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Naturis is an innovative firm, whose growth is based on the exploitation of ... explore how resources are managed to promote corporate entrepreneurship ... became independent from Riso Gallo and .... that sells products that have no market .... Table 3. The contribution of resources and competencies to Naturis's competitive.
CASE STUDY Managing resources for corporate entrepreneurship: the case of Naturis by Riccardo De Vita, Salvatore Sciascia and Fernando Alberti (Entrepreneurship and Regional Development Centre – ERDC, Università Cattaneo – LIUC, Italy. E-mail: [email protected])

The Case Study section of the International Journal of Entrepreneurship and Innovation serves two purposes. First, the case studies presented are concerned with problematical issues that are pertinent to students of entrepreneurship. Thus they constitute appropriate teaching and learning vehicles on a variety of postgraduate and undergraduate programmes. Each case study is accompanied by a set of guidelines for the use of tutors. Second, it is envisaged that those engaged in entrepreneurial activities will find the cases both interesting and useful. The case in this issue is that of Naturis. Entrepreneurship is a resourcebased process. Through the continuous recombination of existing resources, companies can promote innovation to build their competitive advantage. Naturis is an innovative firm, whose growth is based on the exploitation of the potential of all its resources. The teaching aim of this case study is to explore how resources are managed to promote corporate entrepreneurship and to discuss the contribution of different kinds of resources to the company’s competitive advantage.

Innovation in the food industry may sound like a difficult feat. Developing new products is difficult, since all the production processes have been known for centuries. In addition, increasingly more consumers are concerned about organic food and its impact on health; these people may perceive any innovation as a sort of manipulation. In spite of these facts, there is a small Italian enterprise that has reached European leadership in the dehydrated rice market thanks to continuous innovation: Naturis.

The history of Naturis The company started in 1988, when Naturis was founded as a joint venture between Puccinelli, a small producer of dehydrated vegetables, and F&P Riso

Gallo, the Italian market leader in the production of rice. Riso Gallo is a well known 100-year-old family business, controlled by the Preve family. The first two years of the life of Naturis were dedicated to the development of the plant and machinery for production: in fact, no-one in Italy was capable of building plant for dehydration processes. In 1991, the entire ownership of Naturis was acquired by Riso Gallo. Between 1990 and 1995, Naturis’s activity was characterized by the production of basic dehydrated rice, sold to companies using rice as an ingredient for their dry products. They turned to Naturis to dehydrate their rice to make it quicker to cook. In 1996, the company became independent from Riso Gallo and was sold to Cesare Preve, the member of

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the family who had first conceived the idea of Naturis. Huge development of the Naturis product portfolio and sales occurred between 1995 and 1998; this growth led Naturis to become the European market leader in its segment. After such a rapid growth, new plants were built to meet the increased demand. In 1999, pre-cooked rice flour was launched as a new product; the offer was focused on biscuit manufacturers and bakery product manufacturers. The same year represented a watershed for the company: the discovery of the fact that dehydrated rice could be ready to eat without cooking, after just a few hours of soaking in water, led the company to reposition its product and to present it not as a fast-cooking rice, but as a pre-cooked rice. This intuition expanded the potential market for Naturis rice; as a consequence, rice could be sold to consumers and manufacturers who had difficulties in cooking rice. This allowed the company gradually to include new customers in its portfolio, starting in 2001 with snack bars, which were barred from cooking by Italian law. In 2002, Naturis started to supply the producers of pasteurized and sterilized products, who wanted to include rice among the main ingredients of their offerings. Naturis was able to prepare the right rice for that purpose, since its rice could be cooked during the pasteurization and sterilization processes. The ‘individually quick frozen’ (IQF) rice manufacturers became Naturis customers for the same reasons: only Naturis was able to develop rice suitable for cooking, treating and freezing, while maintaining its taste and quality. In the same year, the company decided to sell its rice directly to final consumers, by introducing Risò, a breakthrough innovation in the industry. It was the first time Naturis had introduced an innovation for the final market. However, business-to-business (B2B) relationships were still predominant in the company’s turnover. In 2003, the production plants were rebuilt to sustain this development. Today the company aims at identifying new uses for its product. Naturis is carrying out a project to use rice cooking water (currently discarded) as a raw material for starch derivatives. It is also evaluating the possibility of entering the

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Case study cosmetics sector, using rice flour for skin-care preparations.

