Critical success factors for entrepreneurial innovation in the Dutch glasshouse industry S.W.F. (Onno) Omta, Olaf van Kooten and Lennert Pannekoek1 Wageningen University The Netherlands Abstract It is the aim of this paper to present the results of a recent study into the critical success factors for entrepreneurial innovation in the Dutch glasshouse industry. This industry is generally acknowledged to be one of the world leaders in horticultural production and trade. Not only are the auctions of Aalsmeer and Naaldwijk among the most important horticultural auctions in the world, also the knowledge of cultivation techniques is highly developed in the Netherlands. In order to maintain its leading position and to compete with low cost countries, Dutch horticulture is constantly reinventing itself. However, if we take a closer look, it is only a limited percentage of 3% of the Dutch glasshouse companies which really take the lead in innovation. Using expert knowledge, from the total population of Dutch innovative glasshouse companies, we selected 44 of the most innovative glasshouse entrepreneurs to participate in the present study. In 2004, all the participating companies were visited. In total 139 innovations were analyzed, using a combination of half structured in-depth interviews with the glasshouse entrepreneurs, and a structured questionnaire, using 10-point Likert scales. The entrepreneurs were asked to fill out the questionnaire for their most and least successful innovations. As expected, more successful (87) than failed innovations (52) were reported. From the results it was concluded that, next to fulfilling customer needs, which includes open communication with the customer, the team factor was extremely important. The entrepreneur should maintain an open atmosphere and show real commitment, for instance by being present at all (or most) team meetings. In addition, intensive network relations, e.g. by clustering of glasshouse companies, leads to more successful innovation. The more firms in the horticultural production chain were actively involved in the innovation process, the bigger the chances of success. This was especially true for firms downstream to the market. Keywords: Entrepreneurial innovation, cooperation, key success factors, entrepreneurial oriented glasshouse companies
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Introduction
The fast development of technologies, combined with increased global competition and fast changing customer demands, imply that a firm’s competitive advantage can only be temporary. Consumers expect continuous improvements in the products offered. Therefore, it is not surprising that innovation management has received a lot of research interest, in particular studies exploring the key managerial factors that distinguish between success or failure. Within the broad field of innovation management, in recent years increasingly the research attention has been drawn to the make, buy or cooperate decision in innovation. The capability of building and maintaining inter-organisational network relationships, such as joint ventures, license agreements, supplier-customer partnerships and strategic alliances are increasingly viewed as key factors to sustained competitive advantage. However, the majority of the studies concentrate on innovation management in large companies, and on the cooperation of large companies with entrepreneurial firms. Not many studies are directed to chain and network innovation of entrepreneurial companies with their suppliers and buyers and with knowledge institutions. It is the aim of the present paper to fill up this gap, by focusing at entrepreneurial chain and network innovation in the Dutch glasshouse industry. This industry is typified by a broad number of small family related entrepreneurial companies, while it is generally acknowledged as the world leader in horticultural production and trade. If we take a closer look, however, it is only a limited percentage of 400 to 450 companies 1
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(about 3% of the total Dutch glasshouse industry) which really take the lead in innovation. Using expert advice we selected the 75 most innovative companies to be included in this study, of which 44 companies were willing to participate. In the present study we focus on the critical success factors in entrepreneurial innovation in general and the role of cooperation with chain partners, knowledge institutions and colleague firms. We asked ourselves what we could learn from these highly innovative glasshouse firms regarding entrepreneurial innovation: What are the critical success factors that enable entrepreneurial glasshouse companies to continually reinvent their products and processes, in order to maintain their leading position? And what is the role of cooperation and outsourcing in entrepreneurial innovation? The remainder of this paper is organized as follows. In the second section we discus different typologies of innovation, and go deeper into the concepts of entrepreneurial innovation and cooperation. In section three we formulate the main hypotheses. The fourth section discusses the study population, the sample collection and the research methodology. Section five focuses on the results of the study/ While in section six the main conclusions are drawn regarding the critical success dimensions of innovation and the chain and network strategies conducted by the different entrepreneurial glasshouse companies. Finally, in section seven the managerial implications of the present study are discussed.
