a regional agricultural development strategy for north ... · interventions to support existing...

A Regional Agricultural Development Strategy for

North West Tasmania

A Component of a Rural Industry Research & Development Corporation Project

RIRDC PRJ-008839 Accounting for Agriculture in Place-based Frameworks for

Regional Development

Laurie Bonney Angela Castles Robyn Eversole Morgan Miles Megan Woods

October 2013

PMC6678

Text Box

Agricultural Competitiveness White Paper Submission - IP363-2 Regional Development Australia - Tasmania Submitted 17 April 2014

A Regional Agricultural Development Strategy for NW Tasmania 1

RIRDC PRJ-008839 Accounting for agriculture in place-based frameworks for regional development

CONTENTS

Tables ...................................................................................................................................................................... 2

Figures .................................................................................................................................................................... 2

Executive Summary ................................................................................................................................................ 3

1. Background ..................................................................................................................................................... 4

1.1 The Project Method ...................................................................................................................................... 4

2. Regional issues in NW Tasmania .................................................................................................................... 6

3. The economic contribution of agriculture in NW Tasmania ........................................................................... 7

4. Conceptual frameworks for the research ....................................................................................................... 8

4.1 The 7 capitals ................................................................................................................................................ 9

4.1.1 Conclusions about the ‘7 capitals’ ....................................................................................................... 16

4.2 Innovation ................................................................................................................................................... 16

4.2.1 Conclusions from the Innovation and entrepreneurship survey .................................................... 21

7. Findings about the opportunities and constraints in agriculture-related innovation ...................................... 22

4.3 The state of the region ............................................................................................................................... 27

6 Policy platforms for constructing regional advantage ....................................................................................... 27

5 Scenarios for the future of North West Region of Tasmania in 2025 ................................................................ 30

5.1 “Battling the boom and bust” ..................................................................................................................... 31

5.2 “Big agribusiness” ....................................................................................................................................... 31

5.3 “Diversity rules” .......................................................................................................................................... 33

A ‘preferred future’ for North West Tasmania ................................................................................................. 34

8. Applying the RDPM and Cooke’s (2007) policy platforms to NW Tasmania .................................................... 35

9. Conclusions ....................................................................................................................................................... 45

Appendix A: Scale sources of the agrifood value chain innovation & entrepreneurship survey (farm version) .. 46

6. References ........................................................................................................................................................ 50



TABLES

Table 1: Preliminary findings about the value reciprocity for agriculture and NW Tasmania .............................. 10

Table 2: Innovation framework with examples of potential continuous and radical innovations in NW Tasmania

.............................................................................................................................................................................. 18

Table 3: Innovation and entrepreneurship survey ............................................................................................... 20

Table 4: Findings about the opportunities, facilitators and constraints in agriculture-related innovation in NW

Tasmania ............................................................................................................................................................... 23

Table 5: Evidence of Cooke's (2007) four policy platforms operating in agriculture in the North West Region of

Tasmania ............................................................................................................................................................... 29

Table 6: Supportive actions for Scenario 3 - "Diversity Rules" based on Cooke’s (2007) policy platforms .......... 38

Table 7: Designed interventions to facilitate Scenario 3 - "Diversity Rules" based on Cooke’s (2007) policy

platforms .............................................................................................................................................................. 41

FIGURES

Figure 1: Implications of regional value chain governance for NW Region farmers ............................................ 21

Figure 2: The futures cone .................................................................................................................................... 30



EXECUTIVE SUMMARY

This Regional Agricultural Development Strategy for NW Tasmania forms part of the Rural Industry

Research and Development Corporation’s (RIRDC) project, PRJ-008839 Accounting for agriculture in

place-based frameworks for regional development. This project aims to maximise the contribution of

Agriculture to regional economies by developing a portable framework to account for the dynamic

role of agriculture over time in regional economies.

This Strategy reports the complete analysis of the data set generated by a new, three phase regional

agricultural development planning framework designed and piloted by this RIRDC Project. It

incorporates and builds on the 1st Milestone Report, an Issues Paper and the 2nd Milestone Report

which was a ‘State of the Region’ Report. It describes a place-based, systems perspective of the

contribution of agriculture to the North West Region including the economic contribution to Gross

Regional Product (GRP). The framework incorporates:

The 7 Capitals framework (Emery & Flora, 2006);

An innovation framework based on Schumpeter’s (1934) foundational definitions;

Cooke’s (2007) policy platforms for constructing regional advantage.

The implementation of this framework was based on the Regional Development Platform Methods

(RDPM) as described by McCall (2010) and included:

Development of the ‘State of the Region’ Report from:

o Interviews with 23 agribusiness executives and farmers;

o Four focus groups with 42 participants;

o An innovation and entrepreneurship survey of 11 agribusinesses and 49 farmers;

Development of the Regional Agricultural Development Strategy for NW Tasmania from

interviews with 11 key stakeholders.

The findings show that there appears to be important place-based strengths associated with the

region’s natural capital, culture of regional pride, supportive community and strong relationships.

However, there were also important weaknesses in intellectual capital, cultural conservatism and

resistance to change. In particular, there appears to be important weaknesses in the governance of

the region’s agrifood value chains and fragmented innovation. The survey indicated a predominance

of specifications-based contracting amongst NW agricultural supply chains and insufficient

communication within chains that could be constraining innovativeness and future ability to improve

competitiveness. Subsequent analysis of the status of regional policy platforms showed that there

appeared to be a lack a strategic approach to promoting the role of agriculture in NW Tasmania. The

consultation with the North West community indicated a wide range of opportunities and the

factors that could facilitate or constrain their development into the future.

Three plausible futures were developed from interview data with one preferred future, “Diversity

Rules”, being likely to facilitate the most prosperous and viable future for the region. This was then

analysed using Cooke’s (2007) policy platforms framework to develop appropriate ‘small

government’ support and collaborative interventions based on successful local experience.



1. BACKGROUND

Local and regional development approaches in Developed Economies around the world now

emphasise endogenous or local rather than external interventions (Khisty, 2006; Tomaney, 2010) for

solving ‘wicked problems’ (Rittel & Webber, 1973). These so-called ‘place-based’ strategies identify

how the unique attributes of individual places determine the constraints and the tangible and

intangible assets that influence the development of comparative advantage and food security (Ryser

& Halseth, 2010; Woods, 2012). Interventions go beyond fragmented policies and simple ‘place-

branding’ to focus on holistic strategies that facilitate supportive, top-down, regional, whole-of-

government policy support and community cooperation (Bachtler, 2010). In particular, rural-urban

networking and capacity have been found to be important to regional innovation (Dabson, 2011;

Pritchard et al., 2012) as well as the influence of individual values, beliefs and norms on adaptive

behaviour in regional change (Raymond, Brown, & Robinson, 2011). Long-term approaches that

focus on innovation and facilitate the active involvement of stakeholders and human capital

development are essential (Tomaney, 2010). Thus, it appears to be appropriate that rural

communities have available a holistic, place-based framework to address the idiosyncratic strategic,

community and individual regional development variables that foster the development of Australian

regions.

