Management of Corporate Innovation at Fonterra Co-Operative Group Limited

This essay discusses the management of corporate innovation at Fonterra Co-Operative Group Limited, focusing on the seven rules of innovation, open vs. closed innovation, and the implementation of a Blue Ocean strategy. The essay also explores the company's commitment to sustainability and its impact on business performance.

Running head: CORPORATE INNOVATION
Corporate innovation
Name of student
Name of University
Author note

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The essay demonstrates the management of corporate innovation considering the
business organisation named Fonterra, which has managed to follow the seven rules of
innovation for determining the competitive profile and ensure application of open vs. closed
innovation to improve business functioning. The assignment will also include the various
concepts and innovation theory that can facilitate the organisational practices and methods,
furthermore ensure management of good decision making skills (Amore, Schneider &
Žaldokas, 2013). A Blue Ocean strategy for the organisation will also be implemented with
proper consideration of the corporate environment, furthermore to ensure improvement of
business performance and achievement of positive business outcomes with ease and
efficiency too.
Fonterra Co-Operative Group Limited is a multinational dairy corporation owned by
more than 10,500 farmers in New Zealand and has been responsible for the management of
dairy exports long with the higher generation of revenue that accounts for more than NZ$17.2
billion. It is one of the largest dairy co-operative in New Zealand that has manage to deliver
fresh quality dairy products to cater the needs and preferences of the clients with ease and
efficiency (Fonterra.com¸2019).
The innovation aspect of business is critical to the success of the organisation in terms
of growth, revenue generation and for attaining competitive advantage in business. According
to Weiblen & Chesbrough (2015), to facilitate innovation, various components are considered
including the leadership, implementation of strategies, processes, resources, performance
metrics, and measurement of performance and incentive rewards. The seven rules of
innovation are to exert strong leadership on the innovation concepts to facilitate moving
in the right direction along with making effective decisions too, integration of
innovation aspects into the business ideas, matching the innovation with the business

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strategies, managing the natural tension between creativity and value creation and
preventing the organisation’s antibodies to affect the business functioning (Weiblen &
Chesbrough, 2015). The other rules of innovation include formation of an innovation
network and developing the right metrics along with providing rewards for keeping
them motivated and encouraged largely.
The need for management of changes has changed largely at present, which has
created scopes for and opportunities to improve the research and development activities that
can facilitate innovation and at the same time, meet the changing demands and expectations
of clients. As stated by Chang et al. (2015), the open innovation management has focused on
the incorporating of knowledge and skills into the knowledge management system whereas
the closed innovation is enabled within the self-contained business environment with the
management of human resources and financial resources for responding to the changes
effectively within the marketplace (Chang et al., 2015).
The closed innovation is applied at Fonterra Co-Operative Group Limited by enabling
innovation within the company itself through the generation of ideas and concepts related to
the marketing activities. It has not only been done through the management of marketing
activities but also by committing to the high standards of sustainability to become more
transparent and proactive in terms of monitoring the products that were sourced both locally
and globally. The closed innovation is facilitated by committing to the delivery of high
quality daily nutrition through the assessment of nutrition problems and maintaining good
production to ensure that the nutritional deficiencies and obesity problems experienced by
people are overcome (Chemmanur, Loutskina & Tian, 2014). The company has followed the
voluntary codes for fulfilling the social responsibilities and by integrating those in the
advertising and marketing of food and beverage products in Australia and New Zealand. The

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company has invested in internal research and development as well as provided various
technological inventions to innovate the products to respond to the changing demands and
expectations of the clients easily (Rebouillat & Ortega-Requena, 2015). The closed
innovation also enabled arranging leadership training programs for improving the
leadership skills of the managers of Fonterra Co-Operative Group Limited and ensure
that the employees are managed properly with their needs taken care of along with
valuing their opinions and feedbacks to facilitate the process of decision making largely
too. This would make the employees encouraged and motivated, furthermore maintain a good
competitive profile to sustain in the marketplace (Bhardwaj et al., 2016).
The closed innovation could be noteworthy considering the fact that innovation
should result in various improvements in the technological aspects and allow the company to
gain greater advantage in terms of competition within the marketplace with the facilitation of
teamwork and coordination all throughout. The level of competition within the Australian
dairy industry is moderate, which assured closed innovation should be beneficial for
exploiting the benefits and ensure achievement of growth by targeting the right clients
(Flysjö, Thrane & Hermansen, 2014). This would also be effective to manage selling,
marketing and distribution of products and services for making the products and services
valuable for the clients and thus influence their buying behaviours to a large extent as well.
The processes should be improved in terms of performance with the use of new
technological resources that has been the strength of Fonterra and the cutting edge
technology, i.e., the virtual reality health and safety training technology. It has assisted
the employees to navigate and access the different sites of manufacturing and distribution,
furthermore ensured reducing the time consumption during the manufacturing and production
processes (Rad & Lewis, 2014). Within the organisation, leaders possess good amounts of
skills and knowledge to focus on the staffs’ development procedures and even made sure to