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Research framework
2.1
Typologies of innovation
Over the years, the topic of innovation has been studied from two broad perspectives. The first, an economics-oriented tradition, examines differences in the pattern of innovation across countries and industrial sectors, the evolution of technologies over time, and intersectoral differences in innovation (e.g. Rosenberg 1982, Dosi et al. 1988, Nelson 1993, Niosi 1995, and Nieto 2003). The second, management-oriented tradition, focuses at the microand meso-level how new products are developed. These studies differ with respect to the sectors studied, the level of aggregation (individuals, projects, firms or inter-firm innovation), the size or type of the companies (high-tech start-ups, large conglomerates, etc.), the scope (incremental, or radical, disruptive or sustaining innovations etc.), types of innovations studied (e.g. product, process, or organizational innovations) and/or the geographical setting. This paper concentrates on the second perspective. Box 1: Radical innovation in the Dutch glasshouse industry One of the major driving forces for innovation in Dutch greenhouse horticulture is energy consumption. To curb energy consumption the Closed Greenhouse® system is developed, a greenhouse with no windows opening to the outside world. In the summer, under relative high illumination conditions, the excess heat in the greenhouse is captured by an elaborate heat exchange system in combination with controlled forced air flow. Heat pumps bring the excess heat down under ground in an aquifer below the greenhouse. In the winter the excess heat in the aquifer is pumped up into the greenhouse where it is used for temperature and relative humidity control. As a consequence, temperature control is much more refined than in conventional greenhouses and due to the closed nature the CO2 concentration in the greenhouse can be augmented to much higher levels when needed. Particularly in full sunlight when in conventional greenhouses the windows have to be opened to prevent overheating. This system appears to reduce energy consumption by 30% and increase production by 20%. The development is still continuing for it is intended to develop greenhouses that do not use any fossil fuel and deliver their excess energy to the public energy grid.
To structure the different types of innovations, researchers developed different typologies to determine what kind of innovation they were dealing with. The most important of these are:
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product and process, and incremental and radical innovations. Product innovations are important improvements of existing products and development and commercialisation of new products. Process innovations are important changes and improvements on existing processes and the development and implementation of new processes (Huizenga, 2000). Incremental innovations refer to the continual process of improvement of already existing production techniques or products. These rather small improvements to already existing products or production methods can be very important for the company, as well as the customer (e.g. in terms of less costly production, or easier opening of an existing package). Radical innovations refer to products and processes that result from advances in knowledge and have a great or radical impact on the products, processes and organisation of the firm or even the entire industry. Examples of the radical innovations that changed their respective industries are the gasoline engine replacing steam traction and the electric light bulb replacing gaslight. As Utterback and Abernathy (2000), Burgelman et al. (1996), Sanderson and Uzumeri (1996), Tabrizi (2005), and Tushman and Anderson (2004) write that, although the distinction between radical and incremental innovations has produced important insights, it is incomplete. There is growing evidence that there are numerous innovations that involve apparently modest changes to the existing technology but that have quite dramatic competitive consequences. Existing models that rely on the simple distinction between radical and incremental innovation provide little insight into the reasons why such apparently minor or straightforward innovations should have such consequences. Innovations that change the way, in which the components of a product are linked together, while leaving the core design concepts (and thus the basic knowledge underlying the components) untouched, are defined as architectural innovations (Henderson and Clark, 1990). For example the colour television resulted after series of ‘incremental‘ changes in the design of the black and white TV. The total effect of this innovation was nevertheless ‘radical’. In the present study we concentrate at all four types of innovation. 2.2
Entrepreneurial innovation
Small companies Are independently owned, operated, and financed Have less than 50 employees Do not emphasize new or innovative practices Have little impact on industry Entrepreneurial oriented companies Embrace innovation in their business strategy Their strategic goals are growth oriented Seek new opportunities Are willing to take risks Table 1 Key characteristics of small and entrepreneurial oriented companies (adapted from Coulter 2002)
Porter (1985) rightly observes that innovation is among the most prominent factors that determine the rules of today’s business competition. Successful firms must repeatedly disrupt competitors, and innovation -taking a creative idea and turning it into a product or process that can be sold or used in the marketplace- is the way to achieve that. Rich and Gumpert (1999) make a distinction between ‘entrepreneurial oriented’ firms at the one end of the scale and ‘managerial oriented’ firms on the other. They state that managers in entrepreneurial oriented firms typically seize opportunities, are accustomed to change, and easily adapt to and capitalize on them. Whereas managers of managerial oriented firms are especially good in managing the existing resources and processes, and are less able to adapt to unpredictable change. Small entrepreneurial oriented companies are bound to their own limited resources, and are often dependent on cooperation with other companies or institutions for their survival. The large managerial oriented firms are certainly capable of 3