RIRDC has commissioned a project by the Tasmanian Institute of Agriculture (TIA) and the Institute

of Regional Development (IRD) at UTas called RIRDC PRJ-008839 Accounting for agriculture in place-

based frameworks for regional development. The purpose is to maximise the contribution of

Agriculture to regional economies by developing a portable framework to account for the dynamic

role of agriculture over time in regional economies.

1.1 THE PROJECT METHOD

The objective of this project is to develop a framework and toolbox that can be used to accurately

describe the current and expected future contributions of agriculture to regions, and to implement

this framework and toolbox to examine the contribution of agriculture to regional development in

the case study region, North West Tasmania. In particular, it will examine:

The role of agriculture in regional economies;

How agricultural industries will evolve and develop in regions over the longer term; and

How to make the most of these opportunities for the benefit of regional economies and

communities.

The present study uses the North West region of Tasmania as a field study to develop and pilot the

framework. The research has been conducted in North West Tasmania which comprises the Local

Government Areas (LGA) of: (1) King Island, (2) Circular Head, (3) Waratah/Wynyard, (4) Burnie, (5)

Central Coast, (6) Devonport, (7) Kentish, and (8) Latrobe. Due to the lack of significant agricultural

activity the West Coast area has not been included in the analysis. Subsequent studies will test the

framework in other regions of Australia to assess its usefulness and generalisability.

The research has been carried out in three phases:



Phase 1. An analysis of existing reports and data;

Phase 2. The development of a ‘current state of the region paper’, which is this report;

Phase 3. The development of a strategic regional agricultural development agenda.

This report forms the third phase output of the study, in the form of a ‘Regional Agricultural

Development Strategy’, based on the piloting of the complete theoretical planning framework. This

is based on an inductive analytical framework framed around three questions:

Q1: What is the value of agriculture and agribusiness as it stands?

Q2: What are the facilitators and inhibitors that determine the value of agriculture?

Q3: What can be done to enhance the value of agriculture?

The methodology included:

Interviews with 13 agribusiness executives and 10 farmers using the ‘7 Capitals’ framework

(Emery & Flora, 2006) as a guide for convergent interviewing techniques;

Four focus groups:

o Two focus groups with 12 participants using the ‘7 Capitals’ framework (Emery &

Flora, 2006) as a guide for discussion;

o Two futures focus groups held as part of the TIA Science Showcase held on 14th

August 2013 with 35 stakeholders, community members and TIA scientists.

An innovation and entrepreneurship survey of 11 agribusinesses and 49 farmers;

Interviews with 11 key stakeholders regarding the ‘State of the Region’ Report and the

‘preferred future’ for the region.

The data were analysed using qualitative content analysis which developed themes representing the

convergent (agreement) and divergent (disagreement) views of respondents. These themes and sub-

themes were interpreted through the 7 Capitals framework and an Innovation/Entrepreneurship

framework (based on Schumpeter, 1934) developed for this project.

It was the original intention to conduct a futures workshop using Mercer’s (1997) Short Scenario

Method however, getting a critical mass of regional stakeholders to commit to a one day workshop

in the short time frames required by this project proved impractical. As a result, 11 interviews were

held with the stakeholders separately. These provided feedback on the ‘State of the Region Report’

and data that were used for the development of three intuitive scenarios.

Finally, these data were interpreted through Cooke’s (2007) policy platforms framework in the

context of the ‘preferred future’, “Diversity Rules”, to develop a range of appropriate government

interventions to support existing regional initiatives and compensate for the market’s failure to

initiate other activities regarded as critical for the development of the preferred future.

This Regional Agricultural Development Strategy completes the public reporting stages of the project

and Milestone 3. The final Milestone 4 will produce a toolbox of planning methods for communities

based on systematic, holistic approaches to:

Quantify the influence and contribution of an industry like agriculture to a community

(economic, social and ecosystem impacts);



Understand the role of place based factors including networks and social relationships in

rural industries’ contribution to regional development

Identify gaps and deficits that may be impacting negatively on industry development and

Prioritise and plan for issues that require action to achieve regional outcomes.

2. REGIONAL ISSUES IN NW TASMANIA

The North West coast region of Tasmania has a history based on rich resources, natural beauty and

industrious people, but has always been constrained by its rugged topography. With a landmass of

2.26m hectares, the region features a settlement pattern of ribbon development and relatively small

size holdings, which influences the scale of agricultural production and drives resistance to change.

The region is known for its expansive wilderness and highly productive natural resources, and large

areas of land have international, national or state protection status.

Whilst the resilience of the population appears to be high, recent population growth is projected to

slow, while the median age continues to increase, demographic changes which will impact

agricultural enterprises. Critically, education participation and completion rates for the region are

below comparable rates for Tasmania and Australia as a whole. Retention rates are also lower, but

post compulsory education and training participation rates are slightly higher, perhaps reflective of

the relatively recent introduction of tertiary education in the region.

Changes in the region’s temperate maritime climate, with its generally reliable rainfall and mild

temperatures, will slightly increase the drought risk in the region but reduce frost incidence and

longevity. A projected decrease in chill hours in the lower elevation warmer regions and increase at

higher elevations may impact on fruit and berry production in the region, but irrigated pasture yields

are projected to increase.

Projected rainfall trends suggest that the currently high rainfall in the North West is likely to remain,

providing an adequate rainfall regime for many cropping and pasture enterprises, together with

potentially higher temperatures. This means that potentially arable land in the region, that is

currently temperature limited, may be suitable for more intensive land uses by 2085.

Regional infrastructure that is important to agriculture is generally of a high quality, and includes

major highways, port facilities and airports. Despite this, a key issue for exporters of resource based

products continues to be the availability, regularity and cost of access to international shipping links.

Primary economic activity has a strong export orientation and is aligned with resource use. A

significant proportion of businesses in the region are small to medium enterprises. Labour force

participation sits around 56.1% participation and unemployment is increasing, due to structural

changes in the forestry and manufacturing industries. Tasmanian SMEs are embracing IT as part of

their everyday business functions, but to varying degrees of sophistication.

