Executive Summary

The report provided a detailed understanding of the innovation methods and strategies adopted by the company namely A2 Milk NZ. This report, it is analyses how the effective company recognized the innovation opportunities and implemented them in the market to accomplish the goals. The innovation opportunities and frameworks with supported and evidence through various scholarly material. It includes the 4p’s innovation space mapping model and many more models that are evaluated by the company to introduced the unique product segment like A2 protein milk in tetra packs with different flavours (A2 Milk, 2019)). It is also considered that the company evaluated the radical and incremental opportunities of innovation to gain a competitive advantage in the target market like China and Local markets to increase the feasibility of the company project. Lastly, insightful recommendations are helpful for the company to achieve the desired results in the long run.

1.     Introduction

This report provides a detailed understanding to the management of the company namely A2 Milk NZ regarding the innovation, search strategies, align with the business strategy of innovation and finally consider the innovative alternatives like radical/incremental opportunities.A2 Milk NZ is the leading 20-year dairy company that is a leader in production, distribution and selling of dairy products like protein milk i.e. A1 and A2 protein milk in the different markets like Australia, NZ, China and other countries that exports the products (A2 Milk, 2019). In this report, the author needs to identify, analyze and evaluate the innovative opportunities for the company to identify the report.

Objective

The main objective of the report is to analyze the opportunities related to innovation through different models like 4P’s and other models into particular frameworks. It measures the opportunities related to innovation on the basis of time and value. Moreover, in this report, it is also analyzed that the selected opportunities are appropriate and feasible for adaption. The overall report presents a detailed analysis of contemporary analysis of innovation strategies in the dairy industry. It also provides a detailed analysis of innovation and searching strategies and sources that gives the idea to the company related to the radical and incremental opportunities for the management to select one of them.

1. Review of Contemporary Innovation

1.1 Sources of Innovation

A2 Milk Company is the leading organization that creates social change through innovation by slowly formulating the concepts and involving others in a transformation bundle. It scales to different regions in the world. The new phase identified that the transforming the environment and then operate in a market as the market leader for the next stage. There are various sources of innovation but some are described in the below diagram.

Source: (Volberda, et al., 2013)

As per the above sources of the innovation mentioned A2 milk consider the sources below

1. Shocks to the system
2. Need to pull innovation
3. Explore future alternatives and different possibilities

The main reason for the A2 milk constant Endeavour to spend time and resources on research and development. In the past recent years, the company has taken major steps in the area of product innovation like change in the quality of milk and dairy products through advanced technology. For example, the products of the company are free from A1 protein. The products of dairy should be made only from A2 protein. For that, the company utilizes the appropriate people and appropriate cows for the particular quality. In this manner, the company ties up with the leading dairy companies and different health experts to sell the A2 protein milk that is good for the consumers and many people who easily digest the milk. The company produces and acquires milk that does not contain beta-casein proteins i.e. called A1 and A2 (A2 Milk, 2019). As per the analysis of the armlet trend and growing demand for A2 protein milk in Australia and other countries the company sources the milk from the cows that produce naturally A2 milk without any discomfort. In this regard the company partnership with farmers that identify cows who produce only A2 beta-casein protein and then milk them separately.

4P’s innovation space mapping

As per the views of Nambisan, et al., (2017) indicates the four dimensions of space innovation to undertake changes, the modifications in the products and services are categorized under product innovation while the method that the changes are shaped and offered is identified as the process innovation. Moreover, innovation related to the position stated the differences in the context whereas paradigm innovation is generated from mental modelling. The four factors are effectively discussed in the below figure related to the contemporary revolution in the dairy industry.

