their product composition and process, and innovations such as improvement of packaging, size, quality, convenience, new markets and marketing exist more often.
information is the source of knowledge, without information there will be no source of innovativeness. Explicit knowledge can be transferred and stored with the use of ICT, but tacit knowledge is hard to store and is in traditional food firms mostly transferred from generation to generation (Avermaete, 2002).
For traditional food firms this means that if they want to become more innovative they need to put more effort into the usage of internal resources, but also strengthen the collaboration with supply chain partners (Avermaete et al. 2004; Gellynck et al. 2011). Collaboration is based on integrated activities, such as sharing of information, knowledge, profits , risks and benefits, but it can fail due the lack of trust in the supply chain or not understanding the benefits of collaboration (Gellynck and Kühne, 2008). Innovation in food firms takes place within a specific environment and this environment is different for every regular food firm, where sectoral characteristics influence the innovativeness of these firms (De Jong and Marsili, 2006; Forsman, 2011). Gellynck and Kühne (2008) describe the collaboration in traditional food chains as informal, based on long-term (social) relationships and where the exchange of information and knowledge through the chain contributes to the competitive advantage. However it is unclear if traditional food firms do take advantage of these external sources or if they are still bounded to their internal resources and information.
Barriers to innovate in traditional food firms are labor shortages and the lack of methods, skills, understanding of benefits, and financial resources (Gellynck and Kühne, 2010; Lee et al. 2010). Another important barrier mentioned in the literature is the lack of information. Here, ICT can support innovation by creating linkages between internal activities, improving coordination of these activities through new information flows, and external activities by facilitating integration with customers and suppliers (Barba-Sànchez et al. 2007).
2.3 ICT
collaboration to improve innovation in for example efficiency, quality, growth, administration, managing external relationships, cooperation, communication, diffusion of knowledge, and to increase the access to markets and the speed of response and transactions both business to business and business to customer (Barba-Sánchez et al., 2007; Dyerson et al., 2013; Ongori & Migoro, 2010).
This is possible through software and applications like data storage technologies, mail, e-commerce, ERP, EDI, internet, intranet, order processing, website, wireless access and video tracking (Arendt, 2008; Antlová, 2009; Dyerson et al., 2013; Ashrafi and Murtaza, 2008). ICT must be complementary exploited along other business processes, because ICT is not a strategic source itself (Barba-Sànchez et al. 2007; Barney, 1991). The impact of ICT on innovation depends, according to Higón (2012) on the strategy of the firm, so if the improvement of efficiency is of greatest importance, ICT applications such as ERP or intranet should be chosen.
2.4 ICT in SMEs
Research by Dyerson et al. (2013) has shown that the most common ICT adopted by SMEs are a website, e-mail, internet and intranet. Furthermore they argue that ICT is in SMEs are mostly used for improving productivity and operational efficiency, keeping up with competitors, improving customer service, to share information with suppliers, information gathering, and very few invest in ICT because of external pressure. However in contrast what is described, they claim that ICT does not always improve the collaboration with other firms. Most of the SMEs they researched used ICT consultants for advice in adoption of ICT.
Harindranath et al (2008) found that in traditional sectors such as food, ICT were driven by needs of regulatory compliance instead of understanding its innovative capacity. The way ICT is adopted depends on training and experience of the managers, if they are forced by suppliers, the financial situation or the size of the organization (Antlová, 2009). If staff and management are more skilled in ICT they are found to be more innovative in it(Schubert et al. 2007).
information about relevant technologies, ignorance of ICT benefits and the resistance to change (Antlová, 2009; Ashrafi and Murtaza, 2009; Ongori and Migoro, 2010). Furthermore, Antlová (2009) claims that SMEs often tend to use ICT as a tool for data processing, not for sharing knowledge or strategic advantage
2.3 Framework
As described, traditional food firms need of internal and external resources of knowledge to be innovative. However, they have limited room to innovate. To become innovative traditional food firms need access to internal and external knowledge by storing, sharing and using information. ICT is the perfect ‘tool’ for the use of information and knowledge to support product, process, position and/or paradigm innovation. The adoption of ICT for innovation of traditional food firms depends on firm specific characteristics that constitute motivations and barriers, the so called considerations. All parts of the described process are influenced by the firms specific environment. On forehand in figure 1, partly derived from frameworks on innovation at food firms of Avermaete (2002) and Grunert et al. (1997), we illustrated the position of ICT in the innovation of traditional food firms process. The terms inside the framework are not comprehensive, for instance financial resources are internal resources also and these could possibly influence ICT adoption as well as innovation.
3. METHODOLOGY
This qualitative research is conducted through a multiple case study. The multiple case study is perfect to study research questions starting with “how” and it enables triangulation and increases the construct validity of the research (Yin, 1994). Through this approach we can identify similar results or contrasting results for predictable reasons (Yin, 1994). In the previous chapter we set the framework, for which want to understand the dynamics of multiple cases within these settings.