North West farmers are in the main price takers, arising from their traditional focus on commodity

production, meaning they compete on price and efficiency against much lower cost jurisdictions.

They often lack the economies of scale to compete on price. Expansion of irrigation infrastructure is

creating new opportunities for agriculture in the region, enabling enterprise diversification and

increased production volumes and importantly, facilitating a most necessary transition from a low

margin to a higher margin business model.



If we are to understand the contribution of agriculture to regional economies and the nature of

regions we should start with the economic contribution as that is the most frequently analysed.

3. THE ECONOMIC CONTRIBUTION OF AGRICULTURE IN NW TASMANIA

Identifying the economic contribution of agriculture to the NW Region is very difficult because of the

complexity of the factors influencing regional economies and the difficulty in representing or

isolating all the effects. The simplified framework of calculations that economists use, often known

as ‘economic models’, are only as good as the assumptions they use and the weaknesses of the

model designs. Therefore, before discussing the economic contribution of agriculture to the NW

Region, a brief explanation of the possible models that could be used is worthwhile.

Regional economic development uses several different economic impact models to analyse regional

economic impacts of a particular industry. They include:

Gross value of agricultural production or employment statistics generated by ABS which

provide a relative sense of the scale of agriculture in a region. The introduction of new

activities can be modelling simplistically using cost-benefit analysis in terms of increasing

production or employment. However, this approach does not model the interactions

between agriculture and other industries in a region, which are important to estimate the

overall regional impact of the change.

Input-Output or IO models which are relatively simple modelling of the interconnectedness

of sectors and market transactions. Strengths are that they capture the inter-industry

linkages well and are easier to implement but prices are fixed, substitutionary impacts are

not accounted for and over-estimates can occur.

Social Accounting Matrix or SAM models represent the flows of all economic transactions

that take place within a regional or national economy for a single year providing a static

picture of the economy. They depict the spending patterns of an economy and can be used

in economic impact analysis. However, they have similar problems as IO models.

Integrated econometric input-output (EC-IO) models incorporate the strengths of

econometric modelling to overcome the IO weaknesses. They also improve the forecasting

performance of econometric modelling and have improved impact analysis capabilities and

can model the time paths of the effects of policy impacts.

Computable General Equilibrium (CGE) models are more complicated models of the

interconnectedness of sectors, institutions, factors, and non-market transactions which

account for price changes but may have difficulty with spatial issues (Cassey, 2009; Mitra-

Kahn, 2008; Seung & Waters, 2009).

Whilst impact analysis avoids the need for a survey of costs and benefits, the main problems with all

types of models are that:

They reflect the structure of regional economies at a point in time and model incremental

changes to this structure. They are less able to model the introduction of new industries to a

region, which is one of the most common and important questions needing to be addressed

Does not provide guidance on how resources should be managed;

Does not take into account the optimising process involved in political and policy decision-

making;

http://en.wikipedia.org/wiki/Economic_impact_analysis



Are poor at long term predictions, and don’t provide forecasting – but rather project current

economic relationships into the future regardless of how these are likely to change.

They are a “black box" that non-economists either greatly distrust OR, and perhaps more

dangerously, rely on too strongly (Cassey, 2009).

The Gross Regional Product (GRP) of the NW Region has been estimated by the Department of

Economic Development, Tourism and the Arts (DEDTA) as being $5.35 billion. However, the

contribution of Agriculture to the GRP is very difficult to calculate because:

The statistics kept are incomplete;

The movement and realisation of the value of primary produce is complex e.g. some

produce is processed outside of the region (poppies), some expenditure counted within the

region is actually employed outside the region and some of the inputs are also outside the

region.

In simple terms, it is likely that the contribution of Agriculture to the GRP is at least the overall

contribution of Agriculture to the Gross State Product (GSP) which is 8.2%. This state average is likely

to be an underestimate for this agricultural region which means agriculture’s contribution is likely to

be greater than $440 million.

Due to these problems with IO models, employment effects are often used for a guide to the impact

of an industry on a region.

NW Agriculture employs 3,850 people directly. However, the ABS uses separate multipliers (Type 2A)

to estimate the indirect effect of agriculture on overall employment (Trewin, 2001; W.McLennan,

2008). When this multiplier (1.828) is applied, the impact on employment in the region is

approximately 7,038 people or about 17.4% of the working regional population (40,370).

These problems illustrate why it is necessary in a project such as this to adopt a more holistic

approach to understanding the contribution of Agriculture to the NW Region. Agriculture’s

contribution is much more than the simple economic and employment impacts. However, no single

framework appears to be adequate as a tool for exploring the current and future states of that

contribution. Therefore, Section 4 outlines the three frameworks adopted by this research to answer

the three core research questions in 1.2:

Q1: What is the value of agriculture and agribusiness as it stands?

Q2: What are the facilitators and inhibitors that determine the value of agriculture?

Q3: What can be done to enhance the value of agriculture?

4. CONCEPTUAL FRAMEWORKS FOR THE RESEARCH

To answer these questions, three frameworks are firstly explained, then the findings outlined in

tabular form and some brief conclusions drawn. They are:

The ‘7 capitals’, a well-known framework in community development that has not previously

been employed at a regional level (Emery & Flora, 2006);

A broad conception of ‘innovation’ based on the foundational work of Schumpeter (1934);

The policy platforms that can be used to construct regional advantage (Cooke, 2007).



4.1 THE 7 CAPITALS

It is now well recognised that agriculture has inter-connected roles in producing food commodities

as well as non-food commodities such as environmental services, landscape amenities and cultural

heritage (IAASTD, 2007). These so-called ‘multi-functional services’ (Millennium Ecosystem

Assessment, 2005) have value to the wider community, just as the community context influences the

nature of agriculture in that area.

To provide a framework for identifying the value created by agriculture we will rely on Emery and

Flora’s (2006) ‘seven capitals’, a recent enhancement of the well-known Five Capitals. Flora and

colleagues developed the seven capitals framework for evaluating community and economic

development, which they define as development activity “…which contributes to healthy

ecosystems; social equity and empowerment; and vibrant, diverse, and robust economies.” (Fey,

Bregendahl, and Flora, 2006: 3). The seven capitals in the framework are:

Natural capital: the natural resources and amenities in a particular location “including

weather geographic isolation, natural resources, amenities and natural beauty”.

Cultural capital: the way people ‘know the world’ and how they act within it, including

language and traditions. “Cultural capital influences what voices are heard and listened to,

which voices have influence in what areas, and how creativity, innovation and influence

emerge and are nurtured”.