Source: (Leonidou, et al., 2018)

1.2 Search Strategies

A2 milk majorly adapts or involve in ‘Exploit’ search strategies that main purpose is to target the middle, upper-middle and rich class consumers mainly the individuals with the age group of 5-60 years. The market of the company is wide like majorly the old persons and kids who can use their milk products mainly. So these are the major consumers for the company that needs to exploit by the company at the forefront level. In the case of A2 milk to look beyond the frontier, they need to address the question of Why (based upon the 5 dimensions structure). The good reason behind this is the global phenomena regarding changes in the social trends of the consumers regarding their health conditions. People are more aware of health conditions and consume quality products. So in this regard, the company analyzes the market trends and introduces the innovations in the product that cater for the needs of the consumers as per changing scenario (Dereli, 2015). Another evident abundance of resources is the problem for innovators as that presents no opportunity to explore or exploit. Similarly, the below diagram is helpful to analyze the co-relation between abundance, social capital, resources scarcity and innovations.

Source: (Tidd & Bessant, 2018)

As per the research of Mergel, (2016) indicates the issues related to obesity, indigestion and other bones problems in old man and children that does not digest the protein milk significantly affects their liver. The main key point to look at the past history of a company is related to innovation is readiness for innovating. The team of leadership, strong capabilities of research and vision to match innovation hunger. The main challenge that is analyzed in the dairy industry innovations are the high competition and every industry disseminates the innovations. It is pretty slow. Thus A2 milk may need to consider the phase of implementation of any innovation and whether they reflect the strategy of business at that period of time. So in this regard, A2 company in the dairy industry is always ahead to analyzed the current trends or issues and reinvent things.

Incremental and radical innovation

The innovation that exists at any place is related to incremental or radical innovation. The things will be better is considered as incremental innovation and doing something entirely different is known as radical innovation. The introduction of different tetra packs and flavoured milk in different variants through processed methods is an example of the radical change that transformed the entire milk sales and product transformation to capture the major market share. In this type of radical innovation, it is risky and the idea is completely unfamiliar to the world. Moreover, this will provide a high return and a huge market share in the long run (Horn & Brem, 2013). As the radical change created the monopoly market for the dairy company that will generate the cash cows until the industry is competing with any rivalry in the industry.

The needs of the innovation are generated through analyzing the needs of the external market related to the products and services. It can be working two different ways like knowledge push where the possibilities are identified and offered by the market. Secondly, the demand-pull where the opportunities are analyzed based on the current needs of the market. Second is the demand-pull where the opportunities are analyzed based on the current needs of the market.

Innovation management

The term innovation indicates the terms of scale, patterns and industry that makes it difficult to manage. In this regard, a formal management strategy is important for the successful implementation of innovation alternatives. The model of innovation consists of four different stages that are used by the company generally to make innovations in the products services and processes.

Source: (Brexendorf, et al., 2015)

In the above diagram, the company adapts the process of innovation at the workplace through systematic steps. The first step, the searching for options or analyzing the opportunities for innovation in the market to increase its competitiveness level. Secondly, it is identified that reason to make innovation in the process or product or services in the long run. Thirdly, it is important for the company to analyze the methods or techniques to implement the innovation in the company to accomplish the goals in the long and short run. Lastly, it is identified that the benefits from innovative results in the process is helpful for the company to achieve desired results. In the context of A2 milk company, the company search the alternatives and need for innovation in products through analyzing the current external market factors that majorly affect the competitiveness and growth in the long run (Kalay & Gary, 2015). After that, the company makes the strategies and adopts alternatives like partnerships with farmers and many small and big dairies to get the unique A2 protein milk that is beneficial for their target customers.

2. Innovation Opportunities for A2 Milk

2.1 Innovation search strategy

Dimensions for search strategy to identify both types of innovations and then build on to

The author identifies the basic principles of innovation searching and then makes an effective plan to implement the innovation strategy in the company. In the context of A2 Milk NZ, it is analyzed that the company effectively innovate the products in the dairy segment in the past recent years to remain competitive in the long run. For example, the company introduced the tetra milk packs in different flavours in order to target the big market segment that includes men, women, children and aged people who can consume the milk as per the composition, dietary requirements and health parameters. This strategy of the company is related to exploit strategy and the company search this strategy through using the framework like Why dimension of the five-dimensional framework. i.e. Who, Why, When, What and How. The main reasons behind the innovation within the core strengths also lie in the Core Horizon framework, Adjacent and transformational realms where the opportunities are related to the time and competencies of the company. The innovation related to core stated that the closest to what the company does best while transform being innovating besides its frontier (Aas, et al., 2015). A2 milk exploits the product line currently in a strategic manner that will help the company to meet the demand of the market in the long run. It is important for the company to analyze the market well through Ansoff’s Matrix model will be beneficial for the company to analyze whether the company is capable to expand its operations in the new markets.