conducting thorough and highly sophisticated research in their R&D (Research and Development) departments, but often lack the flexibility and entrepreneurial drive that are so characteristic for the entrepreneurial oriented companies. It must be emphasized here that, although entrepreneurial oriented companies are typically small business, they are fundamentally different from the average small firm (see table 1). 2.3
Cooperation in innovation
Within the broad field of innovation management, in recent years increasingly the research attention has been drawn to make, buy or co-operate decisions. Omta and Van Rossum (1999), Gibson et al. (2001), and Hillenbrand and Biemans (2003) state that currently innovations are increasingly developed in ‘open’ network oriented structures. Co-operation for innovation is increasingly seen as a means for lowering development costs, accelerating product and process development and maximizing commercialization opportunities. The capability of building and maintaining inter-organisational network relationships, such as joint ventures, license agreements, supplier-customer partnerships and strategic alliances are increasingly viewed as key factors to sustained competitive advantage. Forrest and Martin (1992) highlight that in biotechnology alliances are frequently successful, since the peculiar strengths of small firms (i.e. entrepreneurship and innovation climate) are complementary to those of the large pharmaceutical firms (critical mass for development activities and scalingup expertise). As Gambardella (1992) concludes: To be part of a network, and to be able to effectively exploit the information that circulates in the network, has become even more valuable than being able to generate new knowledge autonomously. Also collaboration between firms and knowledge institutions is rapidly becoming the rule rather than the exception (e.g. Biemans 1992, and Millson et al. 1996). Currently, more than 50% of Du Pont's new product leads in agriculture stems from university laboratories.
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Main hypotheses
The pressure to do more with less inexorably pushes companies to focus on few, unique, hard to imitate and distinctive competencies (skills and knowledge) and capabilities (managerial and technical systems), continually nurturing and enhancing them, while abandoning those activities in which they do not posses distinctive competencies and capabilities (Leonard-Barton 1995). Also Huizenga (2000) states that concentration towards the company’s core business is a key success factor in developing a successful innovation. Translating these ideas to the glasshouse industry, we expect that glasshouse innovations are more likely to be developed in cooperation with chain partners and knowledge institutions to increase the available resources, such as time, capital and knowledge. We therefore hypothesize: Hypothesis 1: Glasshouse companies to be successful in developing innovations will take the lead in an innovative consortium, including chain partners and knowledge institutions, rather than conducting the innovation process in-house, alone. Porter (2000) states that clustering companies in a certain area stimulates the diffusion of innovative ideas and fosters cooperation among entrepreneurial firms, and in this way has a positive effect on the innovative performance. In the present study we can define ‘Het Westland’, the biggest glasshouse production area in the Netherlands, as a cluster. Comparing the innovativeness of the companies located in ‘Het Westland’ with the other companies spread over several other smaller glasshouse production areas can be used to test this hypothesis. We therefore hypothesize: Hypothesis 2: Companies located in the Dutch glasshouse cluster ‘Het Westland’ will be more innovative and successful than companies located in other glasshouse production areas in the Netherlands.
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Research design & measures
4.1
The study population: The Dutch glasshouse industry
The Dutch glasshouse industry includes about 11,500 companies in total. About 5,800 companies concentrate on cut flower production on 3,600 ha. with a total value of 2.1 billion euros; 1,300 concentrate on potted plants on 2,600 ha., with a total value of 1.3 billion euros, whereas around 3.000 companies produce glasshouse vegetables on almost 4,000 ha., with a total value of 1.2 billion euros. Roses and Chrysanthemum are the most important cut flowers, Pot-chrysanthemum, Ficus and orchids the most important potted plants, whereas tomatoes, sweet peppers and cucumbers are the most important crops in the vegetable glasshouse sector (Vakblad bloemisterij 2002). The Dutch glasshouse industry is generally acknowledged as the frontrunner in the international horticultural industry. Not only the auctions in Naaldwijk and Aalsmeer are among the most important horticultural auctions in the world, also the knowledge of the latest cultivation techniques and methods is highly developed in the Netherlands. Due to high production costs in comparison with other horticultural countries in Southern Europe, Africa and South America, there is a real thread that a large portion of the total Dutch horticultural production would move to these countries. In order to compete successfully, the Dutch glasshouse industry constantly improves their products and processes, in order to maintain a positive quality to price ratio compared to these countries. As a consequence of this, the productivity of the Dutch agricultural sector is constantly improved during the last decades. Since the early seventies the production has doubled, while the labour force has decreased by 20%. This gradual process of technical progress is responsible for the rapid transformation of the Dutch horticultural sector from a traditional