Capacity of innovation in primary sector value chains

Capacity of innovation in
primary sector value chains
Araceli López Dueñas
Mexico
SEPT 2004
Content:
1.
2.
3.
4.
5.
6.
7.
Research Project
Scope
Innovation concepts.
Value chain concepts.
Capacity of innovation “Ixlte value chain”.
Capacity of innovation “Candelilla value chain”.
Conclusions
Research Project
„
National Forest Agency (CONAFOR) and National Agency for
Science and Technology (CONACYT) called for a project
“Estrategic Marketing Analysis for Comercialization of
Wood and Forest Products”
„
The aim was to identify products to enhance their industry and
increase their economic performance.
„
Over 165 surveys were conducted for Wood products in the top
5 producing states of Mexico.
„
The sample also included almost 80% of the total stablishments
oriented to industrialize Forest products in several states of
Mexico.
Candelilla
Ixtle
Orégano
Resina de pino
Palma camedor
Presentation scope
„
The main objective of this presentation is to show how innovation
is developed through intra relationships in the primary sector value
chain. (Ixtle and Candelilla forest products)
„
The source of innovation, in the Ixtle and Candelilla value chain,
lay between Schumpeterian growth theory classification.
„
In this case industrial organization and process change have indeed
produced innovation.
Use of Value Chain Analysis
Value chain analysis can help to answer critical questions such as:
„
Who has access to what markets? How can access to markets be gained?
„
What are the challenges and opportunities for local producers?
„
How are the gains distributed along the chain?
„
Where are the weak links in the chain? Who has the power to change
this?
„
How can technical assistance be provided to small producers?
„
What is the dynamic of innovation in the value chain?
Manual for value chain research on homeworkers in the garment industry, Dorothy McCormick and Huber Schmitz, Sussex, UK 2002.pp. 18
Joseph Alois Schumpeter (1883-1950)
Combined, resource discovery and technological progress were what Schumpeter called
innovation.
He noted five cases of innovation:
Product
Industrial
organization
Process
New
Resource
RM
Market
2. Value Chain concepts
Research method for analyzing value chains
1. Constructing maps
Retail
2. Information of the stages
3. Finding linkages
Local retailer
4. Value aspects
National retailer
International retailer
Wholesale
•Technical support
•Innovation
5. Finding solutions
Small producers
Productions
Medium producers
Technical support
Large producers
Innovation
Inputs
Supplier 1
Supplier 2
Supplier 3
Manual for value chain research on homeworkers in the garment industry, Dorothy McCormick and Huber Schmitz, Sussex, UK 2002.pp.
18
The thesis
„
In the case of Ixtle and Candelilla there was a change in the
industrial organization of the sector, oligopolystic behavior
between the actors increased competition.
„
Raw materials (Input) is a critical component of the value
chain.
„
Innovation capacity in the first stages is provided by the upper
levels of the value chain, through intra industry
relationships.
FOREST PRODUCTS
Ixtle (Lechuguilla)
Ixtle
„
Ixtle is a specie located in the semi-desert zones of the Mexican
altiplane. It looks like a small maguey.
„
From the ixtle plant a fiber is obtain to manufacture a diverse kind of
products, such as:
‰
Ropes
‰
Pillow/Pads
‰
Brushes/Scrubbers
‰
Rugs
‰
Automobile air filters
„
Ixtle is a perfect substitute for plastic fibers used in the construction
industry.
„
Its versatility includes textile fibers, a perfect substitute for nylon and
polypropylene
2. Capacity of innovation “Ixtle Value Chain”
Ixtle
„
The Ixtle industry was organized between 1941 and 1991, through
the formation of 745 cooperatives and a single government owned
processing/sales consolidation plant.
„
The industrial organization of the industry (monopsomy) resulted
in a technology gap for the sector.
„
In 1991 the Mexican privatization reforms broke down the
industry in several small plants.
Main components of the “IXTLE” value chain
2,500 ton.
year
• Apparell
• Scrubber
• Mops
• Soaps
• Creams,
cosmetics,
INTERNATIONAL
47,500 ton.
