Practical examples of Open innovation models used in New Zealand organizations

This report discusses the practical examples of open innovation models used in New Zealand organizations like Fonterra Co-operative Group Limited and Parrot Analytics. It provides a brief profile of the organizations, academic description of the models, presentation of the models, evaluation of success, barriers to innovation, and skills required to perform the selected models. The report also includes the subject, course code, and college/university if mentioned.

Practical examples of Open innovation models used in New Zealand organizations

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Contents
1. Brief Profile of the organization...............................................................................................2
Fonterra Co-operative Group Limited.........................................................................................2
Parrot Analytics............................................................................................................................3
2. Academic Description of the model.........................................................................................5
Fonterra’s collaborative model....................................................................................................5
Parrot Analytics model.................................................................................................................5
3. Presentation of models.............................................................................................................6
4. Evaluation of the success.........................................................................................................9
5. Barriers to innovation.............................................................................................................11
6. Skills required to perform the selected models......................................................................12
7. Key aspects affecting the financial results of companies.......................................................13
8. Conclusion & Recommendations...........................................................................................14
References......................................................................................................................................15
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1. Brief Profile of the organization
Fonterra Co-operative Group Limited
Fonterra is New Zealand based Multinational dairy organization which is co-operatively owned
by 10,500 farmers. It is a global dairy nutrition firm and is responsible for around 30% of dairy
export worldwide. This organization is a large New Zealand organization with total revenue of
NZ$17.2 billion. This dairy group was established in 2001 following the merger of the two
largest dairy firms in New Zealand. Fonterra is very popular in shaping the dairy industry in
terms of innovation and product quality offered to the customers. Fonterra has employed more
than 22,000 people over the globe. This dairy organization serves around 140 countries and over
1 billion people each day (Fonterra Co-operative Group, 2018). Fonterra has a rich experience in
manufacturing nutritious dairy products. The organization collects, manufactures and sells milk
and milk-inferred products. It is considered as an FMCG company and largely operating
foodservice business. Fonterra supplies dairy fixings to food organizations, marked dairy items
to customers, and foodservice to nourishment experts in pastry shops and eateries. It offers the
customers with products like milk, ice-cream, cheese and butter.
Fonterra’s vision is to become natural sources of Dairy nutrition around the world. The company
is passionate to share nutrition for people of all age groups, everywhere & each day. Fonterra is
dedicated to uphold its standards along with maintaining its competitive leading position in the
dairy industry thereby delivering efficient and profitable service to the customers. Fonterra
creates a culture where employed staff shares their expert knowledge, skills, best practices to
develop the company as a whole. The service portfolio of Fonterra includes top most popular
brands (Fonterra, 2019).
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Figure 1: Service portfolio of Fonterra
This year’s goal is to become the market leader for introducing innovative products and fruitful
product launches. Fonterra's strategic plan is to create solid client associations with world's
known leading organizations in the nourishment and sustenance enterprises to turn into their
supplier of decision, and to keep on structuring its brands in developing countries like Asia and
the Middle East. Fonterra is planning to buy and operate the American factories of Nestle dairy.
It will not be mandatory for Nestle to purchase products or ingredients from Fonterra. It plans to
become America’s largest raw milk manager
Parrot Analytics
Parrot Analytics is a small to medium size data analytics organization in New Zealand which is a
data science company known to measure and forecast the global demand of existing and new
media content over the common platform. This organization empowers the different media
brands, companies and media agencies to determine global audience demand for TV content
(Verizon Media, 2019). It depicts the true value of content in the market. Even it helps the media
organizations to compare the same content in different countries. For this, it has its own country-
specific system for audience behaviour measurement and audience demand. This company also
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provides leverage to react to audiences immediately. The technological system of Parrot allows
the networking companies and other media agencies to standardize how they value their content
across the world thereby providing the true global view of audience’s demand in almost every
country at any point of time (Cohan, 2019).