Human capital: “the skills and abilities of people to enhance their resources, access outside

resources and bodies of knowledge to increase understanding, identify promising practices,

and to access data for community-building”, as well as leaders’ ability to lead across

community differences and proactively shape community development.

Social capital: the connections among people and organizations or the social “glue” to make

things, positive or negative, happen.

Political capital: access to power, resources and power brokers and “the ability of people to

find their own voice and to engage in actions that contribute to the well-being of their

community”.

Financial capital: access to the financial resources necessary for development and “to

accumulate wealth for future community development”.

Built capital: regional infrastructure. (Emery & Flora 2006).

As Emery and Flora (2006) explain, the community capitals framework has two particular advantages

for analysing community and economic development. The first advantage is that it provides a

systems perspective for by enabling: “the identification of assets in each capital (stock), the types of

capital invested (flow), the interaction among capitals and the resulting impacts across capitals” (p

20). The second major advantage is that it focuses on assets and investments rather than needs and

deficits. These advantages make it a particularly suitable framework for this toolkit, as it is focused

on identifying ways to enhance the value of agriculture in regional communities. Table 1 outlines the

findings from the stakeholder interview and community consultation processes about how the 7

capitals enhance or constrain agriculture in NW Tasmania.



Table 1: Preliminary findings about the value reciprocity for agriculture and NW Tasmania

7 Capitals Specific capital attributes Enhancing Constraining

Natural capital (Soil, weather, location, natural resources)

Mild Climate - temp Day=25

0C/night=14-15

0C

Lower risk in NW Coast

High yields, suited to root crops

Climate change relative advantage

Higher risk in Midlands

Soils Resilient, deep, well-drained Poor regional planning produces poor soil resource utilisation – ribbon development, lifestyle farming

Agricultural practices facilitating erosion

Environmental credence & local provenance (including air quality)

‘Clean, green, unspoiled’ brand integrity

Clean and green energy

Important for locally marketed niche produce

‘The story’ is important to tourists

Cleanest air e.g. Cape

Grim Beef

Good QA standards

Not leveraged to advantage

‘Clean’ energy not reflected in energy costs

QA not promoted e.g. hormone-free beef

Water Plentiful & good quality High cost of Taswater scheme water

Island location Enhances bio-security Increases freight costs

Sunlight Long summer days Low incident solar radiation March to September

Topography NE slopes warmer, more solar energy Fragmented, undulating topography is a barrier to scale and greater farm profitability

Land Quality and availability

Cheaper than some Aust/NZ areas

Finite area of Red Ferrosols used for cropping – now regarded as limiting

Overall Wide range of options Fragmentation of production areas

Cultural capital (Religion, art, ethnic groups and sub-cultures, educational opportunities)

Mindsets about change New farming arrivals bring innovative ideas & openness to region

Farmers open to technological change

Some farmers are positive, embracing change, adaptive

Regional resistance to change

Farmers resistant to behavioural change

Farmers conservative, risk averse, fatalistic, which limits innovation

Entitlement mentality amongst some farmers

Mindsets about education and the value of it

Utas Cradle Coast Campus strategically located Regional lack of culture of formal education

Low level of regional education - now 49% functional illiteracy in Tasmania

Farmers don’t value formal education

Mindsets about the future of agriculture

Regional populations pessimistic

Empathetic towards farmer’s problems

Focus on place in value chain so farmers lack a whole-of-chain outlook

Many farmers are negative, blaming others,



disempowered

Poor community understanding of multiplier effects of agriculture

Mindsets about the NW region

Resilient, supportive community

Agriculture a source of natural environmental values

Community sense of stewardship of natural capital

Community resistant to change

Knowledge and practices in NW such (e.g. root crops) lags behind other areas e.g. USA and Europe

Value given to cultural heritage Loyalty to agriculture and particular sectors based on longevity and tradition

Willingness to share cultural heritage and embed it in the business model

Mindsets about work Government payments/welfare dependency

Human capital (Skills and capabilities, educational level)

Agricultural expertise Substantial professional expertise amongst advisors

Strong base of agricultural related trade skills

Impending crisis in professional level skills as workforce ages and downturn in national agricultural enrolments

Increasing innappropriate practice interventions by non-agric graduates

VET sector agricultural skills output 75% down on 1990

Poor agronomy leads to low productivity/ high costs of raw materials

Lack of technological expertise needed for new agricultural machinery e.g. GPS

Numeracy and literacy Farmers - low levels of formal education

Managerial skills High level of professional skills in service sector

New entrants with other non-agricultural professional experience

Low level of farm business management skills means farms are inefficient, operate with high overheads

Access to training locally is a constraint

Leadership by key farmers/ individuals Dominated by older farmers

Breadth/depth of agric knowledge & experience

Minority with up-to-date knowledge Lack broad knowledge of agricultural techniques overseas

Human resource management skills

Associated with higher performing growers Lacking with poorer performers

Ability to source knowledge Some open to learning via best practice or international ideas

Closed informal or enterprise driven knowledge not shared

Lack of internet search skills

Attitudes to change Small group of farmers have the skills, think Generally very negative attitudes



laterally, accept responsibility for own destiny

Farmers highly resilient to industry stress ‘historically institutionalised’ mindsets from processing –

“…last year bad, this year bad, will plant next year…”

Needs crisis to drive change

Unwillingness to lease out/in

Land ownership Many multi-generational families with high level of commitment

Risk averse, conservative towards expansion

Need to own land you farm which: o Constrains operational scale o Will decline in the future o Promotes over-capitalisation

Local labour

Long term employees from within the region

Agribusiness invests in up-skilling locals & promoting from within

Preference given to locals by farmers & agribusiness

Increased commitment to employer by some local employees

Women coming back into agriculture

Competition with other industries

Loss of employment pool through emigration

High relative cost

Generally poor work ethic

Unreliable

Generally un/semi-skilled

Low pay

Emergence of FIFO/DIDO in other industries

Imported labour Agricultural work attracts back-packers & grey nomads (e.g. Harvest Trail) o Great work ethic o Reliable, better educated

Transient/short term

Difficulty attracting/ retaining professionals and technical skills from elsewhere

Social capital (Strength of ties and networks, NGOs)

Benchmarking groups (e.g. Boat Harbour Group)

Inspire innovative thinking, constructive criticism of business

Generally farmers too competitive, so few groups last

Family & social connections between neighbours

Local knowledge, trust in family name

Develops agricultural understanding and empathy

Knowledge-sharing and trust

Direct links with farmers diminishing so understanding is diminishing

Family connections mean some stay in agriculture for no other reason

Goodwill towards major employers e.g. VDL, McCains, Simplot, Serve-Ag

Community pride in locally produced product

Symbiotic relationship with community: Community recognises agribusiness are significant employers: the town ‘treat us well’

Recognition of agribusiness contribution Gross Regional Product

Resistance to change in relationship, e.g. greater automation, changing labour patterns

Some major employers have historically adopted paternalistic approaches which sheltered agriculture from change imperatives

Lack of certainty/stability

Support for communities by major employers

Local effects of corporate social responsibility by agribusiness



Simplot ideation1 capability e.g. data

mining social networks Growing capacity

Local and international networking. Farmers that regularly travel to gather intelligence are a source of new ideas.

