Innovation and New Product Development in smes: An Investigation of the Scottish Food Industry




НазваниеInnovation and New Product Development in smes: An Investigation of the Scottish Food Industry
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9.3Taxonomy of innovation



Taxonomical efforts on innovation have resulted in many classifications. The prominent amongst them are technical versus organisational, product versus process, radical versus incremental and new to the firm versus new to the market innovations.


Technical innovations refer to development of new products, services and production processes (Knight, 1967; Daft, 1978 and Damanpour and Evan, 1990). Organisational innovations, on the other hand, refer to innovations that are related to alteration in an organisation’s structural and administrative procedures (Knight, 1967; Daft, 1978; Kimberly and Evanisko, 1981 and Damanpour and Evan, 1990).


During the course of this investigation, it was observed that innovation in the case study companies is geared largely towards technical innovation and there is relatively less evidence of organisational innovation. Though organisational innovations, in the form of alterations in an organisation’s structural and administrative procedures, are less evident here, there is, however, evidence of a whole gamut of activities that should be considered as organisational innovation exhibited by the case study companies. These include innovations in logistics, supply chain management and subcontracting. One interesting example of this is Company E, which found insurmountable obstacles in exporting haggis and other Scottish food products to the USA because of the restrictions imposed by the American Food and Drugs Administration. This company circumvented the problem by getting these products manufactured in Canada, as Canadian produce is not subject to such stringent conditions as the European food products are for import into the USA. Similarly, many of these companies had to exhibit great ingenuity and deploy innovative methods to get round the problem of transporting small quantities of food to a very widespread market without compromising on the economies of scale.


In terms of product versus process innovation, the innovation in the case study companies is predominantly product focussed. One reason for this is that some relatively smaller case study companies, using two-stage idea validation serve a niche market and do not need any changes in existing manufacturing to produce new products. These companies thus have carried out product innovation without any preceding or concomitant process innovation. Slightly larger companies, which principally supply to grocery multiples, however, sometimes need to make minor changes in manufacturing to successfully create new products. In these cases, process innovation, if indeed it occurs, is a by-product of product innovation. As the customer-tastes have been changing over time and the buyers are looking for new kinds of food, there is often discussion between food companies and their grocery multiple associates if a new product to cater to this newly emerging need is possible and potentially profitable. If there is consensus between the two on this, then the subsequent search for ways and means to produce it sometimes leads to realisation that current manufacturing methods may have to be altered to produce it. This process change, however, is achieved not by inventing new kind of machines or manufacturing methods but by using some manufacturing equipment not used previously. The resultant process innovation is thus new to the firm but not new to the industry.


In terms of radical versus incremental innovation, the case study companies engage very much in incremental rather than radical change. Some people in the industry use a distinct jargon to express these incremental changes. A range change or a line extension involves changing only some ingredients in a product that is otherwise identical to previously made product; a recipe change involves making an altogether new recipe previously not a part of the company’s product range. This recipe then may undergo several range changes over its life. Ultimate in the league is the format change, which may involve major changes in packaging or processing. The format change thus is not really a radical product innovation. It is a relatively bigger change in the manner in which the product is produced or packaged.


Though, the Scottish food companies engage in some imitation, new products here usually reflect incremental change, which is most often marginal but sometimes, quite substantial. New to the firm innovations thus here are far more numerous than new to the market ones. The format change is a process innovation but not a radical process innovation, described in literature, as a major technological breakthrough. The vocabulary used by the respondents to describe the hierarchy of innovations thus is different from the standard taxonomy of innovation. The hierarchy here is purely in terms of the amount of money needed to carry it out. Range change needs very little monetary expenditure, recipe change needs a bit more and a format change needs the most. The first two are incremental product innovations of varying degrees whereas the third one is an incremental process innovation requiring a far larger investment.


To sum up, the evidence from the case studies suggests that innovation in the case study companies is more technical and less organisational; it is largely in products and less frequently in processes; it is very often incremental and rarely radical; it is mostly new to the firm and less frequently new to the market.


As the survey to triangulate the case study findings is focussed on product innovation, survey results have bearing on only one of the case study finding pertaining to incremental product innovation. Confirmation of survey proposition, ‘innovative companies’ successful new products are very different from their existing products’ means that case study observation on incremental product innovation is not borne out in the larger Scottish survey involving all 85 companies. Though the fact that this proposition is rejected in the segregated data analysis involving 59 ‘low-tech’ companies, 23 ‘high-tech’ companies, 29 food & drinks companies, 53 non-food & drinks companies, 43 ‘young’ companies, 40 ‘old’ companies and 68 small companies means that the case study finding on incremental innovation is observed in a wide variety of sub-groups of innovative Scottish companies. In fact, it is only the sub-group of 15 larger companies, which is not engaged in incremental innovation. As the case study companies are all small and the only sub-group of survey companies that does not show evidence on incremental innovation are larger companies, it appears that only larger companies an afford to engage in costly radical innovation. Rest of the Scottish companies like the case study companies focus on incremental innovation.
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