The mission of Parrot Analytics is to hook up content creators and customers by empowering
information-driven choices over the business. The company works with a portion of the world's
most famous brands who utilize their content demand estimation system to drive choices over the
substance improvement lifecycle, from venture and creation choices to conveyance and
permitting arrangements (Parrot Analytics, 2019).
Parrot Analytics company had announced recently that it has plans to assist sports office Creative
Artists Agency with worldwide examination information and arrangements with bits of
knowledge on an overall group of onlooker's interest for diversion content. This year's goal is to
decipher the magic of content via its products. It has a strategic plan to work in coordination with
CAA in next years so that it can deliver according to its mission.
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2. Academic Description of the model
Fonterra’s collaborative model
In collaborative model, organization enters into collaborative partnership or agreement with
experienced and intensively knowledgeable leaders, universities or professionals. Under this
model basically, the integration of external partners is done with the innovation processes of the
organization. Through this model, a company can ensure regular and free interactions between
the collaborative partners along with the evolution of mutual trust among the two partners.
Moreover, this model eases the exchange of tacit knowledge across the company's boundaries
(Saebi & Foss, 2014).
This strategy provides a common platform for partners to gain profit by offering innovative
products or services to the customers. Fruitful collaborative innovation strategy development
requires a non-antagonistic mentality, a staggered and multi-practical authoritative methodology,
the capacity to figure out how to talk "another dialect," new measurements, and the readiness to
share licensed innovation (Friedman & Angelus, 2017).
Parrot Analytics model
This company utilizes Intrapreneurship model of open innovation. Intrapreneurship is ideally a
process through which people within an established organization can conceive, foster, introduce
and manage a new idea that is different from the parent organization but leverages the assets,
market position, resources, strengths and capabilities of the parent company. It varies from
corporate funding, which prevalently seeks after budgetary interests in outside organizations. In
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spite of the fact that it frequently includes outer partners and capacities (acquisitions), it draws in
critical assets of the built-up organization, and inward groups normally oversee ventures. It's
additionally unique in relation to spinouts, which are by and large built as remain solitary
ventures that don't require ceaseless utilizing of current business exercises to understand their
potential.
3. Presentation of models
The strategic innovation team of Fonterra looks after all the innovation programs and activities,
thereby balancing the project portfolios and ensuring the appropriate capability and resources to
reinforce the innovative developments. Fonterra is aware that development of innovative model
and technology in products and courses is very important for the growth and sustainability of the
dairy industry operating in New Zealand (NewZealand Government, 2019). For driving
collaborative innovation Fonterra has recently launched Venture C-lab. This is a common
platform where anybody can participate from anywhere to present the ideas for mutual benefit.
Eminent professionals, small corporations and large corporations across the globe can share their
novel concepts through this Venture C-lab and then the team of Fonterra reviews the concepts to
partner on to the scale and flourish together. Submission should be a kind of innovation in any
field such as strategies, business models, technology, operations etc. The company thinks on
external boundaries and is open-minded to accelerate growth and enhance the ultimate value to
its farmers (Cornall, 2017). The main goal of Venture C-lab is to construct long-haul
partnerships with the organizations which can work in synergy with Fonterra limited. According
to the Fonterra’s innovative model, the concepts submitted by the participants remain protected
along with their application but once if any particular concept is selected then that party requires
to sign a mutually-agreed contract with Fonterra. This agreement sets out the rules for the
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collaborative partnership indicating how both the parties will conduct, operate and will be the
obligations. In support of this external open innovation, Fonterra is running another program
named "Activate 2.0”. This program involves seven different teams launching their innovative
ideas in the format of Dragon’s Den style. Experts and researchers from big companies
participate in this program and apply with their idea (Mack, 2017). There is also one more
network named “InnovationXchange” which is run by Fonterra where companies can disclose
their intellectual property to get tied up with Fonterra and potential innovation partners. One
such example is a biotechnology company named ViaLactia Biosciences which is working as a
complete owned subsidiary of Fonterra. ViaLactia aims to likely distinguish, find, and popularize
techniques for determination and qualities imperative to the dairy business, including those
influencing field grasses, milk creation, and milk synthesis.