family based to a really knowledge-based industry, characterised by automation, mechanization and better control over the production processes. However, as stated in the introduction of this paper, the constant stream of innovations has been conducted by a small percentage of the Dutch Glasshouse companies, the so called ‘innovators’. If the improvement has proven to be successful a much larger group of Dutch Glasshouse companies adapts these products or processes in their own company, the so called ‘fast followers’. The relatively small group of innovators consists of 400 to 450 (3% of the) Dutch Glasshouse companies, while the group of fast followers consists of about 35%. The rest of the companies consist of slow followers (Diederen et al, 2000). So although the Dutch Glasshouse industry is considered to be innovative, only a relatively small group of companies or entrepreneurs has really taking the lead in product and process innovation. 4.2 Sample selection As mentioned before the group of innovative glasshouse companies consists of only 3% of the Dutch glasshouse industry. Of this group of 400 to 405 companies a sample was taken using 5 sector experts. They were asked to make a list of the most innovative, and another of the most successful companies in the Dutch glasshouse industry. These four lists were condensed into one list containing 74 successful innovative companies. Of these 74 companies, 8 turned out to be non-eligible: 3 companies could not be reached, 1 had stopped and the 4 others were not suitable to participate in the study, because the owners/entrepreneurs did not consider themselves as innovative frontrunners, but as fast followers. From the remaining 66 companies, 44 were willing to participate in the study (a response rate of 67%). Telephone inquiry learned that the main reasons for non-response were lack of time, and lack of interest.
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4.3
Research methods
In the NEWPROD study, Cooper (e.g. 1999) developed a questionnaire to identify the key success and failure factors for innovative projects, based on the following constructs: 1) the strategic fit between the company’s competencies and capabilities and the innovation project 2) the potential product or process superiority compared to the existing ones in fulfilling customer needs; and 3) the features of the market, e.g. market size and level of competitiveness. He used this questionnaire to provide feedback to an innovation project team, by comparing the answers of the team members with a database, containing 100 successful and 100 failed projects. By comparing the answers of the team members with this database, the results can provide up-front insight in the potential problems in the innovation process. Knowing these bottle necks may help the team to improve these critical points and by doing so increasing the chance of success. Hollander (2002) adapted this tool by adding the team communication construct that indicates the level of project team communication and co-operation. We used this tool as a starting point, but we had to reduce the number of statements in order to make it feasible for use in the Dutch glasshouse industry, were the owner/entrepreneur typically has very little time available for filling out a questionnaire. We therefore reduced the number of questions from the original 46 to 30. First we removed (and reformulated) the questions that refer to large companies that are not typical for the Dutch glasshouse industry, i.e. the questions regarding strategy formulation, and those regarding the project team leader (the questionnaire was filled out by the owner/entrepreneur, who normally is the project leader). In order to lower the number of statements further per factor only the three statements with the highest factor loadings or/and the factor loadings that were higher than 0.70 were included in the questionnaire (see table 2). Constructs Product/process superiority
Variables Product/process will fulfil user needs Product/process will be of higher quality Product/process has a number of unique features Prospects for protection were good
Market
Innovation is new to the market Idea came from market High potential need Innovation adapted by other companies
Environment
Innovation will have positive effect on environment
Company fit
Innovation totally new to company Use of innovation was totally new Management skills more than adequate Technical skills more than adequate Adaptation skills more than adequate
Team communication
Good communication between team members Team expressed commitment to project The project requirements are clear Understanding potential problems Open team communication when problems occur Satisfaction with used development process Table 2 Overview of constructs and variables
At the site visits the owner/entrepreneur was asked to fill out the questionnaire for one successful and for one failed innovation project using 10-point Likert scales. Because most entrepreneurs were willing to fill out more questionnaires than two, 139 innovations could be
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analysed, 87 successful and 52 failed innovations. Different statistical methods were used to analyze the data. The bivariate procedures included t-test, Chi-square test, one-way ANOVA, Kruskal-Wallis test, and Spearman rank correlation. The multivariate procedures included factor analysis, and multiple regressions. Whenever possible, more than one technique was used. In general, substantive conclusions were supported by all statistical techniques.
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Results
5.1
Level of innovativeness versus the level of success
The five experts were asked to rank the 44 glasshouse companies that participated in the study on level of innovativeness and successfulness. Figure 1 shows that success and innovation show a linear relationship in this sample of highly successful innovative companies (r = 0.59) But there are a number of companies which are very far above or below the average line, what makes it very interesting to look deeper into this relationship.