Lack of intelligence gathering constrains innovation & performance

Negatibe attitude to ‘outsiders’

Social license for farming What is defined as ‘good farming’ has changed/is changing

‘Right to farm’ not established

Lack of confidence in regulatory environment

Political capital (Access/influence on local, state & national government)

Farmer associations e.g. TFGA Good lobby group Limited by a lack of unity amongst commodity groups

Agribusiness associations (TAPG) Constructive input to community

Opportunity for community to have input to agribusiness issues

Limited ability to influence macro level issues e.g. labour costs

Unions e.g. AMWU Unions not listening; no longer a constructive dialogue

Union power increasing labour costs

Voting power of farmers and ag-related stakeholders

Active on local councils Feeling of disempowerment

Tasmanian future controlled by middle income, urban voters outside of Tas

Local Government - creating the right conditions for business to survive and flourish

Formation of the Cradle Coast Authority a joint initiative of the nine regional councils to facilitate the sustainable regional development, resolve regional issues and coordinate regional-scale activity.

Some LGAs fund Regional Economic Development positions

Some LGAs are active in promoting agricultural development

Not interested, not listening

Slow, negative, risk-averse

Siloed knowledge

Don’t understand modern agricultural businesses

Disempowered – farmers perceive low level influence over local regulations

Need single-point advice for navigating regulations

Tasmanian governance structure 20 yrs out-of-date

Access to State or Federal politicians Easy access to state politicians Federal/State Government not listening or wider priorities

Greens ideologically driven, not rational, ill-conceived policies

Government complacency re agriculture/food security

Green lobby Preservation of unique environmental Sometimes anti-development without scientific rationale

1 Ideation is a new word for ‘idea generation’ or the process of creating new ideas, now a formal part of innovation in many manufacturing industries.



attributes valued by consumers Tasmania’s future determined by non-Tasmanians & Tasmanians have to live with the consequences

Financial capital (Funds for debt and equity economic, social, and cultural investments)

Rabobank Specialise in agricultural lending

Banks generally Broad satisfaction Think they understand agriculture but don’t

Too reactive to changed circumstances (boom/bust) – creates hardship

Inadequate financial instruments for modern agricultural businesses

Rsik premiums applied

Grants for innovation Funds available to assist capital expansion Need to divulge sensitive business information (or innovation) a barrier to access

Non-standard sources of finance Non-standard finance little-used

Investment in ag produces relatively low yields

Built capital (Physical assets and infrastructure)

Roads

Good quality Regulations re B-Double trucks on minor roads

Rail Infrastructure too old

Service too slow, limited access

Cross-Bass Strait freight service Reliable, regular, quick turn-around Cost

Capacity is constraining development

Agricultural produce competes for priority with tourists on TT Line during peak production (Dec-May)

Airports/Ports at Burnie & Devonport Agriculture is a major generator of revenue for port infrastructure

Adequate quality facilities

Burnie only deep water port

Attitudes to haulage/travel distance

Agricultural businesses are a source of & contributor to community infrastructure

Water supply Abundant supply

Regional willingness to collaborate for private irrigation schemes

Cost of accessing water high

Processing equipment in factories Simplot Devonport – old, inefficient

Simplot Ulverstone – adequate

McCains ceasing operations April 2014



Other more general infrastructure e.g. hospitals, schools

Adequate but necessary to attract new entrants to agriculture and agribusiness

Waste management Effluent management is still a high cost



4.1.1 CONCLUSIONS ABOUT THE ‘7 CAPITALS’

1. Natural capital: the NW Region’s mild climate, soils, abundant water and environmental

credence are a wonderful asset to agriculture that, whilst there are inherent constraints

associated with island isolation, leveraging the region’s natural capital for advantage presents

future opportunities.

2. Cultural capital: whilst there is a deep cultural pride in the region and a resilient, supportive

community, the region’s culture is not outward looking so lacks global understanding, are

resistant to change and tend to blame others for the region’s problems. There is a widespread

belief that “…why should we have to change, if we hang in there long enough, it’ll come right…”;

a potentially misplaced optimism.

3. Human capital: whilst there is considerable commitment to the region and substantial

professional expertise exists within the advisory inputs to agriculture, farmers lack the education

and skills necessary to be able to improve their competitiveness in world markets. Local labour

inputs to agriculture are of poor quality.

4. Social capital: there are strong, mutually supportive relationships between the broader

community and agriculture per se and large agribusinesses, as well as within agriculture itself,

but paradoxically this strong individual competitiveness amongst farmers that works against

collaborative efforts that would assist domestic and international competitiveness.

5. Political capital: whilst access to politicians is good, there is a general feeling of

disempowerment amongst farmers because they feel they are not able to influence the business

environment which they blame for their problems. Government generally but local government

in particular, is regarded as slow, siloed, unresponsive and lacking in understanding of modern

farm business management.

6. Financial capital: there is an almost universal reliance on banks for financing and little

understanding of broader sources or financial instruments.

7. Built capital: generally regarded as adequate but Taswater scheme water, electricity and Bass

Strait freight services are regarded as too expensive and customer service quality poor.

4.2 INNOVATION

Strategically, innovation is critical for improving competitiveness in world markets as globalisation

accelerates (Arumapperuma, 2006). However at the micro level of agrifood suppliers, innovation is

necessary to maintain access to supermarkets and stay relevant to the modern retailing system

(Keogh, 2013; Reardon & Timmer, 2012).

The Australian Innovation Research Centre’s (AIRC) Tasmanian Innovation Census (Arundel, Torugsa,

& O'Brien, 2012) identifies that agriculture’s innovativeness is only mediocre and declining since the

previous census in 2007. However, the survey only incorporates data from businesses employing five

or more people so 36 North West businesses participated; therefore the majority of farmers and

SMEs servicing agriculture were excluded on size. This leaves the question of the underlying

innovative capacity of North West Agriculture unanswered. Furthermore, the survey defined

innovation as new products and processes which limits our understanding, particularly when it

comes to SMEs.