The production process The company’s production process can be described easily: once bought and stored, the rice is steamed, cooked and dried. These three phases compose the dehydration process. The rice can then be sold directly, ground into meal (ground rice) or prepared for risottos. There is nothing innovative in dehydrating rice; what makes this company innovative is the way the product is marketed. Naturis is constantly looking out for potential new uses of its product, making and maintaining contacts with the main players in the food industry in order to spot the possibility of using dehydrated rice, by continuously recombining it with other ingredients. Naturis rice is bought by companies producing ‘easy-to-cook’ food. These companies (eg ‘dry mix’, pasteurized, sterilized or frozen food and dairy producers) need to combine cooked rice with other ingredients. Avoiding cooking makes the production process of these firms less complicated. Naturis rice also meets the needs of those individuals who want to save time in preparing dishes (catering companies, hotels, restaurants). The company’s newest product, Risò, was offered to the final consumer as a faster solution for preparing rice dishes and for all those people who face extreme living conditions or periods of isolation (sailors, travellers, climbers). Finally, Naturis’s rice-based flour was the first pre-cooked rice flour, and this allowed it to be used as an ingredient in the bakery and biscuit industry. It is the flexibility of Naturis rice that makes the majority of customers’ products that use it innovative. This is the case with filled rice, rice-based food in cans, rice-based desserts and rice-based dry mixes: all products whose launch on the consumer market was made possible thanks to the properties of Naturis rice. Moreover, in many cases Naturis rice made the production process of its customers innovative; this is the case with rice-based biscuits and frozen food, pasteurized and sterilized food. From this perspective, it is of great importance to identify the areas in which

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the value perceived by the customer can be improved. As stated by the Chairman of Naturis, ‘Entrepreneurship starts from a need: find a need and you will find a business’ (Cesare Preve, Chairman of Naturis).

The management team The common trait among the members of the management team of Naturis is a wide experience of the rice industry. Each one of them, however, has a set of specific and complementary skills. The Chairman, Cesare Preve, is still on the board of directors of Riso Gallo; he has also been the president of both the European and the Italian Association of Rice Producers. The Managing Director graduated in chemical disciplines and has worked for different companies, selling raw materials in B2B markets. He uses his know-how in chemistry to find new businesses and uses for the products, also on the basis of long experience in the company: ‘I have been everywhere, I have done everything’ (Francesco Rocchi, Managing Director of Naturis.) The R&D manager previously worked for 12 years for Arroz Gallo, the Argentinean company of the F&P group. She is primarily concerned with designing rice with new physical characteristics. The production manager has been involved in various different projects with the most important Italian rice-producing companies. In Naturis, before being in charge of production, he was responsible for R&D activities; later he was involved in the creation of new production machinery. Backed by this team of experts, the role of the Chairman, Cesare Preve, is continuously to generate new ideas. He is the leader of the firm, not only as his formal position, but also because he embodies the mission of the firm: ‘The word “impossible” does not exist. The main thing is knowing what to look for. Everyone in our company knows that we look for innovation. We have to communicate it to

everybody in the company, to motivate them and listen to what they say. When everybody in the organization knows what the company is seeking, everybody helps the organization in finding it’ (Cesare Preve, Chairman of Naturis). This continuous effort in stimulating innovation seems to permeate the whole company: ‘In Naturis there are two laboratories: the first is the R&D department, the second is Naturis itself’ (Claudio Carriere, Production Manager of Naturis). Throughout the whole organization, in fact, there is an attitude towards change, also stimulated by the human resource management philosophy: ‘We continuously improve the attitudes towards change of our personnel: people have to be more open to change. I only ask them to do the same things in different ways everyday: to change continuously to find better solutions’ (Francesco Rocchi, Managing Director of Naturis).