244 Scrubber
year
Manufacturer’s
DOMESTIC
5%
2%
93%
$4.3/kg
5%
Brush
Inlay
Dimensioning
40% USA
8% Germany
5% Italy
40% EU
INDUSTRIAL
86
Finished Product
Packaging
Cut
Quality
Control
Market
Ixtle Industries
3
Intermediary
95%
Industry Sector
$1.2/kg
Distribution/Sale
Drying
Carving
Transport
Harvest
Ixtle hoarders and carvers
31,196
Inputs
“IXTLE” Value Chain Key Elements
DOMESTIC
INTERNATIONAL
Market
Feedback and communication
with international markets
INDUSTRIAL
Finished Good Sales
R&D
New
finished
Intermediation goods
Feedback with
domestic markets
Ixtle
Industries
Develop of new machine
Inputs
New Fiber technology
extraction
New Brush machine
supplier’s
Comunication
Industry Sector
New Industrial organization
New Sustainable exploitation
Ixtle hoarders and carvers
Relations and education
New organization form
“Division of labor”
Candelilla
Candelilla
„
„
“The wild plant known as ‘Candelilla’ contains wax of excellent quality and in sufficient
amount to make it extremely valuable”.
Candelilla Wax Applications
•Shines
•Crayons
•Paper
•Adhesives
•Pharmaceuticals
Furs/Leather
•Electrical
•Insulation
•Chewing Gum
Paints
•Anticorrosives
•Matches
•Waterproofing
•Polishes
•Integrated Circuits
•Lacquers
•Textiles Confections/
•Candies
•Lubricants
•Cosmetics
•Molding
•Candles
•Rubber
•Plastics
1.Nearly a century ago, The Journal of the Royal Society of Arts declared
Key components of the “Candelilla” Value Chain.
INTERNATIONAL
INTERNACIONAL
Diversas industrias
NACIONAL
DOMESTIC
10%- 20%
80%- 90%
Direct directa
Venta
Sale
Finished product
Germany
France
UK
Japan
EU
INDUSTRIAL
20 Prom.
Avg.
100%
$4.5- 6/kg
0%
Pastillas
Shells
Whitening
Refinado
Refined
Escamas
Flake
PROCESS
Polvo
Powder
6
$.26/ kg hoarder
Raw-Refinement
Semi-refinado
$2/ kg collector
Transportation/Market
Traslado para su venta
Hervida y
Wax
Extraction
Extracción
de la cera
Industry
Industrias
“Candelilla”
Wax Refinery
6
Corte
Cut
Recolección
Harvest
“Candelilla” de
Hoarders
Recolectores
candelilla
and16
Collectors
000
16 000
Harvest Yield
100kg.
~ 2-3 Kg. of cerote
“Candelilla” Key Elements for Success
DOMESTIC
INTERNATIONAL
Market
Appellation of Origin
Direct Sales
Finished Product
INDUSTRY
Candelilla Wax Refineries
Intermediary
Industry Sector
Resource Inventory
New Sustainable exploitation
New Industrial organization
Develop of new process
New Wax Extraction
Technology
“Exano”
Relations and education
Candelilla Harvester’s
New organization form
“Division of labor”
Inputs
Conclusion of the innovations in the value chain
„
The change in the industrial organization pushed innovation
forward to cover the technology gap prior to the transformation
of the industry.
„
The industrial sectors gives to the primary sector elements to
improve through innovation on areas such as:
„
‰
Labor organization
‰
Tools and equipment
‰
Sustainable exploitation
The industrial sectors push to the chain in the upper stage on:
‰
Appellation of Origin
‰
R & D New finished goods
‰
Upgrade tools and machinery (technology suppliers)
Reflexions ...
„
The use of value chain analysis was able to show what is the
dynamic of innovation in the industry.
„
„
„
The domestic market was the best option to have
communication with the custumers and create innovation.
The competition was the motor of the innovation instead a
goverment or institutions.
To support the industrial sector (second stage) will be the
best option to enhance performance in primary products.