Innovation can be understood using a framework that considers the form of innovation and the

magnitude of innovation in pursuit of superior economic returns through disruptive innovations

(Miles, Paul, and Wilhite 2003). Adapting Schumpeter (1934) the present study classifies innovation

into the following categories: (1) product, (2) process, (3) marketing, (4) supply chain, and (5)

strategic management or governance of the firm or the chain. Product innovations focus on product

features, benefits, and forms. Process or administrative innovations change how the product is

created, produced and marketed. Strategic innovations change the firm’s position in the market, the

value proposition, and even the domain of the business. Marketing innovations include both market

development by entering new markets and market creation by offering radical new products and

thereby creating a new market. Supply chain innovation pertains to either the development of new

sources of inputs or the creation more efficient and effective supply chains. Strategic innovation

involves innovation of the value proposition itself; for example, shifting from a commodity produce

marketer to a using the produce as the foundation for a valued added product.

Likewise, the magnitude of the innovation is classified into radical and continuous. Radical

innovation force new producer or consumer behaviour and can create new markets, while

continuous innovations do not force changes in producer or consumer behaviour, but attempt to

shape the market preferences towards the innovator. Table 2 offers an innovation classification

framework with examples from the data gathered for this project.



Table 2: Innovation framework with examples of potential continuous and radical innovations in NW Tasmania

Form Description Continuous innovation Radical innovation

Product Product innovations involving new features, benefits, presentation and forms.

Bio-dairy speciality cheeses.

New frozen vegetable mixes or condiments/flavour enhanced vegetables.

Evolving from juice production to cider, dried fruit.

Moving from frozen vegetables to pre-washed salads in a bag.

Moving from frozen vegetables to chilled, mixed salads & condiments in a PET

2 box.

Moving from whole fruit to juice production.

Process Management innovations involving new or new to industry changes to the process of how the product is created, produced or marketed producing novelty in the product or increased efficiency of the process.

Taking industry based continuous education courses.

Continuous improvement programs.

“Lean Manufacturing” programs.

Change from field to greenhouse production methods.

Change from processing to fresh market production.

New crops (e.g. expanded flower, protected cropping industries)

Marketing Both market development by entering new markets and market creation by offering innovative new products, thereby creating a new market.

Serve-Ag moving to a whole farm “bottom-line” focus from a production focus.

New promotional strategies.

Developing a supplier relationship management focus.

Continuous improvement.

Adding a farm gate retail marketing function.

Individual commodity supply to cluster marketing for scale and sustainability.

Export to international niche or high volume, higher value commodity markets.

Brand development.

Supply chain Development of new sources of inputs or the creation more efficient and effective supply chains.

Incremental improvement projects.

Searching and acquiring complementary sources of raw materials (e.g. Simplot drawing supply from Northern Midlands).

Searching and acquiring new sources of raw materials (e.g. OneHarvest (Qld) seeking new fresh market suppliers from cool climate NW Tasmania as climate change risk management).

Strategic management/governance

Strategic innovations that change the firm’s position in the market, the value proposition, and even the domain of the business.

Shifting from a commodity producer to a using the produce as the foundation for a valued added product or fresh market product.

Serve-Ag divisional demerging.

Serve-Ag relationship with TIA3

Moving from producing juice to cider

Cluster production & marketing

2 Polyethylene terephthalate or PET is a thermoplastic polymer resin used in synthetic beverage, food and other liquid containers.

3 Horizontal co-innovation occurs when competitors collaborate or when an organisation collaborates with research organisations such as TIA.

Source: Derived from Schumpeter (1934).



This framework formed the basis for the development of an innovation and entrepreneurship survey

of agribusiness and farmers in NW Tasmania conducted in partnership with the Tasmanian Farmers

and Graziers Association (TFGA) and the support of the Tasmanian Agricultural Productivity Group

(TAPG), an association of 43 agribusinesses in the region. The 57 questions were a reduction of some

of the leading rating scales for the innovation, market orientation, power, leadership and trust

constructs in the literature (Appendix A).

Whilst the survey was administered as two separate surveys, they measured the same constructs

and are able to be combined. The two surveys have only slightly different introductory questions and

wording in some questions to suit the two groups. Respondents rated questions on a 7 point Likert

scale of ‘1 Strongly Disagree’ to ‘7 Strongly Agree’. The survey was conducted using SurveyMonkey

to administer surveys (using online, emailed and hard copy alternatives). Initial email invitations to

participate were supplemented with 280 phone invitations. At the time of writing this report only 49

farmers and 11 agribusinesses had responded.

It should be noted that the number of responses received at the time of writing do not allow ANY

statistically significant conclusions to be drawn. Notwithstanding, some indications about

innovativeness can be identified and are presented in Table 3 which presents the data separately for

the two groups showing slight (but not statistically significant) differences in perspectives.

Preliminary analysis of the psychometric properties of the marketing orientation, entrepreneurial

orientation, and strategic alignment scales as part of subsequent scale development process

suggests the following:

1. The marketing orientation scale

a. Cronbach’s Alpha = .872 which suggests that the items are reliable and

consistent measurement of some construct.

b. Maximum Likelihood factor analysis suggests that three dimensions account for

46% of the variance: (1) Customer focus by chain; (2) Information sharing

throughout chain; and (3) competitive aggressiveness and rent seeking within

the chain.

2. The entrepreneurial orientation scale



b. Maximum Likelihood factor analysis suggests that two dimensions account for

60% of the variance: (1) product innovation; and (2) administrative / marketing

innovation.

3. The strategic alignment scale



b. Maximum Likelihood factor analysis suggests that three dimensions account for

40% of the variance: (1) intra-organizational trust and values ; (2) a dominate

lead firm in setting strategy for the chain; and (3) self-serving rent seeking chain

member behaviour.



4 Note one large farm respondent (8,000ha) has been excluded from this item due to the skewing effect.

Farmers (n=49) Agribusiness (n=11) 85% engaged mainly in a specifications-based contracting or spot markets or a combination of these.

Largely specifications-contract based and involved in marketing/exporting, processing or services to the industry.

30% have no formal qualifications, 22% a Certificate 1-4 and 18% a degree. Over 90% claimed to invest in knowledge, skills and innovative activities and pass the value back to farmers.

Employ an average of 2.5 FT employees, one part time and 3.7 casuals4. The average

size of area under production is 154 ha1.