9.0
8.5
Level of innovativeness
8.0
7.5
7.0
6.5
6.0
5.5 6.0
6.5
7.0
7.5
8.0
8.5
9.0
Level of success
Figure 1 Level of innovativeness versus level of success
5.2 Drivers for innovation The most important drives that trigger innovations are cost savings and quality improvement. In 38% of the 139 innovations cost saving was mentioned as a main reason to start the innovations development. Quality improvement was mentioned in 30% of the innovations. Another important driver in product innovations is the improvement of the company’s market position (24%). New products are often used to improve the company’s market position or to create a completely new market. In most cases the costs saving innovations were machinery, internal logistics or other technical innovations. Quality improving innovations are selling materials like gift wraps, pots, flow packing or cultivation techniques like assimilation lights.
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5.3
Sources of innovative ideas
Figure 2 shows the sources of innovative ideas that are mentioned in the interviews. Relations and network are the most common sources in the glasshouse industry, 37% of all sources mentioned are related to these sources. Relations can be colleague growers, family relatives, customers, suppliers or trainees. In some cases entrepreneurs get their ideas from literature, workshops, business trades or excursion / study groups. Earlier research of Claro et al. (2002) has shown that especially the downstream network is very important to get the right market signals to lead the innovation process. For example, the development of an expensive technique like camera sorting started this way. Also internal sources are very important to get ideas, 30% of all sources mentioned is ‘from the work floor’. This source provides ideas and solutions that came up out of the company itself. Often these ideas are mentioned by employees, or came out of brainstorm session within the company. Most of these are incremental improvements on already existing techniques or processes. These incremental innovations are often conducted in cooperation with suppliers. Also other horticultural and agrifood sectors and countries are mentioned as sources for innovation. Often product innovations occur in cooperation with a supplier in foreign countries. On business travels to these foreign companies, ideas for new products arise. Mostly the foreign companies show future potential products found in tropical or sub-tropical areas. Others 14% Relations & Network 37%
Other Countries 7%
Other Sectors 12%
From workfloor 30%
Figure 2 Sources of innovative ideas
5.4
The key success factors
An important assumption in our study is that key success factors can be determined comparing the answer scores given for successful and failed innovations. A problem was that some entrepreneurs give very radical scores. For example, one entrepreneur will value his management skills as good and gives it a mark 7, and his marketing skills as poor, and gives it a mark 5, while another in the same situation gives a 9 mark and a 2 mark, respectively. This problem was solved by use of the paired t-test, which compares the difference between successful and failure for each owner/entrepreneur individually. To assure reliability we compared the same kind of innovation trajectories in a company, so successful product innovations were compared to failed product innovations, while successful process innovations were compared to failed process innovations. In total the results of 37 entrepreneurs could be used, including 13 product and 24 process innovations (see table 3). Table 3 shows that the variables determining product superiority and market need, including the factor environmental protection (an important issue in glasshouse production) clearly stand out as important factors determining success or failure of an innovation project. The only variable that does not come out significantly is the potential for innovation protection. This variable even scores lower for the successful then for the failed projects. Apparently pace and listening to the voice of the customer is much more important than protection. The factor ‘company fit’ is not discriminating between success and failure. Apparently there are many ways that lead to success.
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Table 3 Mean scores and standard deviations of successful and failed innovations (N = 37, if process between brackets, N = 24) Constructs Success Failure Mean (sd) Mean (sd) Product/process superiority Fulfils user needs 9.00 0.88 4.86 2.14 *** Product / process of higher quality 8.78 1.03 4.92 2.77 *** Unique features for user 8.78 1.00 5.81 2.84 *** Good protection potential (patents) 3.58 3.25 4.47 3.52 Market New to the market Idea from the market High potential need Adapted by other companies
7.77 6.31 8.20 7.91
2.15 2.55 1.44 1.44
5.95 5.06 6.71 3.38
3.04 ** 2.88 * 2.22 * 2.90 ***
Environment Positive effect on environment (process)
5.88
2.86
3.79
2.70 *
Company fit New to the company No former innovation projects New to the company (process) Mech. / tech. complex Cultivation complex Management skills Technical skills (process) Adaptation skills (process)
8.38 6.59 8.30 6.05 5.44 6.68 6.42 6.65
1.71 2.70 1.77 2.76 3.25 1.72 1.82 1.67
8.57 7.11 8.09 5.89 5.76 6.24 6.29 5.91
1.61 2.64 2.02 2.83 3.03 1.99 2.35 2.17
Team communication Team communication 7.19 1.61 Project commitment 7.75 1.54 Clear project goals 8.08 1.69 Potential problems known 5.54 1.59 Open problem discussion 7.81 1.28 Innovation process satisfaction 7.57 1.24 * p < 0.05; ** p < 0.01; *** p = 0.000, paired 2-tailed t-test
6.22 6.65 7.65 4.45 6.89 4.87
1.83 * 2.02 * 1.72 2.08 * 2.17 * 2.14 ***
The reader should realize that nearly all entrepreneurs encountered failure as well as success. The last important factor discriminating between success and failure is the innovation project team. In the successful innovation projects communication was significantly better than communication in failed projects. Glasshouse innovation projects are often executed in cooperation with other companies. It’s important that communication, knowledge exchange and team structure is well organized. Tasks, communication and openness between the people that interact during the innovation project must be clear and good. Entrepreneurs must choose the right companions, with whom the entrepreneurs can work well and whom they can trust. ‘Potential problems known’ has a very low score. Most problems that occur during the innovation project seem to be unexpected problems, because of the low mark for both the successful and the unsuccessful projects (although the mark is significantly higher for successful projects). Open problem discussion and satisfaction with the project processes have a significantly higher score in successful projects as well. During successful innovation projects discussion are more clear and open and the communication within project teams is clearly better. This makes the innovator entrepreneurs more satisfied with the innovation project.
