MBA501

Disruptive innovation Analysis for Essendon Food Solutions (EFS)

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Disruptive innovation Analysis for Essendon Food Solutions (EFS)

Introduction

Among the technological innovations which have emerges as strategic for business is disruptive innovation theory which is an idea of Christensen. The approach serves in developing new markets and might disrupt market links for a company. In this case an evaluation of Essendon Food Solutions (EFS) serves to show the possibility of them adapting the disruptive innovation strategies while suggesting ways in which that can be possible. In the discussion various leadership theories and business ideologies are utilized alongside an analysis of the internal, external, marketing, strategic leadership, and technological aspect of the company.

A. Internal perspective

Disruptive innovation strategies occur where an organization establishes incumbent business through improving available services and products for their demanding clients. The company needs to overcome the needs of some customers but in the process, other clients are ignored. In the internal perspective, there is organizational structure, human resources, resource allocation, and organizational culture as factors that can either support or hinder the application of disruptive tactics.

A review of the resource allocation and how it relates with disruptive innovation indicates that when resources are not put aside for creativity due to structured routines containing evaluation and implementation of emerging disruptive projects, it becomes difficult for a firm to have change at all. The reliance on routine in terms of allocation of funds and trust in conventional technologies, products or research processes hinders innovation. The financial resources of the company are competed for between Essendon Emulsifiers and Enzyme Tech subsidiaries, and they are kept in the stock exchange. The two subsidiaries compete against each other instead of competing with other external busies and the board loves that. This situation communicates a great challenge to disruptive innovations as it means at no time can the company set aside adequate funds for the disruptive innovations.

It is recommendable that the management of the company puts aside funds for the two subsidiaries and such funds are particularly meant for disruptive strategies. Once the budget has such a kitty, then processes will always go through and help the firm to better its situation when competition seems stiff for them.

In terms of human resource, Essendon Food Solutions has ensured they engage people with knowledge in microbiology so that they help in working towards the right direction. However, such a strategy might hinder disruptive innovations because such individuals are focused towards knowledge alone. Apart from hiring high achievers it is important for EFS to consider people with diverse knowledge in various aspects of business management. The workers should be given autonomy just as the managers have and they will be free to make major contributions in the organization, discover gaps, and opportunities unlike when they know decisions will never be made from them. The pure training sessions within the company alone are not enough to help an individual have skills and risk-taking interest. It should be necessary that the firm hires high risk-taking individuals who have served elsewhere so that they lead in the process of discovering and implementing disruptive innovative schemes in this firm.

Besides within the human resource, there are managers and employees who contribute towards the competence or incompetence of disruptive innovations. If senior managers do not understand what disruptive innovations bring to the company because of being so much involved in the current situation of past ideologies, then innovations cannot be accepted. This would be as a result of such managers having been trained in conventional business processes, hence they feel products, technologies, and processes within the company are perfect and well defined. It is also possible for middle managers to consider allocation of resources towards sustainability of ancient processes than new ones due to the trust they have in them. The founders and professional managers of a company might also avoid innovations because they are confident in processes that were set long ago by a company (Denning, 2005). The autonomy of the workforce enhances easy implementation of disruptive innovation in any given firm that when it is missing. In this organization the workforce is not free to make any decisions or directly be involved in matters of creating new ideas. Besides, a supplementary team at the corporate level is necessary to take responsibility of collection of disruptive innovation ideas so that suitable mechanisms are implemented in an organization. The absence of such a team means that a firm cannot have any success in matters pertaining effective initiation of disruptive innovations.

It is fundamental that this company transforms the way the human resource operate and lets them freely engage in decision making as long as it is checked and seems reasonable. Furthermore, there is need for a supplementary team at the corporate level of Essendon Food Solutions and such a team will serve in the collection of ideas pertaining the adoption and implementation of disruptive innovation aspects. It is also fundamental that the organization adopts formula-based incentives and short-term based plans for principal executives who risk and bring about disruptive innovation ideas that are functional for the company (Govindarajan and Kopalle 2006). Managers of the company should also begin acquiring training from external organizations or other sources so that they do not only rely on conventional strategies. Still, external expertise from frustrated scientists or engineers is imperative in bringing to the company talents for they are often good source of disruptive innovations.