Data is collected through three semi-structured interviews. This qualitative approach can provide comparable, qualitative data and will not only provide answers but also the reasoning. The tactic that is used in this research is described by Eisenhardt (1989). He suggests that one tactic to search for cross-case patterns in multiple case studies is to select categories or dimensions and then look for within-group similarities coupled with intergroup differences. Moreover, the use of multiple cases enables triangulation and increases the construct validity of this research (Yin, 1994).
3.1 Participants
The participants are owners or managers of traditional food manufacturers from the Northern Netherlands. They have to employ fewer than 250 persons and their annual turnover cannot exceed 50 million euro. The traditional products of the five firms have to be different to each other. Examples of these products are liquor, cakes and soda. The number of firms inside this scope is exhaustive thus the willingness and allowance of participating forms a limitation to this research. All traditional food manufacturers were contacted to be sure that enough participants would take part in this research. They were asked if they were interested in both innovation and ICT, and at least try to continuously innovate their business performance. Because this research wants to explore if innovation and the support of ICT exists in these firms it is emphasized that it is not mandatory to have an R&D department. There will be no selection other characteristics of the firms.
3.2 Procedure
split up in product, process, position, paradigm and customer’ acceptance. The interviews are semi-structured, which leaves room for reasoning, so that owners or managers would come up with examples of innovation, examples of the use of ICT in general and in relation to innovation, their interest in why they do or do not innovate and use it, and internal and external forces affecting these choices. Also important is the focus to traditional products, dependent on to what extent these products are still important. This resulted in questions like:
(1) How does the organization innovate on products? (2) How does ICT facilitate the innovation of products? (3) What are the motivations and barriers to invest in ICT?
In advance of the interview the participants are told that the questions will aim at all kinds of innovation in the organization and the use of ICT supporting this issue. The participants do not know the exact questions about the topics prior to the interview. The interviews last for approximately one hour each, where in one case the goal was to not exceed that one hour on forehand request of the participant. Each interview is recorded and literally transcribed. The transcripts are send to the participants. Through coding (see Appendix B) the data of the transcripts are categorized by topics, themes and codes. Coding is useful because it is the initial step to the evocative analysis and interpretation for a report (Saldaña, 2015), where in this research In Vivo coding is used to keep data rooted in the participant’s own language. All information in the coding is translated to English and made fully anonymous.
4. RESULTS
This results section first gives an insight in how traditional food manufacturers innovate. Paragraph 4.1 to 4.4 analyses the innovation. Second in paragraph 4.5 it is argued how they use internal and external resources in their innovation. At last, paragraph 4.6 describes the use of ICT in general and in innovation.
4.1 Product innovation
the production of traditional products, most organizations have developed their product range by producing other products. Although these products are not considered as traditional a lot are also recognized by people because of their unique name, taste or look. It is wise to first analyze what is important for the firms in the innovation of these different product groups.
Traditional products
All firms indicate that by no means they innovate on the composition and taste (recipe) of their traditional product. Also package is more or less restricted. The main reason for this resistance to change is that it cannot be considered as a traditional product anymore. Another reason is that because of the uniqueness every change will be noticed and losing their loyal customer base is at stake. However, there are cases where firms are forced to change their recipe, for instance because their supplier stopped producing specific ingredients or the government decided to forbid specific (amounts of) ingredients due to health issues.
The perception of health and organic food is of importance in society nowadays and the firms respond to this trend with research on unhealthy ingredients in their traditional products, for example the amount of sugar, dyes, carbs and alcohol. This research is done by research by quality managers or by university students. Thus traditional food firms have no interest in innovating their traditional product, however when it comes to external pressure there is room for change. But, also in considering health, it must never change the taste of the product. Nevertheless, participant 1 reacts on health issues that “you have to consider for yourself that it is unhealthy to eat the whole package in one time”.
has to render workmanship and inexpensiveness”. Participant 2 indicates that they had to change the composition of the product to export to the United States and Canada. Thus the firms that export their traditional product have more options and interest to innovate their traditional product.
Developed products
Three out of the four firms studied developed their product range through the years and are still active in product development. Reasons for product development are the search for growth and to respond to serve the market, for instance Participant 2 reasons: “Ladies rather drink a glass of white wine than [traditional products]”. Now they created a wider scope of products the developed products are the most important in terms of annual turnover and continuity. However, the longer the product exists, the more people get familiar with it, which creates restrictions again in changing the composition. Participant 3 indicates: “Everything you change the customer will notice, it will amaze you. We have a customer base that is loyal to our products and we are very proud of and happy with. […] You can change the composition but we want to guarantee the same taste”. So this customer’ acceptance in some cases also valid for taste of developed products. However, for developed products there is more room for package innovation like changing the design or shape or product innovation like raw materials or color.