The organizational structure The need for innovation calls for an organic structure: flexibility and informality permeate the functioning of the firm. Fixed intra-organizational boundaries are banned and individual initiatives are tolerated and promoted. The separation between the roles and responsibilities of each person is flexible. To overcome hierarchical and organizational barriers, regular interfunctional meetings are held. In these meetings, the marketing department is called on to describe the evolution of the different national markets to the firm’s other divisions. Moreover, meetings are organized every time someone in the firm has a new idea or thinks of new products or new potential uses for existing products. The continuous interaction among different offices is stimulated by Cesare Preve and his aim of involving the greatest number of employees in the development of the firm.

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Case study Naturis is oriented towards the continuous monitoring of everything that is external and can influence its operations. First of all, this is done through the establishment of relationships with several research centres in marketing and technology. Environmental scanning is also facilitated by contacts with customers, who are involved during the design of the products. It is also important to underline how wide the variety of Naturis customers is: they include companies operating in the food industry, snack bars and final consumers. Naturis is also about to start

selling its products to the cosmetics industry. Furthermore, these customers are located in several countries, thus helping to increase the company’s contact with the market. Via these contacts, Naturis has developed many receptors in the external environment, positioned in different phases of the value chain, thus absorbing outside information very efficiently, as is consistent with the objective of Cesare Preve: ‘We have to go and “ransack”, look everywhere and hear what people say’

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(Cesare Preve, Chairman of Naturis). The role of the company in such a complex network of relationships is to maximize the value of the information and knowledge available to create new markets: ‘We are a company made of entrepreneurs, not of managers. A company that sells products that have no market because a market for these products does not exist yet’ (Cesare Preve, Chairman).

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Case study

TEACHING NOTE 1.

Learning objectives

Entrepreneurship can be perceived as a resource-based process (Alvarez and Barney, 2002; Kazanjian, Drazin and Glynn, 2002). Entrepreneurial innovations are in fact the ‘carrying out of new combinations’ (Schumpeter, 1934, pp 65– 66) of existing resources. It is such a process of recombination that leads to the innovations on which companies can build their competitive advantage. We therefore suggest a resource-based approach to address the issues raised by the case, aiming at: •



emphasizing the contribution of different kinds of resources to the company’s competitive advantage; and investigating the managerial practices that promote corporate entrepreneurship.

This case is intended for graduate and undergraduate courses in either entrepreneurship or strategic management. No specific background in other subjects is required.

2.

Teaching suggestions

The case can be an individual exercise, but could be better used within small group discussions. We expect the case to suit a two-hour discussion, after theoretical introduction of the resource-based view of the firm. The models of Grant (2005) and of Hamel and Prahalad (1994) taken from this area of literature may represent a good framework to answer the assigned questions. Students should be asked to read the case in advance. Students could prepare answers to the questions individually or in small groups in the first 30 minutes. Afterwards, the instructor can solicit responses to the questions, using the board to record students’ opinions and focus the discussion.

their impact on competitive advantage. The following questions will help students’ reflections and can be used as a guide for the discussion:

The tables presented here can be represented on the board by the instructor as a guiding scheme for the discussion and to summarize the possible answers.

Tangible resources Physical Up-to-date production plants Intangible resources Technology Technology for dehydration processes Culture Innovation-oriented culture Human resources Skills/know-how Individual background and experience Capacity for com- Involvement of everymunication and one in promoting collaboration innovation Motivation Promotion of individual initiative

4.

Source: Personal elaboration on Grant (2005).

(a) What are the core resources and competencies of Naturis? (b) How much do these resources and competencies contribute to Naturis’s competitive advantage? (c) How are they managed? Is Naturis an entrepreneurial company?