Source: (Nagano, et al., 2014)

 As per the above analysis of the matrix, A2 Milk may select the market penetration in its existing market and analyze its supply chain and channels of distribution or development of the new market through exploration besides the frontier or make new products that come under the area of WHAT category or select to diversify its line of product. While answering or recognizing the area of WHY dimension, the company needs to select the WHAT category which includes product/process/position/paradigm and then put on time-based metrics to innovate the things. The strategy of the business is related to WHEN factor and selects the team like R and D would start looks for the opportunities of innovation i.e. WHO and when all fits together and effective planning to start the process, select the techniques and implement in the process that is related to HOW factor. Similarly, one potential target market for the company to sell A2 protein Milk and tetra pack milk is in the UK where the ageing population and infants population rates are high. The study examined that one out of every thirty-six people is suffering from health issues in old age people or children like bone problems, digestive systems and obesity that increases the rate of mortality in the future.

Similarly, the formulae of A2 protein milk are less in protein and good for digestion for infants also. In this regard, the profitability of the milk is not recorded good only in China market but also creates more demand in other Asian countries. It is an opportunity for the company to get radical and incremental innovation in the product to meet the market needs in the long run. As per the report, the company’s shares up by 26% on an all-time high as revenue from direct sales in China more than tripled that is benefited to the company where milk powder does not contain the A1 casein protein. A2 milk is digested easily and healthier than the other cow’s in the market. Milk is a good source of protein that consists of 8gms per 8-ounce (oz) glass. The major proteins in milk are casein and whey. Casein accounts that 80% of the protein in milk. Similarly, other types of casein are known as beta-casein. In this Beta-casein it is analyzed that 30% of the protein in cow’s milk.A1 and A2 are the two variants of beta-casein (A2 Milk, 2019)). In this manner, the company also introduced the tetra packs in flavoured milk in different quantities like 100ml to 1000 ml that contains 5 different flavours to attract the target market.

2.2 Incremental innovation opportunity

The opportunity for the company related to the incremental innovation in the two countries like NZ and China. A product like A2 milk protein provides the opportunity to the company to provide healthy solutions and alternatives for the individuals who are suffering from the diseases like obesity, gastro and bones issues. It is identified from the company study on the market like consumption of A1 protein is not suitable for individuals who suffer from health issues. The reason that an individual consumes A1 protein milk the protein is digested under small protein. It produces a small peptide known as beta casomorphin-7 (BCM-7). The intestine absorbs BCM-7, and it passed into the blood. Doctors linked BCM-7 to stomach discomfort and symptoms similar to the people who had the problem of lactose intolerance. So in this regard the company focus on the new innovation opportunity i.e. A2 protein milk that is better than human breast milk and milk from sheep, buffalo and goat (Ratten, 2017). So in this regard, the company focuses on those cows that produced only A2 protein milk. The demand for A2 milk is high and the supply and competition are low not very high in the industry. The company takes the first-mover advantage.

In this way, the company sees an incremental positioning opportunity in the form of the introduction of solutions for all income groups in selected markets like China and NZ. This opportunity is good for positioning healthy milk at reasonable prices at different packets with many variants that offer the value proposition. It is an incremental innovation for the company as the company already produced the A1 protein milk in the same sizes. So the positioning of A2 milk is for the customer who has health issues and like the different tastes at various quantities and prices (Klerkx & Nettle, 2013).