The firms have a lot of knowledge of their products and skills of managing their processes. They are aware of where they are capable of. Therefore most of the ideas of new products are created and implemented by the firm itself. Participant 2 indicates: “For R&D we do not have a special employee but we do it in groups […] We are all involved in the development of new things”. Participant 3 indicates: “We arrange product development consultations”. Some firms do collaborate with external partners in the development of products, but this is more or less restricted to input about the capability of supplying a new package.
4.2 Process innovation
As described, the process of a product could determine whether it is traditional or not. Participant 4 states that there is potential for modernization of the process but that they are not interested: “I want to keep the tradition of my ancestors alive”. It is a relative small firm that does not want to render a factory. Only small machines are installed to fasten the process. Other firms do not perceive their process as traditional and the way of production is not important for their customers. They installed their process in such way that both traditional and developed products can be made by the almost the same set of machines. So the development products does not bring a risk to the production of traditional products.
The firms primarily invest in their machine park to increase their capacity and to produce more efficient and effective. They have technical managers who have knowledge of existing machines. These machines are built by other manufacturers and the firms only have the knowledge for minor changes, for instance when another package is being used. Some firms have the knowledge available to develop their own machines. Participant 1 indicates that “the machine was not available on the market so we had to develop it by ourselves. A prototype was made using division technology”. Without this technology it would be impossible to do it themselves.
All innovating firms have regulated and described all possible procedures that belong to the production process. This is important for when a recall has to occur and because this is regulated by the BSC quality label that the firms need to have. Participant 2 indicates: “Annually we check if these procedures still represents the efficient way of working”. These procedures are put on the intranet as well as a points of improvements list. Employees can suggest changes in these procedures.
expensive firms rely on external services to innovate ICT in the production process. However, there is a difference in the amount of internal knowledge of using data from ICT to innovate.
4.3 Position innovation
Export of products has become increasingly important for three of the four studied firms. The firms stand at fairs, visit countries by themselves or they make use of external parties like relations or importers. They do benchmark by themselves or by university students, and governmental and other parties can provide country specific information about values, norms and tastes. As described, in the export market they are less recognized by name, package design or product name. Therefore it is even possible to change the product for an interested customer, as participant 3 indicates: “… Then they already tasted the product because taste is the most important for them. They can change everything, except the taste. It is fun to start these kinds of dialogues”. ICT like e-mail and calling made the contact with overseas relations easier and digitalized data is important to do benchmarks.
4.4 Paradigm innovation
Paradigm innovation is not of importance or interest in traditional food firms. There is one firm recently integrated another process. Without this process the firm would not even exist in the first place, but through the years they outsourced this process. Participant 2 indicates: “We want to go back to the roots with integrating the ‘old-fashioned’ production process”.
4.5 Internal and external resources in innovation
Larger traditional food firms have more qualified staff and invest more in know-how to innovate. Innovation is very dependent on the extent to which it is embraced by the owner(s) or organization. Moreover, we found that innovation in the different operations within the firm is dependent on the interest and knowledge of that specific operation. For instance, if the owner/firm has relatively more interested and has more knowledge about the technical aspects of the production process, this then becomes the most important source of innovation.
Relations with for instance non-competitive similar producers are generally based on consulting. However, the traditional food firms are dependent on the retailers to sell their product. Sometimes pressure from these retailers results in innovation like new barcodes or new registration norms.
The most important barriers to innovate are the lack of financial resources, the relatively conservative approach of doing business and the lack of staff and time. The way the traditional food firms are trying to overcome these barriers is that they try to innovate the firm all together. There are strong relationships and short communication lines within the firm.
4.6 ICT
The use of ICT in traditional food firms primarily enhances cost reduction and efficiency improvements through for instance PLC software, intranet and excel. Also does ICT support internal communication to innovate, such as cameras and telephones, and in creating knowledge through applications such as intranet, ERP, administrative software and e-mail. However, to a small extent traditional food firms have digitalized their knowledge, but most consider to do it in the near future. One firm was forced by their retailer to implement an order system, but got support of an external party to implement it. Therefore it was no reason of failure of implementation. ICT has made the communication with external parties more easy, safer and faster, but it did not change anything on the intensity of collaboration between external parties.
Main advantages of ICT in innovations for traditional food firms are increasing the control of resources, quality improvements and the safety of knowledge. The firms have websites but do not have e-commerce. The main barrier to innovate in online sales is because they are dependent of retailers. Participant 3 indicates: “The danger of e-commerce is that it skips the retailer [...] but e-commerce could expand our market. Main disadvantages are the expensiveness and the lack of internal knowledge of software, but also lack of security in trust and resistance to change.
5. DISCUSSION
5.1 How traditional food firms innovate (RQ1)
Section 4.1 indicated that traditional food firms do indeed have to consider more restrictions in innovation. We found that also for traditional food firms the ultimate innovation is a new product (Earle, 1997). The firms want to grow through the development of in the first place new products, and by new markets or production methods. Although the traditional food firms have no interest at all in innovating the recipe of their traditional product, they are still able to innovate their process or package without changing their sensory properties (Kühne et al. 2010). Most of the traditional food firms do not perceive their process as traditional and the way of production is not seen as important for their customers. This is in contrast with Gellynck and Kühne (2008), who state that it is not frequently observed that traditional food firms innovate their process. In line with Grunert et al. (1997) who state that innovation closely linked with product, process and position innovation is often most important for the competitiveness of food firms, this seems to be the case for the traditional food firms also.