There was high (6) agreement that they co-innovated within their triad (farmers-processor-retailer).

Between 50-70% believed that firms in their chain undertook a range of innovative activities and shared the benefits of that back to other members of the chain. The most strongly supported form of innovation was technological innovation.

Strong agreement about their involvement in activities consistent with the broader definition of innovation; particularly seeking new/expanded markets, new technology and local networking. They strongly believed their chains were innovative.

Farmers appeared to have little knowledge of co-innovative activities in other parts of their chains. Their appeared to be only a moderate orientation towards market intelligence gathering and customer/consumer orientation. There appeared to be a moderately strong belief by farmers that they focused on providing solutions for their customers and consumers (5.1). There was quite a strong response (5.38) indicating that farmers regard other farmers as competitors.

They were strongly of the view that they invested significantly in market intelligence gathering and were consumer focused (6), although they were much less certain that they had systematic processes to measure consumer satisfaction (4.6). They strongly believed they were consumer/customer focused and understood their business model (delivering value to consumers).

Farmers appeared to strongly believe that information was gathered about supply performance and forecasting but that it wasn’t shared up the chains.

Agribusinesses believed they were market-oriented, gathering and disseminating consumer research within their organisation (5.18), were not so sure that they systematically shared this with the chain (4.55) but believed they did share it with suppliers.

They were also strongly of the view that costs and benefits of innovation were not fully shared with suppliers.

Agribusiness was equivocal about the lead company sharing risks and rewards with suppliers for innovation.

There appeared to be a strong ethical commitment in supply relationships by farmer respondents. Most were equivocal or negative about the trustworthiness of chain partners.

They believed their chain partners were trustworthy (5.3), having similar values and attitudes to them (4.5) but had little confidence in their performance (2.9). Agribusiness believed that sometimes they would vary supply agreements/contracts where it’s appropriate (3).

Believed that there was little loyalty to suppliers/buyers in their chains. They believed they received benefits from meeting customer/consumer needs but believed that they would be dropped as a supplier for one bad year’s performance.

Farmers had a moderately strong belief in the resilience of their chains. They believed they generally amicably resolved disputes and didn’t need contracts of supply. They believed there was little sharing of strategic information, a poor recognition of chain leadership and a low level of sharing of chain strategies and goals.

Believed everyone in the chain understood who the chain leader was and that they regularly discussed strategy with their chains, but were more equivocal about effective collaboration, sharing the costs and benefits of co-innovation.

There was a strong reliance on contracts to govern relationships. They believed they generally amicably resolved disputes but agreed that they need contracts of supply.

Table 3: Innovation and entrepreneurship survey

NOTE: Respondents rated questions on a 7 point Likert scale of ‘1 Strongly Disagree’ to ‘7 Strongly Agree’.



4.2.1 CONCLUSIONS FROM THE INNOVATION AND ENTREPRENEURSHIP SURVEY

When adjusted for a single large land holding, the average farm size of 154 ha is too small

for the large scale production required for profitable commodity production.

The generally low level of education supports the 7 Capitals findings. The 18% of farmers

with graduate qualifications seems high compared to the ABS Census based analysis in

Bonney (2008a; 2008b) which identified just over 5% graduates in the industry.

Most of the chain relationships are based on spot markets or specifications contracts

(Peterson, Wysocki, & Harsh, 2001) when agrifood value chains world-wide are adopting

more relationally-based alliances. Figure 1 summarises the implications of this.

Source: L.B. Bonney (2011)

The key implications are that NW Regional agrifood chains are governed by price-based

mechanisms and inflexible specifications-based contracts that are often inadequate for the

complexities of collaborative innovation or ‘co-innovation’. Co-innovation is the main

strategic response of value chains to develop sustainable competitive advantage because

the resourcing of the continuous innovation and the complex responses required by modern

retailing requires collaboration by the whole chain to ensure efficiency and effectiveness.

This means that every member of a value chain has to work together to solve the shared

problems involved in becoming more competitive. Spot market-based and contract-based

chains which lack this synergistic effort are unable to achieve the level of performance

necessary to be globally competitive.

This means that in many value chains there is a general lack of strategic alignment,

coordination and co-innovation necessary to create consumer value. Chain participants are

opportunistic and lack the long term commitment necessary to develop their value chain.

There is very little evidence of vertical market coordination with the exception of the

packing house contracts. Some farmers in the NW have attempted to create their own

Figure 1: Implications of regional value chain governance for NW Region farmers



vertical marketing systems through some farm gate marketing and value added production,

but success is highly related to location and proximity to tourist traffic, so those more

isolated farmers move away from the farm gate to get a share of the market.

There appears to be insufficient information sharing about chain issues and this is consistent

with the form of governance. This has implications for claims made regarding the perception

of moderate levels of innovativeness.

There was trust in NW agrifood chains which indicates chain participants believe that their

partners would not deliberately do harm to their business interests, but there was little

confidence in partner’s supply performance.

Marketing and evidence of a strong marketing orientation where agribusiness leverage

market intelligence to create value for consumers and themselves (Jaworski & Kohli, 1993) is

largely absent. There appears to be little evidence of any form of systematic sharing of

information with in value chains. Likewise, there appears to be a lack of focus by

agribusiness on understanding customers’ explicit and implicit needs.

The sharing of the benefits of innovation with those who create added value through

innovation is a fundamental incentive for co-innovative value chains. The lack of this

occurring in NW regional chains is consistent with the form of spot market or contract form

of governance and the apparent lack of innovativeness, conservatism and resistance to

change indicated in the survey responses and interviews.

Thus, even considering the structural issues in the Australian economy that affects farmers, it

appears that many NW Tasmanian agrifood chains and especially the farm suppliers, lack the

capability to develop and implement strategies to be more competitive.

In the light of the surveys of farmers and agribusiness regarding innovativeness and

entrepreneurship, what did the qualitative interview indicate about agricultural innovation?

7. FINDINGS ABOUT THE OPPORTUNITIES AND CONSTRAINTS IN AGRICULTURE-

RELATED INNOVATION

Project interviews and focus groups identified a wide range of opportunities within Schumpeter’s

(1934) conception of innovation (Table 2) and provided evidence of what would either facilitate or

constrain the development of those within the Region.

An analysis is provided in Table 4 which could be the focus of further discussion by regional

stakeholders.



Table 4: Findings about the opportunities, facilitators and constraints in agriculture-related innovation in NW Tasmania

Concept Opportunities Facilitators Constraints

Product Extensions of existing products e.g. tray-wrapped carrots, snap frozen fresh vegetables, partly frozen vegetables.

