forest owner and innovation strategies

Miika Kajanus Savonia Polytechnic

2. Forest owner and innovation strategies


Assessing forest strategies by applying a value-focused

continuous strategy process model in a rural enterprise


Contents Background Objectives Results Conclusions


Entrepreneurship and local assets

Employment, regional income and value-added production in rural areas

Entrepreneurial development strategy leans on• Local assets• Initiativeness and creativeness of individual enterprisers

Innovations as a source of competitive advantage Innovations as a source of economic development


Sound entrepreneurship is based on

Clear choices of values Strategic insight Creativity


Need for a strategy and innovation model

There are various models helping forest owners in multiple planning situations

However, there is a lack of strategy and innovation models helping individual forest owners in their endeavor to develop innovative strategies for utilizing forest resources as part of rural enterprising


Objectives To apply Value-Focused Strategic Planning

Model (Kajanus 2001) in defining strategies for a rural enterprise

To assess forest strategies for managing “the forest business unit” in the case enterprise

To discuss the usability of the models


The structure of the strategic planning model

Framing the decision context Objective analysis Analysis of external and internal environment Identifying decision opportunities Formulating the set of decision alternatives Selecting the strategy Continuous planning concept:

• from values (objectives) into strategies• from strategies into actions


Results 1 According to the theoretical framework, four issues

and the interactions between them are emphasized in any strategic planning situation, also in rural enterprises, these being objectives, capabilities, future uncertainties and creativity.

This study resulted in indicative support for using the approach of strategy as a position in the NIPF context.

This result encourages the use and further development of internal and external analysis tools such as SWOT and portfolio planning in the strategy planning of NIPF owners


Results 2 The thesis presents a model for creating ideas and

formulating them into strategic alternatives for an enterprise.

Value–focused thinking (Keeney 1992), including clearly defining and structuring the fundamental values of an enterprise in terms of objectives and using those objectives to guide and integrate decision making, offered the main line of approach for the model.

In the rural environment, where different kinds of objectives are emphasized, this is a useful approach in the endeavor to integrate objectives in the strategy process.


Results 3 The idea creation process which is conducted in four steps by :

• (i) objectives, • (ii) environmental aspects (applying TOWS-matrix), • (iii) portfolio alternatives and finally • (iv) by integrating all of them together.

These steps provide insight into the whole business and the interactions contained there in, and for including alternatives that might otherwise go unnoticed.

The approach means enhancing value-focused thinking by, besides using the objectives, by also using other relevant factors affecting decision making in order to create alternatives before deciding.

This approach may be applied in many planning situations, where searching for innovative ideas is emphasized.


”Value-Focused Thinking”

Different kind of values are emphasized in rural environment, e.g. owning land, environmental issues, culture, social aspects...

Value-focused thinking (Keeney 1992) including clearly defining and structuring the fundamental values of an enterprise in terms of objectives, and using those objectives to guide and integrate decision making, offers the main line for the model


Value hierarchy

Profitability

Perpetuity of the

enterpriseSubsistence Meaningful

workObligation

to traditions

Return on assets

Labour productivity Solvency

Liquidity

Mean source of incomes

Productivity

Cost level

Financial synergy and subsidiary incomes

Growth

Optimal cuttings

Subsidiary incomes

Flexibility

Cost level Milk SBU

Forest SBU

Machine SBU

for Society- taxes etc.- ecological, economic and social sustainability

for Employees- salary- continuity- interesting tasks

For Owners:

Economy

from the enterprise

genetic qualityanimal healthfeeding

feedinglabourmacinery

from Milk SBU

from Forest SBU

silviculture

planning

from Machine SBU

milk qualityevenness

qualitylogistics

qualitypricecustom

for Customers


Strategic alternatives Concentrating on Forestry SBU

• No change in machine contracting. Financing investment into the additional forest area by increasing the level of felling over the short time horizon and by dispensing with dairy production.

Intensifying Forestry SBU • No change in dairy production and machine contracting. Manufacturing and marketing of

prefabricated wooden buildings in co–operation with other enterprises and making use of one's own raw material.

Machine Contracting • Dispensing with dairy production, concentrating on machine contracting. No change in forestry

SBU to minimize risk. Special Cheese to Helsinki

• Dispensing with machine contracting and forestry. Concentrating on dairy production, producing one's own special cheese and marketing it in co–operation with a restaurant in the Helsinki area.

Traditional Dairy Production • Dispensing with machine contracting and forestry. Concentrating on dairy production.


Strategy selection by Even-Swaps method

Alternatives

Objectives Concentr.on Forestry

IntensifyingForestry

MachineContracting

CheeseProduct.

DairyProduct.

EVA(weighted), EUR/year 3 000 300 4 100 2 600 5 000

Meaningful work,index value

13 8 23 18 13

Obligations to keepup traditions, indexvalue

17 13 27 27 25


The choices of directionMission “From fields and forests, with sustainable and ethic production,

creating welfare, respecting the quality of life and traditions”

Vision “Strong, basing on three economic units, solid and profitable

enterprise” “We are known about ethic and responsible actions, which

takes into account the environment and society”


From objectives into strategies, an example

Objective: Profitability (ROI 5 %) Intensive silviculture, objective is to gain 350

m3 removals per year Timing the cuttings in order to gain financial

synergy for the enterprise Optimizing the forest taxation in long time

period


From strategies into actions, an example

Strategy: Intensive silviculture, objective is to gain 350 m3 removals per year

Actions:- Preparations of final cutting areas before cuttings;- Regeneration in a year after final felling; - Young stands treatments in time; - Thinnings in time - Renovation ditching with thinnings; - Ash fertilization in appropriate stands;


Action table

Action Person in Resources Schedule Monitoring charge

________________________________________________A1 xx 1 month 5/2001 work done

A2 xx 2 months Forest plan 350 m3________________________________________________


Conclusions

In the case enterprise, the model yielded desired results The entrepreneurs identified the strategy process

laborious The entrepreneurs learnt strategic insight when going

through the process The process provided new point of views for managing

the enterprise In private forestry, an entrepreneurial strategy planning

model is needed, among other planning models Private forestry can learn from value-focused thinking as

well as from strategic thinking


References Keeney, R. 1992. Value–Focused thinking: A path to creative decision–making.

Cambridge, Massachusetts: Harvard University Press. 400 p. Kurttila,M., Pesonen, M., Kangas, J., Kajanus, M., 2000. Utilizing the analytic

hierarchy process (AHP) in SWOT analysis - A hybrid method and its application to a forest-certification case. Forest Policy and Economics 1, 41-52.

Pesonen, M., Kurttila, M., Kangas, J., Kajanus, M., and Heinonen, P. 2000. Using A’WOT in Assessing the Priorities Among the Alternative Natural Resource Management Strategies at the Finnish Forest and Park Service. Forest Science. 47(4):534‑541.

Kangas, J., Kurttila, M., Kajanus, M. and Kangas, A. 2003 Using the S-O-S (SMAA-O in SWOT) Approach for Evaluating the Management Strategies of a Forestland Estate. Journal of Environmental Management.

Kajanus, M., Kangas, J. and Kurttila, M. 2003. The use of value focused thinking and A’WOT hybrid method in tourism management. Tourism Management 25 (2004) 499 – 506..

Leskinen, L., Leskinen, P., Kurttila, M., Kangas, J. and Kajanus, M. 2004. Adapting modern strategic decision support tools in the participatory strategy process – A case study of a forest research station. Forest Policy and Economics. In press..

forest owner and innovation strategies

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