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Competitiveness, Innovation and the Value Chain

Competitiveness, Innovation and the Value Chain. Rodolphe de Borchgrave Arcadia 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®

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Competitiveness, Innovation and the Value Chain

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  1. Competitiveness, Innovation and the Value Chain Rodolphe de Borchgrave Arcadia International® Den Haag, 27th November 2008

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

  3. 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  »

  4. What is value in agro-food…? Consumer’s (Willingness to pay) € Producer’s (Revenue) € The challenge : Profit Health Distribution Life style Marketing Convenience Logistics Pleasure Production Nutrition Materials

  5. Interdépendent operations/operators € Margin Distribution Costs Transformation Ingredients Agriculture Inputs Consumers

  6. Materials and information flows Agriculture (farms) Ingredients’ producers (1st transformation) Food products producers (2nd transformation) Distribution

  7. Agro-food value chain specifics PUSH PULL Retail Agriculture Ingredients Food products • Many operators upstream (farms) • Largely a push supply chain • Contact with the consumer dominated by retail

  8. Competitiveness, innovation and value chain transformation • Competitiveness emphasis • Cost reduction • Integration • Innovation emphasis • Value creation • Reinvention

  9. Cost reduction Initial costs • DRIVERS • Retail pressure • Overhead • Substitution • Reformulation • Scale • Economic cycle • down turn Reduced costs • do the same with less resources • an endless spiral ! • the price to pay : which impact on value ? Ex : addition of water (fruit juice) or sugar (chocolat, jams) Reduction of portion size (chocolat, biscuits …) or packaging weight

  10. 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 Integrated Non integrated Company A Company B Company C

  11. Integration driven VC re-design An example : P&G LOOSER INTEGRATION STRONGER INTEGRATION Distribution center Goods Sales data Point de vente Point de vente Point de vente Point de vente Production Data consolidation Point de vente Point de vente Point of sales Point of sales Production Biens Consolidation Of data Supplies Sales data

  12. Innovation : value creation Examples Health and hygiene Health and hygiene • nutraceuticals • bio-food • … • origin (appellation) • exotism Life style Life style Convenience Convenience • pre-cooked • sizing….. • variety • texture • ingredients Pleasure Pleasure Nutrition Nutrition

  13. Value as a combination of strategic capabilities Benchmark XXXX XXX XXX XXXX Standard ou sub-standard By-products valorisation Strong « regional product » image Innovative patents in milk peptides Secure and reliable raw materials sourcing OTHER….. Value production seen as the resultant of a unique combination of company specific capabilities

  14. Complementary capabilities in the business environment CHEESES Valorisation APPLIANCES ? Patents Logistics HOTEL CHAIN Supplies International Patents ? Internet sales R&D Image Managing client fidelity ? BRIGHT DESIGN ETC … Image ETC … ETC …

  15. Complementary capabilities in the supply chain STRONG COOPERATIVE UNIQUE NUTRIENT EXTRACTION BIO FRIENDLY PROCESSES Ingredients Food products Agriculture

  16. Recombining inter-company capabilities to create joint value iNTERNAITONAL LOGISTICS NETWORK OF SALES POINTS SUPPLIES

  17. Examples • Philips Domestic Appliance Senseo + Douwe Egberts • Coca Cola + Nestlé Ready to consume tea and coffie • Mc Donalds

  18. 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 !

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