Competitiveness, Innovation and the Value Chain

Rodolphe de BorchgraveArcadia International®

Den Haag, 27th November 2008

Agenda

• Competitiveness, Innovation and the Value Chain• Approaches to Value Chain re-design• Agro-food SME specifics

Introduction

• Arcadia International®– Agro-food industry consultants– An international network of experts– Info : www.arcadia-international.net

• The motto of this presentation :

« Competitiveness oriented innovation involves re-inventing the company’s value chain  »

What is value in agro-food…?

Life style

Convenience

Pleasure

Nutrition

Health

Materials

Production

Logistics

Marketing

Profit

Distribution

Consumer’s(Willingness to pay)

€ Producer’s (Revenue)

€

The challenge :

Interdépendent operations/operators

Agriculture

Ingredients

Transformation

Distribution

Costs

Margin

Inputs Consumers

€

Materials and information flows

Agriculture (farms)

Ingredients’ producers(1st transformation)

Food products producers(2nd transformation)

Distribution

Agro-food value chain specifics

Agriculture Ingredients Food products Retail

• Many operators upstream (farms)• Largely a push supply chain• Contact with the consumer dominated by retail

PUSHPULL

Competitiveness, innovation and value chain transformation

• Competitiveness emphasis – Cost reduction – Integration

• Innovation emphasis– Value creation – Reinvention

Cost reduction

Initial costs Reduced

costs

• do the same with less resources• an endless spiral !• the price to pay : which impact on value ?

DRIVERS

• Retail pressure• Overhead• Substitution• Reformulation• Scale• Economic cycle down turn

Ex : addition of water (fruit juice) or sugar (chocolat, jams) Reduction of portion size (chocolat, biscuits …) or packaging weight

Integration• Interconnection and coordination of…processes, activities, or information and materials’ flows ….• with a view on continuous (seamless) operations• as if there was no organisational or legal intercompany boundaries• reducing inventories, improving flexibility and cycle time

Company A Company B Company C

Integrated

Non integrated

Integration driven VC re-design An example : P&G

Production

Point de vente

Consolidation Of data

Distribution center

Point de ventePoint

de ventePoint of sales Production

Data consolidation Point de ventePoint

de ventePoint de ventePoint of

sales

Sales dataSupplies

GoodsSales data

Biens

STRONGER INTEGRATIONLOOSER INTEGRATION

Innovation : value creation

Life style

Convenience

Pleasure

Nutrition

Health andhygiene

Life style

Convenience

Pleasure

Nutrition

Health and hygiene

• nutraceuticals• bio-food• …• origin (appellation)• exotism

• pre-cooked• sizing…..

• variety• texture

• ingredients

Examples

Value as a combination of strategic capabilities

Value production seen as the resultant of a unique combination of company specific capabilities

Secure and reliable raw materials sourcing

Innovative patents in milk peptides

Strong « regional product » image

By-products valorisation

OTHER…..

Benchmark

XXXX

XXX

XXX

XXXX

Standard ou sub-standard

Complementary capabilities in the business environment

Supplies

Patents

Valorisation

ETC …

Image R&D

Patents

Logistics

ETC …

BRIGHT DESIGNManaging client

fidelity

Internet sales

International

ETC …

Image

CHEESES

HOTEL CHAIN

APPLIANCES

?

?

?

Complementary capabilities in the supply chain

Agriculture Ingredients Food products

STRONG COOPERATIVE

UNIQUE NUTRIENT

EXTRACTIONBIO FRIENDLY PROCESSES

Recombining inter-company capabilities to create joint value

SUPPLIES

NETWORK OF SALES POINTS

iNTERNAITONAL

LOGISTICS

Examples

• Philips Domestic Appliance Senseo + Douwe Egberts• Coca Cola + Nestlé Ready to consume

tea and coffie• Mc Donalds

What about SMEs ?• Not only for multinationals !• SMEs also have unique and specific strategic capabilities !• These CAN be inter-company combined to create value• Examples :

– Pain Quotidien : « social » network of sales points– Marcolini + Nestlé : international development

• Requisites : – assessing one’s own strategic capabilities – monitoring the business environment !

• A role for SME support agencies !