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5.5
Outsourcing of innovation projects
Table 4 Outsourcing versus in-house development in the most successful (n=22) and the less successful (n=22) innovative glasshouse companies Outsourced In-house Most successful glasshouse companies 46 (57%) 35 (43%) Less successful glasshouse companies 19 (33%) 39 (67%) P < 0.05, Chi-square test
Table 4 shows that the companies that are ranked as most successful by the expert panel outsource their innovations significantly more to specialist (e.g. automation machinery) companies then the less successful companies. So it seems that successful glasshouse entrepreneurs concentrate on their core activities and let (at least part of) their innovations be developed by other companies. 5.6
Chain cooperation in innovation
Table 5 Cooperation with different tiers of suppliers and buyers in radical and incremental innovation Radical innovation Incremental innovation No cooperation 3 (14%) 25 (22%) One tier 9 (43%) 69 (58%) Two tiers 6 (29%) 20 (17%) Third tier suppliers and customers 3 (14%) 4 (3%) Total number of innovations 21 (100%) 118 (100%) P < 0.05, one-way ANOVA
Most innovations that we studied were incremental innovations. Radical innovations that completely change the company’s or supply chain’s structure and organization were relatively rare, only 15% of the innovations could be considered as radical innovations. Examples of radical innovations were automated plant transportation systems, camera sorting, opening of daughter companies abroad, and organic production. Table 5 shows that a significant relation exists between the level of cooperation with different tiers of suppliers and/or buyers and if it is a radical or an incremental innovation. Radical innovations are much more often developed in cooperation with other companies in the supply chain than incremental innovations. In the case of radical innovation in 43% of the cases at least two tiers of suppliers and/or buyers were involved, whereas this was only the case in 20% of the incremental innovations. In addition, expert analysis revealed that the more radical the innovation, the more tiers of suppliers and/or buyers was involved in the innovation trajectory. 5.7 Innovation and clustering Table 6 Division of innovative companies based on location. Het Westland Other Area’s Most innovative glasshouse 15 (68%) 7 (32%) Less innovative glasshouse 7 (32%) 15 (68%) p < 0.05, Chi-square test
Table 6 shows that the glasshouse companies that are located in ‘Het Westland’ cluster are ranked significantly higher by experts for their innovativeness than the companies located in the other areas in the Netherlands. However, in the ranking for success there were no differences between the companies located in ‘Het Westland’ and in the other production areas. So clustering in the glasshouse industry seems to have a higher impact on innovative behaviour than on performance. Interestingly, knowledge institutions participate in only 15% of the incremental as well as the more radical innovation projects. Especially lack of speed
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and efficiency, and problems with secrecy was mentioned by the entrepreneurs as reasons not to cooperate with knowledge institutions.