The firms do innovate their process and try to align the production of new products with the production of traditional products. They use their own knowledge of their production process and are being consulted by external parties to innovate their production process. We can truly confirm that, primarily internal resources and to a smaller extent external resources contribute to innovation (Avermaete, 2004).
It seems to count that also for traditional food firms firm size has a positive relationship to innovation (Hussin et al. 2002). Larger firms seem to have more qualified staff, more open to new ideas and invest more in know-how (Avermaete et al. 2004; Gellynck et al. 2011). We can see that this is the case, for instance Participant 4 is very conservative to innovation and owns a relatively small firm, but participant 1, who owns a relatively large firm mentions: “We like to innovate on the process”.
5.2 How ICT influences innovation (RQ2)
Section 4.6 indicated that ICT has a positive influence on innovation through sharing and access to knowledge. Concerning product innovation ICT does only support the storage of recipes and making designs, concerning process innovation ICT supports innovation in efficiency and effectiveness, and concerning position innovation it supports communication and benchmark-data. ICT has made communication and administration a lot easier and faster, but it has not intensified the collaboration with the supply chain yet. In line with Dyerson et al. (2013), for traditional food firms ICT does not always improve the collaboration with other firms.
Referring to figure 1 on page 9, the link between ICT and innovation is not as strong as the other two. We found that the use of ICT enhances cost reduction and efficiency improvements (Higón, 2012) through for instance PLC software, intranet and excel. Also does ICT supports internal communication to innovate, such as cameras and telephones, and in creating knowledge through applications such as intranet, ERP, administrative software and e-mail. So ICT is not supporting innovation but is more focused on efficient and effective ways of working. Adoption of ICT does not influence the innovation in traditional food firms in a radical way, but supports the underlying mechanisms that result in innovation.
5.3 Limitations and future research
A limitation to this research is that traditional food producers are not of the same size in terms of employees and turnover. Comparing firms of the same size would obtain a more accurate differences and similarities. However in this specific market there is a wide variety of sizes, resources available, characteristics and are all influenced by different environments. An opportunity lies as to increase the amount of firms to get a more integrated view of this market towards innovation and ICT. This bring us to another limitation. The list of firms within this market is exhaustive. Therefore this research could be expanded to southern regions of the Netherlands. It would be interesting to see whether traditional food firms in southern regions have another approach to innovation and ICT.
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APPENDIX A INTERVIEW GUIDE
Introduction
Thank you for participating.
As you (might) know, I am Pre Master student of Business Administration: Change
Management at the University of Groningen. The study gives me the opportunity to research a change-related organizational phenomenon. I am interested in how ICT is used in traditional food SMEs and if this has effect on the innovativeness. Additionally and as a part of this study I am investigating the motivations, benefits, challenges and barriers of owners/managers in the adoption of ICT.
ICT has become an important part of social life as well as organizational performance nowadays. I am interested in how the pressure of adopting ICT is affecting a
low-technological sector. Does communication and knowledge creation through ICT have effect on the innovativeness of traditional food producers.
To do this, I am conducting interviews with managers or owners of traditional food producers. To preserve the accuracy and integrity of this research I would like to audiotape the
interviews, if this is allowed by you. I make literal transcripts of the interview which I will use in my research paper. The results will be responded when the research is finished. With this the organizational view towards ICT can be compared to the sector.
This interview is confidential. This means that your name will not be linked with anything you express during this interview. I am responsible for the anonymity. I would like to ask your permission to use the data from this interview confidentially for my study. Would you like to sign the informed consent I prepared? Furthermore, do you give me your permission to audiotape this interview?
Opening questions
You are the owner/manager of …organization X… Can you tell me more about this organization?
Probes: What is your age?
What is your role in the organization? For how long do you work here? Which products do you produce?
How many employees does the organization count? What is your education?
Core questions
Innovation can be partly divided into four main activities: product innovation, process innovation, market innovation and paradigm innovation.
Topic 1 Organization wide innovation
Could you explain what continuous innovation means for this organization?
Probes: How is innovation being implemented? (training, consulting) How important is continuous innovation for the organization? Does the organization spend more or less than 1% of the total turnover on R&D?
How does the organization innovate on products?
Probes: On which parts of the product is being innovated on? (eg. composition, raw materials, taste, packaging, size)
Who is involved and has the knowledge to do that? Which technologies are being used?
How is knowledge being generated? (e.g. intern or extern) How are changes being implemented?
To what extent does the organization pay attention to a certain kind of consumer acceptance in the innovation of the products?
Probes: How is this being considered?
How is this knowledge being generated?