Through culture people are coordinated and controlled on how to conduct themselves and also generate ideas or even present them. Disruptive innovations tend to tamper with a culture. Some organizations have cultures with support change while others block it. When the culture of an organization holds on to the rigid or conventional practices, it is quite hard for a company to have successful disruptive innovations this is because such strategies always bring change. Nevertheless, a company with a transformative or flexible culture can easily adapt and embrace the disruptive innovation, hence support its application, creativity, risk-taking and other related substantial and timely changes. A company that readily prepares for and learns institute organizational changes while unlearning the deeply engrained values which restrict change are always steadfast in utilizing disruptive innovations in their business operation.

At Essendon Food Solutions, there is a rigid organizational culture in which the workforce cannot offer any creative ideas. There is restriction on what to change and the board believes in the traditional mechanisms of training, promotion, and operation. There are no incentives which would encourage one to come up with disruptive ideas. In fact, new ideologies are frowned upon. It is recommendable that with the stiff competition they are now facing and the waning market, short term ideologies, new ways of training, operating, product generation, and promotion are established so as to encourage usage or disruptive innovation.

In the organizational culture of Essendon Food Solutions (EFS), there has been insistence on giving all the dividends to the stakeholders without using part of that for Research and development that could enhance disruptive innovations. At Enzyme tech, the workforce is old even though renowned for developing varied applications over years in the company. The center conducts a lot of research and development through which they pioneer numerous enzyme applications in the food industry. However, recently there has been an observed drop in research and development as various global business rivals make great inroads into the traditional customers of the company. The reason behind such a situation is that the organizational culture does not permit the change in how to acquire information on possible products that customers will need in the future or now. Due to the bureaucratic know-it-all process in which the staff do not agree to visit clients and work with them, hence they work from Adelaide all the time. Such a culture hinders the disruptive strategies because the company cannot learn ahead what the clients might want now or even in future.

According to Kawamoto & Spers (2019) organizational structure deals with the size of the company, the number of its business units and how successful disruptive innovation can be implemented therein. R & D effectiveness is the determining factor of innovative research and it tends to be more effective or productive for small companies as compared to large ones. The organizational structure implies that when a firm is large then it might have narrow possibilities of successfully or efficaciously developing and implementing disruptive innovation strategies. On the other hand, smaller firms have a high likelihood of taking up disruptive innovation and using it to better their business because it is easy to introduce new products there. Still, there is an argument that when a company consolidates its small business units then redundant expenses are eliminated and handling new innovations becomes cheap.

From a review of its organizational structure, of Essendon Food Solutions (EFS) there are 800 people, every subsidiary is managed by a General Manager who report to the overall CEO of the mother company. Only the General Managers control the business unit on issues pertaining appraisal of projects and selection of the same. Such a consolidation process eases the expenses the company might incur in bringing in new ideas, but it makes it difficult to adopt the ideas because of the inflexibility in decision making and low excitement and seriousness of taking in new decisions or opportunities.

It is suitable that the decisions and management does not maintain the top down strategy anymore but rather acknowledges the contributions of everyone in the company. The adjustment of the culture is required here or the transition of the company’s architectural independence. As proposed by Demircioglu (2016) the setting up of autonomous organizations is a potential tool of incumbent leaders as it results in the success of disruption and unfretted freedom to adopt the new changes , use resources, and manage both radical and incremental Innovations for significant performance and improvement of customer needs and satisfaction level. That way, the company will acquire diverse issues and learn a lot of aspects in the operation of the business, demands of the customers and trends in the market , hence adjust to the future world or overwhelm the competing firms against it.

To be safe, therefore, large organizations should modify the business structure for flexibility to be feasible and that can only happen where small business units are established hence enabling decision makers to be attracted and ready to own up emergent opportunities with seriousness. Even though Essendon Food Solutions (EFS) which was started 40 years ago is indeed a large company a fact that can affect the adoption of disruptive innovation strategies, it is still possible to capitalize on such mechanisms if the two business units will be fragmented into more divisions now that the firm operates globally. The explored market and more which are yet to be established should be explored for the success of this process.

In terms of allocation of resources, if a company only long to invest funds into what will return and they thus stick to such an evaluation, they can never think of considering disruptive innovation in their business processes. However, those firms which adapt the utilization of strategic buckets for management of sustainable as well as disruptive projects in an autonomous way do allocate adequate resources towards disruptive innovation projects (Haase, Gertsen, Johansen, & Rosenstand, 2017). It is also observed that the revenue is at least 1.6 billion USD at Essendon Food Solutions (EFS), with this kind of financial situation, it is possible for the management to budget equally for essential schemes that will help it acquire more capital and fix a certain percentage towards disruptive innovative strategies.