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Conclusions and discussion
All the entrepreneurs have conducted both successful and failed innovation projects within their companies. That implies that factors related to the company and the entrepreneurs themselves aren’t critical for the success of an innovation project, at least not in this sample of highly innovative entrepreneurs. Of course, financial resources of the company are important, but that doesn’t imply that only companies with vast financial resources innovate successfully. Apparently, there are many ways that lead to successful innovation. The key success factors are hidden in the innovation process, the market and the innovation itself. 6.1
Key success factors related to chains and network and clustering
Hypothesis 1 is clearly confirmed. Innovative glasshouse companies do take the lead in an innovative consortium that includes chain partners. Only the contribution of knowledge institutions is rather limited both in incremental as well as in radical innovation. Also hypothesis 2 was confirmed, the cluster of companies in ‘Het Westland’ was clearly more innovative than the glasshouse companies in the rest of the Netherlands (see table 6). Apparently, Porter (2000) is right in stating that clustering companies stimulates the diffusion of innovative ideas and fosters cooperation. It can therefore be concluded, that: Chain and network relations are a prime source of innovative ideas The most important source of innovative ideas can be found in the firms’ network of relations, for instance suppliers, customers, consultants or relatives. The work floor is another important source of innovative ideas, i.e. employees who come up with an innovative idea to improve the existing products or processes. Companies in foreign countries are also important sources for innovative ideas, especially in the case of product innovations (see figure 1). Downstream chain relationships are used to get marketing information Interestingly, marketing knowledge is not considered as especially important by the innovative Dutch glasshouse entrepreneurs. New products are mostly sold to buyers (e.g. wholesalers, supermarkets) that already have a long-term relationship with the company. These chain relations are often in some way involved in the innovation process, and are therefore very well informed, well in advance of other buyers (see also table 5). After market introduction, the auction clock can be used to bring the new product under the attention of a large number of other potential buyers. Chain cooperation and outsourcing lower the uncertainty of innovation Hollander (2002) and Huizenga (2002) found that if a company develops an innovation that highly fits with the company’s strategy, core business and skills it has a high chance of becoming successful. In other words the advice: ‘Do what you are good at and do not take too high risks in other areas.’ Interestingly, in the Dutch glasshouse industry this does not come out as a success factor. Innovations that are really new to the company have an even chance to become successful than innovations that use technologies and skills that are already known to the company. Probably, the high level of chain cooperation together with the outsourcing of innovations has diminished the chance for failure if the technology, product or the markets are not known to the company (see tables 4 and 5). Intensifying the network relations by clustering of glasshouse companies leads to more successful innovation (see table 6).
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6.2
Other key success factors
From the present study it can be concluded that innovations by horticultural firms that show the following characteristics have a high chance to become successful in the market (see table 3). Product or process superiority Product or process superiority is by far the most important factor discriminating success from failure. An innovation can only be successful when it is clearly of better quality, has unique features and fulfills customer’s or user’s needs better than the existing products or processes. Quality, unique features and need fulfilment play an important role. A new product or process that is of higher quality has unique features or fulfils a clear customer need has higher chances to become successful. In case of process innovations an entrepreneur must be well informed about internal costs, benefits, and needs within the own company. The product or process must be carefully designed to fulfil a specific customer demand, and at the same time all other specifications must be at least as good as those of the products and processes that are already available in the market. Products can be tested for e.g. colour, sensitivity towards diseases, sensitivity for different transport conditions, etc. Processes can also be tested (e.g. relating to ISO 9001-2000), although this is more difficult. Market needs To develop a superior product or process one has to know what these needs are (e.g. Verhees 2005). To know what is needed in the market an entrepreneur must be well informed about actualities in the market through frequent contact with customers or other market sources to investigate emerging customer wishes and demands. Therefore, searching for emerging market needs is a key success factor within the glasshouse industry. Companies that keep an eye on the market have better opportunities to introduce innovations successfully. When innovations initiate from sources that relate to the market there is a higher chance that the market will pick it up and make the innovation a success. If the innovation is new to the market; it will face limited competition from comparable products or processes. However, sometimes a ‘me-too but better’ strategy is better, especially if high introduction costs have to be made, and the knowledge behind the innovative product or process can not be effectively protected. In the glasshouse industry an additional key success factor comes to the forefront: the ‘positive effect on the environment’. In glasshouse industry environmental friendly production is a hot issue. So, most successful innovations improve the environmental friendly crop production, and/or decrease the energy consumption per product. Company fit It is concluded that there are many ways to conduct the innovation process successfully. Only the knowledge and skills have to be sufficiently available how to implement the innovative process into the company’s and chain’s existing processes. Team communication In the glasshouse industry conducting innovations is one of the many tasks of the owner/entrepreneur. The respondents emphasized that entrepreneurs need very good communication skills to innovate successfully. If an entrepreneur wants to develop an innovation, he must be able to convince others about the feasibility of his idea. If an (e.g. automation) innovation will change the working conditions of the personnel, it may lead to (sometimes strong) resistance among the company’s personnel. In that case, communicative skills are very important to overcome this resistance. Communicative skills are also very important when the innovation is developed in cooperation with other companies, like other growers, technical companies, suppliers, buyers and consultancy firms. A good preconstructed plan, with accurate process specifications about the appearance, possibilities and functions, which the innovation should fulfil. This can be helpful in convincing other