How does the organization innovate on the production process? Probes: On which parts ?
Who is involved and has the knowledge to do that? Which technologies are being used? (Bijv. ERP, PLC) How is knowledge being generated? (e.g. intern or extern) How are changes being implemented?
Are external parties involved in this innovation? (e.g. customers, suppliers, engineers, or other organizations inside and outside the sector)
How does the organization improve the position on the market? (e.g. financial situation, new markets, new distribution channels)
Probes: Who is involved?
Is actively being searched to improve it?
Who has the knowledge to do that and how is knowledge being generated? (e.g. intern or extern)
Are external parties involved / collaboration ? (e.g. customers, suppliers, marketing agency)
How does the organization improve the image/perception of the business model? (for example outsourcing, integration, new strategic vision)
Probes: How does this relate to products?
How does this relate to the production process?
Probes: How do consumers influence innovation? How do suppliers influence innovation? How do competitors influence innovation?
Topic 2 ICT
Introduction: An organization that invests in ICT has the potential to become more
innovative. Some benefits of the adoption of ICT are that it can be helpful to improve internal and external communication and collaboration, creation and storage of knowledge. Some examples are e-mail, intranet, Facebook, e-commerce, crowdfunding etc.
Which ICT applications and services do you use? Probes: Do they get outsourced?
Is there pressure by the environment to adopt ICT?
How does ICT facilitate the innovation of products?
Probes: ICT training or service by external parties? Which technologies are being used?
How does it support communication? How does it support collaboration?
How does it support creation and storage of knowledge?
How does ICT facilitate the innovation of the production process? Probes: Training or installed by external parties?
Which technologies are being used? How does it support communication? How does it support collaboration?
How does it support creation and storage of knowledge?
How does ICT facilitate the improvement of the position on the market? e.g. to reach new markets or distribution channels
Probes: ICT training, sales or services by external parties?
How does it support collaboration?
How does it support creation and storage of knowledge? How important for competitiveness?
How does ICT facilitate the improvement of the image/perception of the business model? Probes: How does it support communication?
How does it support collaboration?
How does it support creation and storage of knowledge?
Does ICT support collaboration with external parties, and is knowledge being created through that?
With customers and suppliers? With competitors?
With organizations outside the industry?
What are the motivations to invest in ICT? What are the barriers to invest in ICT?
Probes: Knowledge? Financial?
Rounding up
We are at the end of the interview Is there anything you would like to add? How do you feel about the interview?
What were your expectations of the interview?
How does your experience of the interview compare to your expectations?
How did it feel to be interviewed? How did it feel to be interviewed by me?
Do you have any questions before we round up?
APPENDIX B CODIFICATION
Codification process
The transcripts of all interviews were read multiple times and all relevant quotes are separated beforehand. To come up with adequate results and eventually answering the research question there is need to categorize the information into themes. Therefore the researcher separated the codification into two main topics: Innovation and ICT use in general and in innovation. All relevant quotes were coded as can be found in the table B1a to B7a of this appendix. First all codes were added in the overview and then for all participants a selection of the most important codes was made. Then a sub categorization was made to get a better overview of differences and similarities between the multiple cases. These subcategorizations are shown in table B1 to B9 and refer to the framework in figure one on page 10: ICT in relation to the dynamics of innovation. It is hard nearly impossible to research innovation in traditional food firms separately, because of the interrelatedness of the innovation types as well as the interrelatedness of ICT and innovation in this research. So all tables consists of multiple codes because the view of certain types of innovation differs between organizations and there is overlap between certain subjects. There are also cases where certain types of innovation or ICT adaption does not exist or are not being mentioned. This is indicated with a cross.
Overview of topics and themes with main codes___________________________________
Topic 1: Innovation (Table B1a to B7a)
This topic consists of codes of six themes: product innovation, process innovation, position innovation, paradigm innovation, internal resources and external resources.
Theme 1.1: Product innovation (Table B1)
Scope
Participant 1 Focus on traditional product
Product development using same resources Finding growth in developed products Participant 2 Product development to serve market
Less than one new product a year
Participant 3 Both traditional products and expanding scope to serve the market Traditional products still important
Arranging product development consultations Yearly one or two new products
Customers want to be surprised so need to innovate Governmental influence on product innovation Participant 4 All products are traditional
Innovation has to be surprising for customers
Composition, taste, size etc.