At Parrot Analytics each individual can become an innovator. There is an official program of the
company named “Kickbox" under which every employee and company's stakeholders are
provided access to an innovation kit. Through this kit, each one is given prepaid credit card and
startup material that assist the participants to take action upon their new concept or idea for the
development of a new system. Many employees since past few years have tried and tested their
ideas through this startup kit and have been influenced through this. Associated employees not
just perform their assigned tasks but also act as innovators who align their invention passion with
the company's main purpose of analyzing the content in the most unique and secure way. Either
the stakeholders are free to apply their new skills to the existing measurement systems or
creating new mechanisms, the overall program aims to arouse the spirit of personal initiative to
conceptualize, to dream and to shape. The best part of this model is that it is an open source
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which implies that any organization can give it a try (Puri, 2016). Inside numerous associations,
development needs to remain an independent biological system. Otherwise, representatives may
experience difficulty adjusting everyday tasks with future-disapproved of endeavours. That is the
reason Parrot Analytics utilizes Kickbox as one piece to the general riddle.
The open innovation manifesto of Parrot focuses on the joint association between experts and
Intrapreneurship to share their ideas and passionately resolve the complex problems.
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4. Evaluation of the success
S.NO Company Achievements Project cost
involved
Return
on
capital
Normalized
EBIT
1 Fonterra
Co-
operative
Group
 Set up of three different
communities of experts for
improving processes and adding
value to the milk
 The company is able to protect
the goodness of dairy and it also
successfully maintained the
nutritional integrity of produced
products.
 Through open innovation
model, it developed specialized
ingredients for reducing the risk
of allergies, infections and
thereby boosting the immunity
and bone health.
 The innovative model
conceptualized the idea of
reducing sodium content from
US$40 million
dollars were
spent on the
nutritionists and
innovative teams
experts to
develop the new
product for
improving the
adults bone
health
6.3% $902m
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cheese.
Fonterra’s brands are equipped with trusted processes and the high quality dairy nutrients which
are loved and appreciated by all the served customers. It thinks innovatively to find out new
method to deliver healthy and benefited dairy products. This organization strongly stands for
sustaining environment and supporting the communities and profitable dairy farming.
S.N
O
Company Achievements Return
on
capital
Normalized
EBIT
1 Parrot
Analytics
 Rise of SVOD platforms
 Improved methods of content discovery
 Traditional TV players are now using the internet
 The living room is equipped with online TV
 Parrot Analytics has successfully engaged consumers
through social networking sites and media.
2% $300m
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5. Barriers to innovation
The first barrier for the Fonterra during the implementation of the innovation model was the
adoption of new technology. The biggest problem dealt with by the company is providing the
employees with productive tools, access to information and privacy required to keep the
application and ideas of the applicants safe. This barrier may likewise develop in settings where
adaptability is limited by fundamental office premises, especially in procedures and capacities
that are chiefly paper-based, since collaborative innovations frequently receive the paperless
methodology. Another barrier observed in this model is the fear of the unknown and the
necessary efforts required to alter the working conditions and existing modalities. The employees
of the company become reluctant to accept the changes towards the innovations. Next was the
infrastructural and resources constraint because once the idea is selected by the Fonterra team
then the implementation of that idea requires resources and infrastructure (Manca, Grijalvo,
Palacios, & Kaulio, 2018).
The barriers to Intrapreneurship model of open innovation are individual resistance, creation of
innovative culture and employee’s encouragement. Individual resistance is due to the personal
traits of an individual. Employees just want to work on the task allotted to them and also they
prefer working in their comfort zone. There are very fewer employees who align their innovation
passion with the company's innovation goal. Well, it demands support from company
management. The biggest challenge for the organization is to create a culture of innovation in its
working environment. Innovation should become the core integral part of the company in this
model of open innovation. Another hurdle for the organization is to encourage the employees in
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taking part in the innovation activities and share their productive ideas which can mutually
benefit the stakeholders as well as the company (Salarzehi & Forouharfar, 2011).