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companies and employees and gives technological suppliers a good hand out in developing the innovation. Owners/entrepreneurs who delegate their managerial tasks to another person in the company gain time to commit themselves fully to structure the innovation process successfully; to improve their network of relations, be well informed about actualities, and to stay in close contact with customers and the market. Translated this way, concentration on the core activities is a key success factor within the glasshouse industry, not measured in money but in time that the owner/entrepreneur has available to spend on innovation projects. Team communication, open problem discussion, team commitment and project process satisfaction comes out of the research as very important. Innovation project teams that spend much time in the start-up phase to investigate potential problems that may occur during the innovation process and develop procedures to prevent them have a better chance to succeed. Not all problems can be foreseen, of course. Therefore, problems that occur during the innovation process have to be discussed on a regular basis. Undisclosed dissatisfaction about the functioning of team members, project goals, timelines and schedules can easily lead to failure of innovation projects. Companies that have an open communication attitude will have more success than companies that try to hide their knowledge. Hiding of information leads to suspicion and shows lack of trust. Many companies are scared that other companies will try to run off with their ideas. Especially when the innovation is conducted with other chain partner’s up-front clear written agreements about secrecy, the division of the potential costs and benefits, and the division of tasks, resources and time spend by the partners will help to clear up doubts and suspicion and improves openness and trust. It is the entrepreneur’s task to create a trustworthy and cross-functional innovation team, to delegate tasks and to guard the open communication within the team (see also Cooper, 1999).
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Management implications
In general, the interviewees have the idea that entrepreneurial innovation is strongly related to the personal skills of the owner/entrepreneur, and is therefore hard to learn. They think that an entrepreneur must be creative and have a feeling what is needed in the market place. From the interviews we diagnosed that most glasshouse entrepreneurs did not pay a lot of attention to the start-up phase of the innovation project. Most projects seem to have been started on the basis of a gut feeling of the entrepreneur that there is a need in the market for a certain product. An apparent danger is the over-confidence of the innovative entrepreneur. Entrepreneurs may easily think that their skills are sufficient and that they know sufficiently well how to set up of an innovation project. Interestingly, when the entrepreneurs were asked about the ‘lessons-learned’ they often advised to structure the start-up phase better. Many glasshouse entrepreneurs made statements like: ‘Take your time to take a look around, to think it over carefully’ and ‘have patience, do not go too fast’. They set a lot of value on being informed about the market actualities and new developments in the glasshouse industry, by visiting companies, and business trades, by reading professional glasshouse literature and literature from other sectors. They also emphasize the importance of careful up-front analyses of the innovation profits and costs, chances and threats, etc. A further solution could be the set up a structured procedure that includes a description of all the important steps in the innovation process, including evaluation and control to improve the procedure and ultimately the innovation project’s chance for success (Cooper, 1999). But it should be realized that such a procedure should only be used in a flexible way, the entrepreneur should always regard the actual situation.
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Our results show that the characteristics of the innovative entrepreneurs are essential for successful innovation. Important competencies and skills are: decisiveness, efficiency, perseverance, emotional stability, capacity for critical thought, access to knowledge and vision. Also company features like commitment of employees and past financial results are key factors to the final success of failure of innovations (see also Honout et al, 2003). According to the present study, the most important characteristics of innovative glasshouse entrepreneurs are: 1. They provide for a good company’s organisation, directed to continuous renewal and improvement of the companies processes. Responsibilities within the glasshouse companies must be very clear. A well structured company gives the innovator entrepreneur time and opportunities to really focus at the innovation process. 2. The innovator entrepreneur has a strategic vision how to serve the market and create value. Each innovation has to fit into this broader strategy. 3. The company of the innovative entrepreneur needs a good financial buffer in order to accommodate risks, and the sometimes high investments in innovation activities. 4. Successful innovative entrepreneurs know the importance of internal and external information sources. They are open to renewal and in contact with a diverse network of business relations to develop innovations in cooperation with other chain and network companies. 5. Successful innovative entrepreneurs acknowledge the importance of cooperation and have the skills to convince internal and external parties of the importance of the innovation project. They bind the right people to the right places in the project, are always eager to learn and have an enormous ‘drive’ and persistence in making the innovation a success (product champion).
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