Participant 1 Restrictions in (traditional) product innovation Trying new things on developed products Health is important but it must not change taste
Research in level of sugar, carbs and proteins for a nutritional quality Participant 2 No changes in the recipe of [traditional product]
Change in the recipe of American market Small changes in developed products
Participant 3 Both customer and market determine which taste is leading Cautious in innovating traditional products
Guaranteeing the same taste of developed products Taking action on criticism of sugar and dyes
Participant 4 Own initiatives and sometimes in collaboration with customers No interest in other or cheaper ingredients
Supplier stopped producing ingredient
Student of university researching organic and sugar free products
Packaging
Participant 1 Packaging innovation differs per country
Packaging of [traditional product] in well-known boxes
Simple, cheap and transparent trays that offers protection and renders workmanship
New package of developed product turns out to be too expensive
Changing package design of other products Participant 3 Shape of package made by supplier
Company name important for products in competitive markets, to preserve identity
Company name less important for traditional products Participant 4 X
Theme 1.2: Customers’ acceptance (Table B2)
Participant 1 We are well known to our product Expect a certain taste
Restrictions in product innovation
Health is important but it must not change taste No faith in changing the product composition Participant 2 Very unique taste in the market
The market is more interested in substitutes Participant 3 Loyal customer base
Customers will notice every change
Cautious in innovating traditional products; customers know products for a long time, the taste and symbolic value
Taking action on criticism of sugar and dyes Participant 4 Customer chooses our well-known name
Innovation in traditional product does not always correspond with demand
Perception of food increasingly important
Low interest in traditional way of producing products nowadays
Theme 1.3: Process innovation (Table B3)
Capacity
Participant 1 Investing in machine park capacity to be flexible and make different products
Extension of production capacity for export market Participant 2 Recently installed a new [machine]
Rather shorten the timeframe for preparation than installing second line Lack of financial resources and capacity for a second line
Participant 3 Changing components if package is innovated Participant 4 Process according to traditional methods
Small machines to fasten the process
Technical improvements
Participant 1 Separated the production line with combined input Developing a new machine by ourselves
Collaborating building machines
Participant 2 Innovate on minor changes of the process
‘Standard’ procedures constantly subject to improvement Points of improvement system for procedures
Measuring wastage saves us a lot of money
Fully controlling wastage through ICT is very complex and expensive Participant 3 X
Participant 4 Potential for modernization but no interest
Technology improvements
Participant 1 PLC minimizes waste and supports consistency in the production process
Financial savings through controlling gas outputs Started with an MRP system
Installed cameras to observe processes Participant 2 PLC biggest innovation in 15 years
Participant 3 Innovation supported by stored process information of the ERP system PLC operated process
Participant 4 Potential for modernization but no interest
Theme 1.4: Position innovation (Table B4)
Financial
Participant 1 Turnover growth by developed products Doing anything to prevent recall
Participant 2 All traditional product sales decline
Participant 3 X Participant 4 X
Domestic market
Participant 1 Traditional product not active in competitive market Developed products more important
Small company so can’t push our suppliers
Packaging of [traditional product] in well-known boxes for domestic market
Participant 2 Traditional product is small compared to developed products Chose to make different products because of small market Developed products most important
Participant 3 Traditional products only on domestic market but has potential Company name less important for traditional products
Participant 4 Low competitive market.
Export market
Participant 1 Extension of production capacity for export market Low market research
Packaging innovation differs per country
Simple, cheap and transparent trays that offers protection and renders workmanship for export market
Participant 2 Change in the recipe of traditional product to serve American market Discovery of new markets by external party
Trying to expand in European market with developed products Name of the product instead of company name is used to advertise Expanding American market through overseas relations
Participant 3 Visiting countries where products being tasted Considering values, norms and tastes of countries
Governmental and other parties can provide country specific information
Theme 1.5: Paradigm innovation (Table B5)
Participant 1 HCCP and BRC certified quality standards
Continuing the tradition as a [product] manufacturer Outsourced PLC control
Outsourced transport
Participant 2 [Production process] was outsourced before
Going back to the roots with adding the ‘old-fashioned’ production process.
BSC certified quality standards Import of [product] since 25 years
Research about outsourcing the warehousing
Participant 3 Outsourced logistics, ICT and some technical service Participant 4 Not rendering a factory
Keeping alive the tradition of ancestors
Theme 1.6: Internal resources (Table B6)
Participant 1 Adopted new technologies to support consistency and waste Technical Service tries to constantly innovate
Developing a new machine by ourselves Solving software problems by themselves Found a bug and fixed it
Instructing employees to preserve quality
Created quality system and intranet by ourselves
35 employees
Long firm experience
We like to innovate the process
Own [production method] and lab to make new and test new tastes Little knowledge of software
Lack of financial resources and capacity for a second line Putting high value to improvements
Labels and caps are designed by ourselves; production is outsourced Production meetings for improvements
Inter-departmental groups for innovation 30 employees
31 year firm experience Participant 3 26 employees
Busy with innovation every day.
