Being Small & Thinking Big

A SME Approach to Innovation

Background
Finnebrogue are a typical SME food business in Northern Ireland with a turnover of £4.5M for 08/09 with a growth to £8.9M in 09/10 of which the primary customer, Marks and Spencer, accounts for three quarters of this. Employees have grown from 32 to over 80 working at the farm and factory in the past 18 months. The business has developed out of 30 years of trading by Denis Lynn within various food sectors. Denis exhibits many of the defining characteristics and behaviours of an entrepreneur, as defined by Carson (1998) in particular intuitive market insight and challenging established industry norms. As a result, Finnnebrogue, as his most successful venture, is an innovative craft manufacture of differentiated premium food products.

Our product portfolio comprises of venison products and pork sausages. Core to the creation of the business was the farming and production of quality farmed venison. Prior to Finnebrogue’s entry, the venison market was dominated by poor quality, inconsistent venison products purchased by a small number of niche consumers. In response to the BSE crisis in the 90’s Denis exited traditional beef farming and began farming deer. Ten years on and Finnebrogue venison is independently regarded by chefs and retailers as the best venison in the world.  Finnebrogue venison is sourced from young deer less than two years old and is processed in our state of the art deer slaughter facility to minimise stress. These two key innovative steps within farming and processing guarantees the quality of the meat and resolves the traditional negative industry norms.

The pork sausage range we manufacture has a similar market led differentiation. We are the only manufacture in the UK to produce sausages 100% of their range as gluten free and have pioneered a methodology which gives a unique definition and texture which is significantly better than other supermarket sausages. We have been able to product sausages of the quality levels of specialist butchers yet on the scale and volume that meets the demand of supermarket volume. Tidd et al (1997) suggest that firms who use innovation to differentiate their products and services from competitors are on average twice as profitable as other firms. In context of the profitability of Finnebrogue I would concur. In considering the typical business life cycle model, Finnebrogue have experienced growth of over 30% every year since trading in 2000 but in context of overall losses. Since 2004 the size and range of products has become appropriate for the overhead burden and there has been a shift into a profitable balance sheet. Relative to the profit of our significantly larger undifferentiated competitors we would typically achieve a higher percentage of profit relative to overall turnover. The ongoing challenge will be to continue to grow turnover and maintain profits in the current economic environment.

Organisation Climate
“ Only the paranoid survive!”
This quote, taken from Bessant & Tidd (2007), is by Andy Grove co-founder of Intel. It highlights the need for business’ to be constantly on the look-out for not only new innovation opportunities but also signs that competitors are creating an advantage in the market with their innovation. This principle has similarity with the approach adopted by the team at Finnebrogue. As an SME with limited finance and people resources we rely on intuitive assessments of the market place, informal consumer questioning / observation and extensive networking to gather the necessary information to develop our innovation strategy. This approach is a natural way of working for Denis as an entrepreneur (Carson et al 2000) and he has established it as a standard process for his managers to conduct. In reviewing the overall business climate / approach to innovation I have identified the following themes.

Strategy
As outlined in the introduction, innovation is central to the success and indeed the future of the business. Historically it has been ‘radical’ innovations which produced first to market or exclusive consumer solutions. There is no formal strategy for the type or focus of innovation. Despite the initial foundation of the business being formed on the consumer focused innovation of venison farming, subsequent developments or innovations, whilst successful, were driven out of necessity to fill the factory with product and not as a result of planned objectives. Based on Wickham’s (2004) models for business organisational growth, Finnebrogue would be characterised by a chaotic growth metaphor.

Culture
There is a very flat management structure and the development of business strategy of which innovation is core, is delivered by three senior managers and the M.D. Feeding into this strategy are a handful of other managers at the interface between the consumers, suppliers and retailers. There is a culture of openness and Denis actively encourages staff at any level to challenge and debate any decision made, including his own. Problems and decision are debated and the ‘best’ argument wins. Ahmed (1998) recognises Dennison & Mishra’s (1993) identification of four key elements to culture; involvement, consistency, adaptability and long term vision. Each of these is evident in how Finnebrogue operate to differing degrees at differing times. Ahmed further advocate the use of ‘organic structures’  such as freedom from rules, breaking down barriers and little red tape as promoters of innovation. These conditions are typical of our SME management environment.

Change
Finnebrogue have a big challenge to continue to grow at the pace they have and deliver their three year business plan and with this comes a an increased level of complexity. However change is not something that the business is resistant or indeed scared of. With growth of over 25% every year since opening staff and managers deal with change successfully. Metaphorically the climate and the approach to innovation could be compared to the metamorphosis of a caterpillar. Wikipedi on line dictionary defines metamorphosis as:

“...a biological process by which an animal physically develops after birth or hatching, involving a conspicuous and relatively abrupt change in the animal’s form or structure…..which is usually accompanied by a change of habitat or behaviour.”

This is appropriate to Finnebrogue as the approach to radical innovation and opportunity generated from this has always resulted in significant growth and change to the business. With these changes comes improvement to structure and processes and new management behaviours.

Knowledge
In recruiting the senior team Denis has targeted young, energetic and passionate managers with a drive for improvement. As part of this review I conducted the innovation indicator (KAI) test on the key management team and all scored on the high innovator scale with Denis scoring the highest. The scored for these type of managers involved in the innovation and NPD process is not surprising and similar to finding in Henry (2001). There is a specific ‘Innovations Team’ within the business made up of Denis, Matt, Emma and myself. In the same way the marketing or production disciplines would meet, have objectives and contributed to the day to day operation of the factory, a similar approach to taken with the role of the Innovations Team.

References
Ahmed, P. (1998) ‘Culture & Climate for Innovation’, European Journal of Innovation Management 1, 30 – 43.

Bessant, J. & Tidd, J. (2007) Innovation & Entrepreneurship, Wiley.

Carson, D. (1998) ‘The Marketing - Entrepreneurial Interface: A Critic and some pragmatic alternatives’, Irish Marketing Review, 11/1, 49

Carson, D. & Gilmore, A. (2000) ‘SME Marketing Management Competancies’, International Business Review, 9, 363 – 382.

Gilmore, A., Carson, D. & Grant, K. (2001) ‘SME Marketing in Practice’, Marketing Intelligence & Planning, 19/1, 6 – 11.

Henry, J. (2001) Creativity and Perception in Management, Sage Publications.

Merx-Chermin, M. & Nijof, W. (2005) ‘Factors influencing knowledge creation and innovation in an organisation’, Journal of European Industrial Training, 29 / 1, 135 – 147.

McKee, W. & McKee, J. (2008) Star: Leadership Behaviours for stellar SME growth, Oak Tree Press.

Nonaka, I. & Takeuchi, H. (1997) The Knowledge-Creating Company: How Japanese Companies Create the Dynamics of Innovation, New York: Oxford University Press.

Tidd, J., Bessant, J. & Pavitt, K. (1997) Managing Innovation: Integrating Technologiy, Market and Organisational Change, Wiley.

Wickham, P. (2004) Strategic Entrepreneurship, Prentice Hall.

Bibliography
Drucker, P. (1995) Innovation and Entrepreneurship, Heinemann.

Semlar, R. (1996) Maverick. Arrow