How to Create Value System Innovations
Value Network Analysis in the Finnish Packaging Business
Kristian Möller
Petteri Ollila
Mikko Laukkanen
Perspectives guiding this study
1. Value system innovations – network roles and positions
2. Value activities, capabilities, and resources in values-
system innovations
3. Business model changes in value-system innovations
4. Management mental models in value-system
innovations
Value Network Analysis
Mental Models & Dominant Logic
Forest owners
Energy
Machinery
manufactor
Pulp mill
Paper- / corrugated cardboard mill
Other suppliers
(e.g. chemicals)
Refiner / printer
Package manufacturer
Contract packaging
Package retailer
Packaging machinery
manufactor
Packaging / brand owner
Recycling company
Central corporation (retail)
Value Benchmark Cases
• Tetra Pak
• Japanese Printers
• Sinebrychoff
• Toyota
Wholesale
Retail
End user (company)
End user (consumer)
VRIN =
Valuable, Rare,
Inimitable, Non-substitutable
Domestic Packaging Industry
Characteristics & Consequences
•
Traditional vertical, multi-tiered supply chain structure
•
Firms have specific and narrow roles
•
Technical collaboration and long-term relations yet – ‘playing the market’
•
Little value-system innovations
•
Domestic market too small – limited value potential
•
Structure: Large Suppliers – Small service providers – Large customers
Notable exceptions:
– Huhtamäki – Global service integrator
– Sinebrychoff – Strategic brand network orchestrator
Mental Models from the Field
1.
PROVIDE FULL SOLUTIONS
”In Finland we only sell blocks. Nobody wants to pay much for blocks, instead we should find out what the customer
really needs and sell the full solution. Milk producer wants to pack milk. Give him the machinery, packaging material and
full service, the whole thing, and you will have a long term customer with good profits.”
– CEO of a consulting company
2.
CUSTOMER NEEDS ARE KING
”Forest industry should stop trying to find out how to find fibre-based packaging solutions. They should try to find the best
solution for consumers and the society, how to tackle the packaging issues in a best way regardless of the material, and
then network accordingly. Technology- and historical industry perspectives are not helping them to solve their problems.”
– CEO of a packaging company
3.
UNDERSTANDING NETWORK PARTNERS
”Forest companies are incapable of admitting that hey, we are forest companies but we need others as well. In a network
every actor has to feel that they are benefitting from the relationship and forest companies obviously haven’t understood
this simple fact.”
– CEO of a packaging company
4.
INNOVATIONS DO NOT HAVE BE TECHNOLOGICAL
”There are so many great examples of value system innovations worldwide that have changed whole industries, but in
Finland we don’t understand business at all. For example UPM’s innovation center in Lappeenranta is very technology
oriented, the guys are researching chemical processes and that is all they see.”
– Owner of a consulting company
5.
SOLVE REAL PROBLEMS
“The forest industry has their own agenda of trying to be associated with forest and fiber, but I think it is much more
important to find the solution, or understand the problems and find answers, instead of focusing on a certain technology
or certain materials.”
- CEO of a packaging company
Finnish Packaging Industry - Huhtamäki
Forest owners
Energy
Machinery
manufactor
Pulp mill
Metso
Paper- / corrugated cardboard mill
External factors:
Other suppliers
(e.g. chemicals)
Refiner / printer
Legislation (lobbying)
Walki,
Rosenlew RKW
Ciba
Package manufacturer
Safety
Consumer trends and attitudes
(e.g. environmental friendliness)
Contract packaging
Package retailer
Novelpack
Education
Research labs
Packaging machinery
manufactor
Germany, Switzerland, Italy
Packaging / brand owner
Central corporation (retail)
External factors affecting
Competitivity (e.g. currency
exchange rates)
UPM, M-real
StoraEnso,
Peterson Packaging
Huhtamäki,
Pyroll
Recycling company
Finnstaples
Fazer
SOK, Kesko
Wholesale
Retail
End user (company)
End user (consumer)
NP-kierrätys
Illustrative Benchmarks
• Value network innovations open new opportunities
– Tetra Pak
– Japanese Printers
• Network innovations require network management
– Sinebrychoff
– Toyota
• Innovation is about ideas and execution
In conclusion…
• Structural and environmental conditions make value system
innovations challenging in the Finnish packaging industry.
• However, a service integrator may find interesting opportunities.
• Our cases show that value system innovations require an
understanding of one’s own network, the willingness to challenge
existing structures, and the ability to execute change.
Network Roles in the Future?