Arranging product development consultations Participant 4 10 employees
Theme 1.7: External resources (Table B7)
Reliance on services
Participant 1 Outsourced PLC control
Relation export is limited to an order
Small marge because of high transport costs to far countries Participant 2 Calling PLC supplier if something is wrong
Working together with package supplier
For innovation of packages we use a designer and sometimes the package supplier cannot produce it
Participant 3 Consulting by gurus and famous persons, No direct collaboration with the market
External parties have knowledge of some machines Benchmarks by students
Collaboration with retailers
External parties train employees in ICT Participant 4 Help from suppliers to adopt EDI
Aligning own billing software with EDI by external party
Student of university researching organic and sugar free products
Participant 1 Similar manufacturers reticent to collaborate Visiting manufacturers of other industries No collaboration with engineering companies Supplier of resources does not collaborate Points of improvement system for complaints Participant 2 Search for alternative suppliers if needed
The machine supplier can be asked for alternatives Supply chain has no influence on innovation
No knowledge networks or complex communication systems in supply chain
Good relationship with similar manufacturers
Supplier does not contact us when he has new technologies to apply Learning from complaints
Participant 3 Diffusion of knowledge is quick in the tight market Watching the market in order to our own steps Suppliers have country-specific information Participant 4 X
Topic 2: ICT (Table B8a to B9a)
This topic consists of codes of two themes: ICT supporting innovation and the applications that are used, and considerations to adopt ICT in general and innovation.
Theme 2.1: ICT in general and supporting innovation (Table B8)
ICT to support innovation
Participant 1 Regulating values at a touchscreen Installed cameras to control the process No negotiation with suppliers through internet Internet does not help us doing market research No intranet
Improving administration to react on recall Plans to digitalize administration
Participant 2 No e-commerce
Website decreased phone calls from customers
Contact has become more easy with other countries through ICT Some products have their own website
Procedures, action points lists and improvement lists are available on intranet
Created quality system and intranet by ourselves Knowledge is safe and can provide statistics
Registering everything in a computer to be prepared for a recall action PLC data is limited to control values
Improving software is expensive and takes a great effort
Controlling wastage through ICT is very complex and expensive Participant 3 No pressure from environment to adopt ICT
Good expectations in social media Processes on intranet
Writing forms for product innovation from intranet Using a website for company and product information Website is not very important
ICT a tool to stay visible in the market and to provide information Data important in benchmarks
Innovation supported by stored process information of the ERP system ICT important in registering for inspection
Data tool to react on frequencies in disturbances Participant 4 Forced by retailers to implement EDI
Potential for improvements but no interest
ICT applications (to store, codify, analyze etc.)
Participant 1 Electronic order system
Electronic salary administration PLC
Using desktop computers, administration software and logistic systems Website for company information for our customers and other interested parties
Contact with relationships through email Participant 2 ERP-like system installed
PLC
Administration software Intranet
Website for information
Forced by the market to use specific electronic label
Communication through calling or email with supplier if there is a problem
Digitalizing knowledge in Excel, now on paper Participant 3 ERP system
PLC Intranet
Management information system
Innovation supported by stored process information of the ERP system Website for information
Product compositions digitalized in ERP and Excel Participant 4 EDI
Order software
Interested in making a web shop Website for information
Recipes digitalized in Excel
Theme 2.2: Considerations to adopt ICT in general and innovation (Table B9)
Advantages & Motivations
Participant 1 Control of the process Control of the stock
Participant 2 Main motivation is to have an adequate quality system We can collect information about our process
E-commerce dependent on strength of brand name and if searchable E-commerce could expand international market
Participant 4 Not digitalizing has its charms too
Calling is preferred as more personal but seen as less efficient than email
Disadvantages & Barriers
Participant 1 Software and adjustment of software is expensive No e-commerce because it will not raise sales. Participant 2 Disadvantage of ICT is giving away control
A software program is capable of doing it, but that is a financial consideration
Difficult to align software to own specific operations Participant 3 Danger of e-commerce is that it skips the retailers
Social media could set a negative image also Participant 4 No knowledge nor awareness of advantages of ICT
Topic 1: Innovation
Table B1a: Product innovation
Participant Code Theme
Participant 1
The company does not produce many different products any more like we did before and like a bakery would, and since [date] we focused on [traditional product], which we are well known to. Moreover, we make different variations on the [traditional product] and for this we use the same ingredients and same production method, because we are good in producing [traditional product] and by this way we want to distinguish our self from similar products. There are a lot of restrictions in changing [traditional product] so we tried to find growth in [developed products], due to investment our machine park is flexible and has the ability to make different products.
I do not believe in changing the composition of [traditional product]. Our products have to be sweet, and if you want to eat [traditional and developed product] you have to consider for yourself that it is unhealthy to eat the whole package in one time. […] Although, it is possible to try to lower the level of carbohydrates in our products, but it is mandatory that it has to have no
Focus on traditional product Well known to the product
Development of products using same resources
We are good in producing [traditional product]
Restrictions in product innovation Finding growth in developed products Investing in machine park to be
flexible and make different products
influence at all on the taste. If you buy [traditional and developed products] then you expect a certain taste, and we have to secure that we deliver that authentic taste. At this moment we are researching to lower the level of sugar and carbohydrates in our products and if it is possible to add proteins to create a better nutritional quality.
I would rather try something out in [developed products] than in [traditional product].