2.3   Radical Innovation Opportunity

It is analyzed that the demand and supply of the A2 protein milk in the countries are arising day by day due to health issues and the Covid-19 pandemic. So in this regard, it is beneficial for the A2 Milk NZ can use the search strategy that is going beyond the frontier or think beyond the imagination, if A2 milk organization provides the products to the target consumers that are completely healthy under competitive prices that is ready to acceptable by the large chunk of consumers can help to build the steady business pipeline. The reason behind the introduction of the product into the target markets is already discussed in the above section (Botha, et al., 2014). The management team and board can use toolkits that are available under looking beyond the lamp post out which is not useful for user mapping for disruptive innovation would be useful for a particular scenario. Below given figure describes the Zone i.e. Zone 3:

Source: (Turner, et al., 2016)

As per the analysis of the above diagram it is identified that Zone 3 is appropriate for the company to sell the product in a unique manner that consists of different elements and involve various methods to search and explore where the radical paradigm opportunities exist. It is difficult for the company to compete in the global market with this product strategy and prices. But the company foundation is strong and the ideas behind the strategy support the company to sale the product that radical shift in paradigm in the business model is known as reframing and changing the perspective to do things (Vereijssen, et al., 2017). The market leaders like Fonterra in the market already dominate the market but still, the innovative strategy and knowledge helps the A2 Milk NZ to offer the value proposition to the market.

 3. Innovation opportunity evaluation

It criteria of innovation evaluation can be used through the below table that measures the incremental and radical opportunities through key criteria like production, regulatory, legal and financial criteria.

			An incremental opportunity like A2 protein milk in existing packaging		A radical opportunity like A2 protein milk in different tetra packs
Criteria of evaluation	Sub-areas	Feasibility	Output		Feasibility	Output
Production	Capacity to manufacture the product	Medium	Similar to alternatives		Medium	Similar to alternatives
	Cost savings	High	High as company tested the product		Low	Cost may be high due to different packaging and process
	Requirements of equipment and facilities	Medium	Similar to alternatives		Medium	Change the process and operations for different tetra products
	Raw material availability	High	Similar to alternatives		High	The company effectively established the SCM and logistics channels.
Legal and regulatory factors	Liability of main product	Low	Affects the goodwill of the product as the customer is influenced through different products in the target market.		High	The value of the company is highly influenced due to different strategies. It is valued by the consumers.
	Regulatory clearance	Low	The company can face political and regulatory issues due to the sale of different products in the market. In China, the communist government is very politically sensitive cannot pass the trade license easily due to the different product nature		High	It is easier for the company to sell the products as it resolves the health issues at lower prices than can be supported by the local traders and government.
Financial	Revenue	High	The revenue can be high as it is the different products that cater for the needs of the consumers		High	The revenue will be high as the concept of the product is unique and offers a value proposition to the market
	Investment	Medium	Expenses like marketing and promotional to position the product		Medium	To investment in different local and big companies like Fonterra and other companies to lower the investment
	ROI	Low	It is risky for the company to get good returns due to the acceptability of the product in the target market due to social factors, political and regulatory factors that affects the cash flow of the company.		Medium	Bulk sales strategy is appropriate to lower the cost and effective inventory management methods like FIFO and LIFO to reduce the level of dead stock.
	Price	Low	Low prices affect the mindset of the consumers regarding the quality issues that affect stakeholders’ choice		High	The lower price of products and the raw material is low due to lower cost. Stakeholders like investors and other board people provide healthy alternatives to the society that is considered under social aspect.

Overall evaluation

Low

Medium

Source: (Pinxterhuis, et al., 2019)

4. Recommendations

The company should implement the radical innovation opportunity that helps the company to accomplish the sales into the target market.

• The company has the good stability and resources to pursue the radical paradigm opportunity supported with 20 years in design development and production.
• It should provide healthy alternatives to children, ageing people and adults in different markets that are helpful for the company to generate good revenues.
• The company has a strong portfolio and distribution network with companies that provide the low price products to the customers at different flavours and quality can be helpful to expand its business into other countries like the UK, Asian countries that may be accepted by the regulatory, political and legal considerations before the business implement into practice(Botha, et al., 2017).
• The company should lower the profit by implementing advanced supply chain methods into the production like lean tools, FIFO and LIFO practices that reduced the costs and increased the profit margins.
• The company needs to partner with local markets and agencies to market, distribute and sell the products as per the needs of the market.

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