Discussion and analysis

Question (a) To start with the case analysis, it is necessary to identify the most important resources and competencies of the company. According to Grant (2005), firm resources are classified as tangible, intangible and human. Working together, resources create organizational capabilities, in which the essence of superior performance resides. In Tables 1 and 2, the key resources and competencies held by Naturis are presented according to Grant’s (2005) classifications. On the basis of these taxonomies, we suggest highlighting only those resources and

Assignment questions

The case discussion will help the students in understanding the link between resources, the way they are managed and

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competencies that are crucial for Naturis (leaving aside the others). As shown in Tables 1 and 2, the company’s stock of resources and competencies is consistent with the profile of an SME. Naturis based its strategy on its human resources and on its innovative ability; given its size, it does not have financial resources, a well known brand, a developed set of corporate competencies or the power to control sales and distribution. These considerations can also explain the choice of Naturis to focus on B2B markets instead of consumer markets in which assets

Table 2. The core competencies of Naturis. Corporate functions Management information Research and development Research

Innovative new product development Fast-cycle new product development Operations Continuous improvement in operations

Flexibility and speed of response Product design

3.

Table 1. The key resources of Naturis.

Marketing Responsiveness to market trends Sales and distribution

‘In Naturis there are two laboratories: the first is the R&D department, the second is Naturis itself’’ Continuous development of product portfolio Naturis is the first to launch some products on the market ‘I only ask them to do the same things in different ways everyday: to change continuously to find better solutions’ Naturis success is rooted in its ability to adapt its product to different needs

Attention given to customers’ needs and social trends (eg less time devoted to cooking)

Source: Personal elaboration on Grant (2005).

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Case study Table 3. The contribution of resources and competencies to Naturis’s competitive advantage. Establishment: Preservation: • Scarcity • Durability • Relevance • Transferability • Replicability

Plant Technology Culture Know-how Capacity for communication Motivation Research Innovative new product development Fast-cycle new product development Efficiency Improvements in operations Flexibility Responsiveness to market trends

Appropriation: • Property rights • Relative bargaining power • Embeddedness

High High Medium High Low Low High High

Low Low Medium Medium

Low Low

Medium Medium

Medium

High

Medium

Medium

Low Medium High High

Low Low

Source: Personal elaboration on Grant (2005).

Table 4. The aspects of resource leverage in Naturis. Concentrating resources Converging Company mission: ‘Everyone in our company knows that we look for innovation. We have to communicate it to the everybody in the company’ Targeting Focus on customer-perceived value: ‘Entrepreneurship starts from a need: find a need and you will find a business’ Accumulating resources Learning 1. Great attention devoted to each individual experience and opinion: ‘ [We have to] listen to what they [everybody in the company] say.’ 2. Naturis competencies come from different sources: (a) Know-how and previous experience • in dehydrating process from Puccinelli • in rice production from Riso Gallo • individual experience and background (b) Competence and knowledge acquired from the external environment • continuous market scanning • collaboration with customers, research centres, universities (c) Competence autonomously generated • construction of the production plants • continuous internal experimentation Borrowing Naturis’s network of relationships is broad and active. There is great collaboration with different research centres, universities and customers Complementing resources Blending This is probably the distinctive ability of Naturis. 1. Frequent inter-functional meetings for knowledge sharing 2. Flexibility of Naturis rice (continuously combined with different ingredients and elements) 3. Application of Naturis rice in new industries to develop new products, eg from pre-cooked rice to pre-cooked rice flour, to rice-flour-based cosmetics Conserving resources Recycling 1. Extension of product portfolio based on pre-cooked rice 2. Search for possible uses of cooking water Recovering resources Expediting Investment in machinery to afford a faster development

Source: Personal elaboration on Hamel and Prahalad (1994).

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such as brand and control over distribution are crucial.