B. External perspective

Within the external perspective aspects such as the regulatory and economic conditions as well as commitments and relationships within the external setting and context of a firm’s operation can determine the success of adapting and benefiting from the disruptive innovation strategies. Denning (2005) argues that the commitments which are reflected in the investor or analyst’s expectations, public goals or promised and current relationships with supplier and providers tend to lock a firm from disruptive innovations.

Investors and analysts play a critical role of building expectations that serve towards molding commitments towards supply and resource provision in the existing relationships. It is critical that any firm evaluates its possible impact on the innovative capacity of a venture before engaging in a commitment . A company with great technological, social, and legal uncertainty takes up reorientation or quantum innovation process than those with certainties. So far, Essendon Food Solutions’ pursuit is to reach out and to consistently make Enzyme products while exporting products to another world. However, they long to maintain Australian customers. It means therefore that their disruptive tactics of relying of distributers are skillfully manage the expectations of the company, and its management. That will mean the marketing and sales executive team works in collaboration with research and development team and distributors in global identified markets so that there is a strong focus towards the desired goals.

On the other hand, regulations and cultures of the market of operation point could hinder the establishing and sustaining disruptive innovation strategies especially when they work against entrepreneurship. Besides, entrepreneurial culture and the economic conditions of a market can hinder or support disruptive innovation process. It seems that Vietnam, Indonesia and China already have an opening for EFS where they could start their disruptive innovation ventures.

It is also possible for the financial systems to fail to sufficiently support development and application of disruptive ideas. In terms of finance the working out on the revenue earned and adjustment of dividends for stakeholders could be adequate to supply the disruptive processes , hence in the long run greater revenue could be acquired.

From the external perspective in the export market situation where distributers are involved for expansion to the international markets away from Australia and the already established Indonesia and China, there would be need for a technical team of sales executives who can handle international customers and visit them. It is essential that for now that the company uses the opportunity they have got in Indonesia and China to work out on disruptive tactics against their competitors. They should try out such tactics after studying well regulations and policies in the target regions and states so that they do not hit a hitch. In this case , it is a time for the company to turn around and have their field staff and R & D teams get as close to the customers as possible so as to know their needs and even predict future desires.

C. Marketing perspective

In the marketing perspective, based on how a firm finds emergent markets and comprehends potential needs that the customer has, disruptive mechanisms could be a possibility or failure. In particular lead-user processes, customer visit programs, and empathic designs show a lot about this.

The customer visits happen when a company organizes for interaction with the customers and that way, the firm learns a lot about the outlooks, desires, and views of the customers. It is important that managers visit customers with diverse representations and gather information that is holistic about a business (Christensen, Davidian, Kaisder, & Foust, 2010). At Essendon Food Solutions, the R & D team insists on working from their research center a factor that is an undoing for the disruptive innovation processes. Large companies sometimes fail to connect the advancement of new technological capacities with the changes in the market conditions or needs of the consumers , hence they avoid new disruptive innovations (Handerson, 2006). Besides, the imagination that the company can continue generating ancient products and services for the customers is choking for the strategies of disruptive innovation.

In Essendon Food Solutions, there is little focus on what is happening with the operational and customer needs. They happen to be focusing on existent customers rather than seeking new ones. Likewise, only the export managers visit external markets which is wrong it could be better that all other managers including the sales executive staff visit customers in Vietnam, Australia, China, Indonesia, and any other markets of interest with an interest to learn marketing processes, innovative ideas, and other needs that the customers have. The R & D should move out of Adelaide, transform their know-it-all perspective and want to learn from the consumers. The varied management teams should acquire information almost at the same time so that there are no conflicts, implicit assumption, or erroneous communication between product development and marketing (Mount, 2012). In matters pertaining lead user processes, a company turns out as the pioneer adopter of new technology or products which are anticipated to receive an ultimate great usage. There should be collection of data about needs of the clients and the needs from lead users instead of from the users from are at the pinnacle of the target market. Consideration of mergers is also an attractive disruptive innovation strategy which can help Essendon Food Solutions reach its heights in the aspect because the management ill readily embrace change and new ways of making decisions.