6. Skills required to perform the selected models
Collaborative innovation model requires relationship management skills between the businesses,
suppliers, agencies and expert professionals who participate in the innovation process. This skill
adds value and drives towards innovation. The organization should have the skills of framing
innovation strategies and should be able to stay focused on innovation. Another vital skill
required for this model is clear and precise communication with all the applicants. It is must for
the organization that it should be able to convey its innovation goals, the process by which the
applicants can be associated with the parent organization. Other supportive skills required are
decision making, adaptability and industry pertinent work experience (Keshava, 2019). The open
innovation model used by Parrot Analytics requires skills like analytical thinking, motivation,
leadership skills, strategic thinking, creative problem-solving capability and effective human
resources management. As the employees and other shareholders can participate in sharing their
innovative ideas in this model, it requires competitive HR management and leadership skills. The
organization which decides to utilize this model as an open innovation strategy must have a
competent leader who can direct, guide, take along and work as a team towards achieving the
innovation goal of the company. The team who handles this model should be able to encourage
and motivate others to become the self-dependent Intrapreneur. One should be skilled enough to
create an innovative culture in the organization instead of creating the head of defeating each
other (Eich, 2018).
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7. Key aspects affecting the financial results of companies
Type of
organization
Aspects that affect the financial results of the companies
Forecasting and
planning
Effective
implementation
Correct
Analysis of
resources and
capital
Expert
management
Measurement
of results
Small to
medium
company
Appropriate
planning helps
the small
companies to
gain appropriate
financial results
If the innovation
is not
implemented
appropriately it
is sheer wastage
of resources
which means
financial loses
This aspect
does not impact
much on
Financial results
This aspect is
not very
important for
this type of
organization
It is a must
for this type
of firms
Large
corporation
Forecasting and
planning both are
must which
affect the
financial results
Right
implementation
achieves long-
term financial
results
This aspect
impacts
strongly on
Financial results
Expert
management is
very much
important for
an open
innovation
model.
This aspect
does impact
financial
results.
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8. Conclusion & Recommendations
Most of the corporations and forward-thinking firms are looking outside of their boundaries to
expand their innovation channel with the aid of open innovation strategies. Nobody can define
what is exactly the open innovation concept and how it can be deployed because each initiative
proceeded by the company varies from one company to the other. There are few organizations
like SMEs which utilize open innovation for adding value to their existing hardware or
equipment, whereas few organizations such as large ones use it to attain more data and
information for the advancement of new products. Both types of companies such as small to
medium sized and large ones have accepted that innovation and creativity play a very important
role and are essential tools to enhance the market competitiveness and to sustain overall business
prosperity. Parrot Analytics has deployed Intrapreneurship model which is cost effective and
requires less number of resources in comparison to the other models. Fonterra is using
collaborative innovation model which is successfully implemented in the organization and it is
also adding value to the business as well as farmers of the company. Open innovation presents
multiple benefits for organizations. Collaborations help the companies push the technological
frontier to the external boundaries and stretch the market approximately, allowing consumers to
access unique solutions at a faster rate. Other benefits are organizational learning, less time to
market for invention, minimal R&D cost and risks involved and many more. It is recommended
that companies should adopt open innovations strategies to benefit themselves from all such
benefits. It is also suggested that if the companies use these innovation models then they should
take care of the knowledge leakage and should ensure the appropriation. Firms are advised to
focus on open innovation management as soon as possible when they decide to engage with
external parties (Brant & Brant , 2012).
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References
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Cohan, S. (2019). Partner with the industry leader and unlock new value. Retrieved from
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partnership-opportunities
Eich, D. (2018). Innovation Skills for the Future: Insights from Research Reports. Retrieved
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https://www.fonterra.com/nz/en/about/our-brands.html
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Friedman, M., & Angelus, H. (2017). Best Practices in Collaborative Innovation: How
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Keshava, N. (2019). The Mind Of An Innovator: Five Essential Skills For Innovation. Retrieved
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