Question (b) There are three factors that determine the profits that firms can obtain from their resources and capabilities (Grant, 2005, p 150): ‘their abilities to establish a competitive advantage, to sustain that competitive advantage, and to appropriate the returns to that competitive advantage’. These factors are linked to a number of resource characteristics. Table 3 summarizes these features and evaluates the contribution of the resources and competencies identified in question (a) to Naturis’s competitive advantage. Table 3 clearly highlights the situation in which Naturis operates. Its set of resources and capabilities allows the company to launch new products continuously and to differentiate itself from its competitors. Naturis, however, faces some problems in the preservation and appropriation of its competitive advantage. In fact, there are no barriers to protect the company’s resources: plant and machinery can also be acquired by other companies, and new products can be imitated by other players. The only competencies and resources that contribute to the appropriation of competitive advantage are the ones that are deeply embedded in it. Culture, know-how and in particular the competencies related to new product development are the distinctive features of the company that contribute most to competitive advantage defence and exploitation.

Question (c) According to Hamel and Prahalad (1994), company success does not depend on its stock of resources, but on its ability to leverage resources. In other words, the issue for many managers is not the lack of resources, but the exploitation of all their value. Resource leverage can be achieved by focusing on the way that five processes are carried out in the company, ie by effectively ‘concentrating’, ‘accumulating’, ‘complementing’, ‘conserving’ and ‘recovering’ resources. Within each of these broad categories, scholars identify specific strategies to leverage resources. Thus, it is possible to describe which of these processes are active in Naturis. Table 4 summarizes the components of

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Case study resource leverage and the elements in the case that signal their presence in Naturis. Here also, we suggest focusing only on those elements activated by Naturis. The table clearly shows the importance Naturis gives to internal resources. The company and thus the whole industry are continuously rejuvenated through the recombination and exploitation of resources that sustain its orientation towards corporate entrepreneurship. Strategy is not shaped by industry or market factors, but on the basis of the unexploited value of existing resources: ‘We are a company made of entrepreneurs, not of managers. A company that sells products that have no market, because a market for these products does not exist yet’ (Cesare Preve, Chairman of Naturis). Moreover, Table 4 highlights the relevance of specific organizational

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arrangements to sustain innovation. The original entrepreneurial proposition of Cesare Preve is continuously expanded thanks to the institutionalization of the employees’ involvement in the company. Consistent with previous studies (Blumentritt, Kickul and Gundry, 2005), the case suggests that employee involvement enhances the relationship between the entrepreneurial personality and venture performance, as well as the relationship between the entrepreneurial personality and innovation. Such participation contributed to facing the challenge of moving beyond the start-up phase and to sustaining the company’s continuous growth.

References Alvarez, S. A., and Barney, J. B (2002), ‘Resource-based theory and the entrepreneurial firm’, in Hitt, M., Ireland, D., Camp, M., and Sexton, D., eds, Strategic Entrepreneurship: Creating a

New Mindset, Blackwell Publishing, Oxford. Blumentritt, T., Kickul, J., and Gundry, L. K. (2005), ‘Building an inclusive entrepreneurial culture: effects of employee involvement on venture performance and innovation’, The International Journal of Entrepreneurship and Innovation, Vol 6, No 2, pp 77–84. Grant, R. (2005), Contemporary Strategy Analysis, 5 ed, Blackwell Publishing, Oxford. Hamel, G., and Prahalad, C. K. (1994), Competing For the Future, Harvard Business School Press, Boston, MA. Hitt, M., Ireland, D., Camp, M., and Sexton D., eds (2002), Strategic Entrepreneurship: Creating a New Mindset, Blackwell Publishing, Oxford. Kazanjian, R. K., Drazin, R., and Glynn, M. A. (2002), ‘Implementing strategies for corporate entrepreneurship: a knowledge-based perspective’, in Hitt, M., Ireland, D., Camp, M., and Sexton D., eds, Strategic Entrepreneurship: Creating a New Mindset, Blackwell Publishing, Oxford. Schumpeter, J. A. (1934), The Theory of Economic Development, Harvard University Press, Cambridge, MA.

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