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keep the clients healthy and safe by providing them with necessary training and allowing
them to use their potential in managing the farms, furthermore produce the best quality milk
products (Vanhaverbeke, Chesbrough & West, 2014).
The open innovation, on the other hand, has facilitated innovation perspectives across
the boundaries to improve the potential of individuals with the strategic implementation
and by managing good interaction between the external ideas, processes, technologies
and sales channels with the aim of managing innovation of products and services of the
organisation along with the management of licenses and intellectual properties too (Felin
& Zenger, 2014). Fonterra Co-Operative Group Limited has made sure to use the
business model change for driving innovation in three major areas including the value
proposition, value networks and by assessing the targeted market segments comprising
of the clients. The company has focused on improving the quality supply chain with the
management of good quality grass, which is essential for enhancing the quality standards and
at the same time, focus on management of processing sites accredited with world class
quality and safety systems along with management of best quality packaging, shipping and
maintenance of storage facilities too (West & Bogers, 2014).
The open innovation not only fosters the process of innovation, but also allows for
managing good relationships with the suppliers and employees, furthermore stay ahead
of the competitors with the management of stable business functions and processes. The
open innovation enables implementing changes to ensure innovation both inside and outside
the organisation (Du, Leten & Vanhaverbeke, 2014). Fonterra Co-Operative Group Limited
has partnered with the right suppliers to make decisions by choosing the right dairy company
where the milk items would be supplied to, though with the consideration of a checklist
consisting of the competitive price of milk, secure the demands and enable proper business

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support and gaining accessibility to skills, knowledge and expertise within the industry. He
informed decision is to be made for achieving great things and at the same time, allow the
suppliers to know about the Fonterra Farm source team who has been responsible for
managing various tools, techniques and services required to make the farm business function
appropriately (Kim & Mauborgne, 2014).
The Farm business source area manager must provide relevant information to the
suppliers through support and assistance, furthermore ensure maintenance of quality of milk
and providing 24/7 Services too. The Farm source digital managed by the company ensures
latest and up-to-date information and data about the quality of products along with the
production process, which can facilitate forecasting income in real time situations. The
economies of scale are leveraged by the Farm Source partners for creating extensive
deals and offers to the products, furthermore ensure influencing the buying behaviours
of clients and creating ease and effectiveness to leverage the best level of profit with ease
and efficiency (Agnihotri, 2016). The professionals of on farm services also helped in
providing expert assistance and support to the different areas such as the agronomics, finance,
management of human resources, quality of milk and animal health and wellbeing. Not only
does the supplier relationships have improved, but also good relationships are established
with the farmer shareholders or investors. It is necessary to provide the investors with
knowledge and information about the highest possible returns, furthermore ensure
commitment to sustainable management and improving the community health and wellbeing
to influence the shareholders to make investments on the organisation (Chandrakala &
Devaru, 2013). Being the focus mainly on the farmers, Fonterra has made sure to take care of
their needs and requirements properly, which has helped in focusing on the main areas of
innovation including the rich land and extracting the goodness from the milk by grazing the
cows. Innovation has been facilitated with the management of strong and healthy local

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environment and community, which is critical to the success of sustainable and profitable
dairy farming too.
The innovation has been matched with the organisational strategies to
understand the need for innovation, furthermore implement newer technologies and
make sure to enable value proposition along with development of supply chain and
targeting the right clients with ease and efficiency. Fonterra Co-operative Group Limited
has focused on managing the water ways by keeping the water bodies clean and even made
sure to monitor the regions to ensure that the quality of water is improved to a large extent
(Fonterra.com, 2019).
The designing of a strategy for innovation is the Blue Oceans strategy that can allow
the business organisation named Fonterra Co-operative Group Limited in Australia to stay
ahead of the rivalries in business and deal with the saturated market space, thereby aiming to
achieve the desired level of profit and facilitate growth and development all throughout. The
Blue Oceans are the market spaces that should assist the company to create new growth
opportunities with the assessment of demands and opportunities for gaining higher growth
and profitability in business with much ease and effectiveness, considering the Game rules all
throughout. The use of Blue Oceans strategy enabled the organisation not to compare with
the competitors in business, rather focus on adding value through prospects with the
management of value addition to both the consumers and the organisation itself (Amore,
Schneider & Žaldokas, 2013). This would create scopes for opening a new and unknown
space in the market, furthermore aim to differentiate the products and services and provide
those at lower prices to gain a sustainable position within the competitive marketplace.
The first step enables creation of value with the identification of products and services
that company has not offered previously such as the new milk items including butter and

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cheese and representing the costs clearly for differentiating with the business competitors.
This would also allow Fonterra to assess the customers’ needs and facilitate the buying
behaviours to ensure high level of satisfaction too.
The second step allowed Fonterra to identify the clients who have made one time
purchases only and are not inclined to the company products again. Maybe, due to the
dissatisfaction with the products and services that they have purchased. Thus, Fonterra Co-
operative Group Limited should focus on the market segments and analyse the buying
behaviours of clients to ensure that the needs of clients are taken care of. The company could
allow the customers to provide their valuable feedbacks and reviews for the products to
determine the things that the clients should need to implement, furthermore make any
necessary adjustments to changes to fulfil the criteria and clients’ needs effectively too
(Fonterra.com, 2019).
During the third step, Fonterra must prioritize on the four major actions including the
removal, reduction, increase and creation of value. This could be possible with the
organisation managing the core values and features of Fonterra Processor’s products and
services and determined whether thee benefits achieved are real or perceived. The company
must offer more products at lesser prices without compromising on the quality rather focus on
sustainable production to reduce the operational costs and overcome the limitations of cost
trade off and competition within the industry.
To increase the value addition, Fonterra should manage adoption of new strategies to
innovate the products and services along with the implementation of new and advanced
technologies for facilitating the innovation perspective and allowing to cater the needs and
preferences of people efficiently too (Bhardwaj et al., 2016).

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