In the market of Essendon Food Solutions, Health experts, food and nutrition professionals, and other personnel with qualifications in the field of microbiology or food specializations but from different departments are essential in determining needs of the current customers. Such a team could then work together to build a proposal of the major product lines that the company should come up with for a better competitive basis of the firm. Even though the company has almost all the workers as brainy leading university fellows with knowledge in microbiology, they could as well outsource information from other experts within the field. Essendon Food Solutions (EFS) company higher high achievers from leading universities, individuals who are more of academics but lacking a broad experience in other industries.

As for empathic design, the strategy focuses on the users and what feelings they have towards services or products they are offered with by a company. Through such designs, it is possible to establish latent needs of clients and create products that customers might not even have known they want (Mount, 2012). Presently, EFS does not have any of such tactics because of the limited conduct with the clients and they cannot successfully engage in such a process unless otherwise.

In the case of empathic design strategies, it becomes necessary for Essendon Food Solutions management to swallow their pride and transform the culture from reliance on purely the workforce who are within the firm and engage consultancy firms who serve in design matter. Besides, there should be a design team to conduct data collection on the needs of the customers while observing the customers. The research and development team too have to carry out research on the feeding habits, usage of enzymes and other related products and services so that such mechanists help in designing products the consumers need yet they are not aware that they require. That way the customers will honor and be loyal to the firm. Meanwhile, the company should target developing markets and avoid relying on the ill-equipped market response tactics that they have been using for generations.

D. Technology perspective

In the technological perspective, there are specific technological approaches that serve in disruptive innovation .

Still the company relies heavily on traditional technologies in generating the enzymes and emulsifiers because of the old team they have maintained in their company. This team has been there for about 40 years and they have just been in Adelaide and within the company premises. It is possible the methods they are using to prepare products are as old as themselves.

Emulsifiers and enzymes for food require that the company creates potentially disruptive technologies that could be more efficient, health-friendly, and highly performing for the clients. Through engaging new teams of people who have served elsewhere and checking into emergent technologies within the field, a clear-cut roadmap will lead the company into a dramatic improvement of technologies that will serve in market and business management. As suggested by Young et al. (2008) it is safe for a company to apply systematic invention tactics found in TRIZ , a technology forecasting tool that serves in scanning technological landscape for new developments and applications in the current products, products models and technology.

E. Strategic Leadership

Strategic leadership emerges when an individual’s influence extends to the entire firm through orientation, supervision, and management behaviors. Strategic thinking competency requires that leaders within a company have the cognitive ability, accumulated work experience, and extraversion. Even though introverts still do well as a leader, because of the directing of affords inwards, careful thought of everything before acting, and their excellence in observing and listening (Nijikamp, 2016).

An examination of strategic leadership at Essendon Food Solutions shows that most of the leaders there are introverts no wonder they refrain from sharing ideologies, interacting with people, they take a lot of time before engaging in aspects and taking up risks or challenges. The strategic leadership is also hindered by the content with situations and exhibitionist conduct seen in some of the managers. Considering the situation in the export markets where the marketing manager is the only individual who visited the expert markets- Vietnam, Indonesia and China, in which the Essendon Emulsifiers had products received positively shows that only the leaders are autonomous and make decisions. On the other hand, the staff are totally left out of the leadership bracket. Such a situation works against possibility of the company adoptive disruptive innovation

In terms of leadership, the management team of Essendon Food Solutions (EFS) comprising of 15 executives comprises of people aged 53 and most of them have worked for the company for so many years, attained experience at EFS before they were promoted. Almost all are educated with a Degree in microbiology regardless of the departments in which they serve. It is always expected that one learns from experience are suits in the company. The company does enhance management trainee program in which people who are hired in the company are made to go through the training and become competitive enough. Given that the hired individuals are always the best in leading universities, their cognitive ability is high, but they are more academic-oriented than broad-skilled individuals. Still, they could use their intelligence to solve problems in a better way, figure out difficulties and unstructured issues in a better manner and handle them (Razavi & Attarnezhad, 2013). Furthermore, most of the managers are experienced having worked with EFS for a long duration before they are promoted to executive levels, yet they are narrow in their experience for they have never worked in other industries.

It is time for the company to engage a mix of introverts and extroverts so that the strengths of the two leadership bring about adoption and utilization of disruptive innovation in the firm. It is also significant that EFS realizes the essence of strong executive support when venturing into innovative programs, such a situation assures the team working on new developments that the entire company is set to attain particular objectives. Once such support is offered the disruptive strategies will work for the company. Another strategy is to source for managers who have shown outstanding performance and creativity in other industries and have employees who are not only competent in the field of microbiology but other areas such as marketing, information sourcing, and many more areas.

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