Room for packaging innovation is limited and different per country. For our [developed product] we have a cheap and transparent packaging with a simple etiquette. In Holland we sell our [traditional product] in well-known non-transparent boxes, but for export and also other products are mainly sold in simple, cheap, and transparent trays with an etiquette on top. This package offers protection to the product and has to render workmanship and inexpensiveness. For one product we have new more expensive [shape] packages, but it turns out that these packages are too expensive. The cost price of one package is 20 cents, and because of the profit margin of the market the customer pays already 40 to 50 cents for it, that’s too expensive for a package of [developed product].
Health is important but it must not change taste
Customers expect a certain taste Research in level of sugar, carbs and proteins for a nutritional quality
Trying new things on developed product
Packaging innovation differs per country
Packaging of [traditional product] in well-known boxes
Simple, cheap and transparent trays that offers protection and renders workmanship
Participant 2
We have two traditional products, and through the years we developed other products of which we are dependent on nowadays.
We do not have an R&D department, but many individuals are busy with it, where we are constantly trying to find new products, new components or new packages. […] We spend less than 1% of our turnover on R&D.
Concerning [traditional product], this is not a large product for us anymore. But our taste is very unique among the other brands in the market so our customers know our taste very well. Actually it is a very small product for us. Our biggest products are [developed products].
We do not make big changes in the recipe of [traditional product]. Recently we changed our recipe in a small extent for the American market, because some ingredients were not allowed to enter the country, nonsense but they had to be removed.
The package of [traditional product] has been changed from [material] to [material]. Also the labels are changed over the years, and even the name has changed. All those steps did not leverage, […] the sales did more decrease
Developed product range to serve market
R&D department for new products, components and packages
Traditional product is small Very unique taste in the market Developed products most important
No changes in the recipe of [traditional product]
Change in the recipe to serve American market
than increase through the years. This has also to do with the national market of these products. All traditional product sales decline. There is a heavy competition in this market, about 40%, maybe 50% for [concurrent1], about 40% private labels and maybe about 10 a 15% [concurrent2]. We have got around 5% of the market so that is very little.
In the old days lots of time and energy were put in our typical products, but the only thing we put some energy in is our second [traditional product], because these sales are relatively still good. Product changes does not occur and we keep the taste as it is. It happens that ingredients are not produced anymore by their suppliers, that is inconvenient and you have to search for an alternative. We got experience with that, and you need to do tests with different samples from other suppliers.
There have been new products on the market and there was no change to sell them. Ladies rather drink a glass of white wine than liquor. We are focused on the products with a high percentage of alcohol […] 40 a 45%, that is our focus. It is nice for being known of [traditional product], but we sell more of others. We want to expand that with our new [machine]. We got our own [production process] and he works together with a small lab where we test new tastes. We invent these tastes by ourselves. The development is
All traditional product sales decline
Sales of 2nd traditional product still good, no product changes
Search for alternative suppliers if needed
Experience with doing tests with samples from different suppliers
Focused on developed products
Own [production process]and lab to make new and test new tastes
expensive and we have to make a good consideration that there is market for the product by doing tests. On average we make less than 1 new product a year, but we want to improve this with our new [machine].
We thought to sell [traditional product] in another [color] [package], structured, another label, a nice new complicated cap, but this did not increase our sales. It did not increase but it also did not decrease. We sometimes change the package of the other products also, but we do more on advertisement and some of these products have their own website. There some information can be found but we do not sell the products on the website.
Yearly less than one product a year
Changing [package], label and cap did not increase sales
Changing package of other products No e-commerce Internal resources Product innovation Product innovation ICT support Participant 3
We produce non-alcoholic and alcoholic drinks. We produce [company] brand products as well as private labels. Also the private labels are very important for our company.
The traditional products are still important for our organization. But we see that innovation is increasingly appreciated by customers. These days customers want to be surprised, and therefore you have to innovate.
Producing own brands and private labels.
Customers want to be surprised so need to innovate
Product innovation
Both the customer and the market determines which taste is leading. The customer decide for a part what we produce, and we also create a part of the demand. It is important to know who the trendsetters are and where these trends are coming from so we can react at the right moment in time. Sometimes we are trendsetter, but if we jump in at the right moment than that is good also. Annually on average we make 1 or 2 new products.
We arrange product development consultations. This process is fixed. We are BSC certified, and therefore a lot of processes have to be registered.
From our [packages] you can see that we innovate in our current products. We do still have our traditional products, but we have to expand our product range to serve the customer in the market. We reckon that the market is demanding something and we want to expand. So we can make our own product or we respond to the demands in the market. If there is money to be made you have to make new products.
You have to be cautious if you innovate in traditional products because customers know the product for a long time and is familiar with the taste and
Both customer and market determine which taste is leading
Yearly 1 or two new products
Arranging product development consultations
BSC certified so need to register a lot of processes
Both traditional products and expand to serve the market
Traditional products still important
Cautious in innovating traditional products; customers know it for a long time, the taste and symbolic value