The natural environment provides soil & climatic conditions that promote innovation e.g. Brandsema’s use of hot houses works more effectively due to the cool climate.

Innovation due to necessity of financial imperatives.

Some processors (e.g. Heinz) want to ‘top up their supplies with Tasmanian produce to meet supply commitments.

Tasmanian farmers are too small & too risk adverse (processor mentality) & farming will become more concentrated on a few large producers due to technology & market factors.

Production NOT marketing mentality.

Generate new products especially lower volume, high margin crops AND high volume, higher value commodities.

Pressures/constraints of sector have driven innovation in the form of new products e.g. Spreyton Fresh developed juices in response to loss of export markets, then diversified into cider as juice market becomes more competitive.

The natural environment provides soil & climatic conditions that promote innovation.

Innovation due to necessity of financial imperatives.

New product innovation constrained by reality that if they can be successfully achieved, then supermarkets leverage their take-over & the chain loses the ‘private brand’ premium to supermarket private label.

Risk-averse mentality.

Lack of brand integrity.

‘Organic’ or ‘niche’ products e.g. branding with ‘Cool Climate’ provenance.

Collaboration around product sees new & innovative relationships between farmers – e.g. Spreyton Fresh partnership with Dickens Cider in Launceston – sharing of intellectual property sped up the development of the cider business & brought scale, saving them significant infrastructure & expense.


Lack of brand development.


Value-adding to existing products.

Economic circumstances & loss of markets has led to interest in value-adding for niche, high value, low volume products & high volume, higher value commodities.

Resources to do this.


Develop new forms of agricultural machinery e.g. broccoli harvester.

Local conditions & support for trialling new equipment

Access to overseas markets for ideas & test markets

Lead times => 5 years + for ag-related machinery.

Costs for IP protection on new products e.g. new machinery.

Low amounts of funding for agriculture-related technology/equipment R&D.

High costs of getting components into NW Tasmania & shipping products out.

New product opportunities:

Dairying

Pharmaceuticals

Organic products

Niche horticulture

Counter-seasonal production.

Niche marketing.

Farm sizes too small so hard to get scale & the necessary infrastructure built for a small scale e.g. variety development, dams, sheds.

Banks reluctant to lend to small-scale activities - need to have contracts to grow large volumes.



Protected or controlled environment cropping

Innovative food manufacturing

Scale of the risk of new business compared to main business is an issue for banks.

New business needs to be of sufficient scale for banks to be interested.

Diversification from dairy into beef.

Traditional alternative. Still subject to cyclical prices.

Increase in controlled-environment agriculture.

Tasmania uniquely suited to supply controlled-environment agriculture.

High establishment costs.

Specialist expertise & knowledge required.


Process New production processes. Red Cow has found that organic rules too restrictive & have innovated into ‘bio-foods’.

Use of biological farming processes (Red Cow).

Commonly believed that “red & green tape” constrains process innovation.

Branding regulations constrain ability to innovate.

Sense of powerlessness.

Mechanisation to reduce labour costs & improve efficiency.

Creation of new technologies in response to growing/paddock conditions & efficiency requirements (e.g. Dobmac broccoli machine, Maintec & Hills relationship).

Use existing machinery, processes to service other crops.

Existing equipment or sharing equipment. Opportunity cost of converting for new purpose.

Learn from other regions & countries through travel.

Industry-led & government-facilitated trips.

Local & international networking.

Lack of openness to new ideas, opportunities to implement in Tasmania.

Green tape & red tape.

Use of new technology. Unmanned aerial vehicles (drones) for mapping & spraying.

Sensing technology (e.g. Sense-T).

Laser levelling of paddocks.

Apps interface – iPads, QR codes.

Confusion/ ignorance about opportunities & value facilitated by the technology.

Access to technology.

Skills to use.

Markets Farm gate sales. Red Cow considering farmer’s market sales due to location.

Need labelling integrity for “Australian made” or other “premium labels”. No market credence with the current labelling regulations.

Direct supply. Use of social media for marketing.

Cluster production & marketing.

Lack of marketing skills.

Lack of negotiation skills.




Marketing clusters. Asian high income, food safety conscious market segments.

Resource sharing (e.g. Spreyton Fresh cider).

Co-investment & pooling of resources to achieve scale &

Lack of collaboration skills & fore-going independence.

Lack of business management skills.



specialist capacity (e.g. processing) & skills (e.g. marketing).

Promotes ideation. Lack of risk acceptance.

Lack of trustworthy behaviour, shared values, vision & commitment.

Explore new market opportunities for high value, high margin, low volume crops AND high volume, higher value commodities.

Decision to seek alternate, non-export markets & exploit waste products via direct sales or value add (Badcock cherries).

Local & international networking.

Often requires technological research.

Low business management skills.

Lack of risk acceptance.

Lack of business management & marketing skills.

Private label requirements of supermarkets.

Asian high income, food safety conscious market segments.

Natural resources, climate advantages.

Branding & brand integrity.

Market salience of claims, farmer skills in marketing.

Lack of persistence.


Lack of capacity to consistently supply.


Marketing based on food quality (e.g. “Clean & Green”).

Most Tas/NW producers are quality assurance under a range of QA programs.



Supply chain Use of GM free ingredients. The cost of transportation into Tasmania then product out of Tasmania constrains innovation.

Existing credence not sufficiently leveraged.

Lack of branding/brand integrity.

Opportunities to diversify products e.g. niche meat products such as game meats.

Government advice & assistance.

Trade visits to Asia.

Opportunity to increase shipping direct to Sydney or overseas rather than via Melbourne.

Lack of marketing skills.

Lack of technical/food processing skills.

Time frames needed to get established in new markets.

New markets want greater volumes than NW can supply.

Freight bottleneck in ports, especially Melbourne & Burnie - in-coming & outgoing.

Freight costs.

Managing value chains to create value.

New markets &/or new products.

Lead firm requisites.

Economic imperatives.

‘Demand pull’ thinking.

Transformational chain leadership/followership concepts.

Old mental models of business models, competitiveness & management.

‘Supply push’ thinking.

Inflexible business posture & processes.

Lack of business management skills.




Strategic management /governance

Exploit location with respect to quality, bio-security, key environmental parameters (clean & green).

Access to transport.

Branding & brand integrity.

Access to passing tourist trade.

“Processor mentality” constrains innovation.

New business models to achieve scale (e.g. unit trusts, joint ventures, alliances etc).

Achieve specialist skills.

Enables farmers to specialise in what they like or are skilled to do.

NW Tasmania has strong networks of relationships amongst suppliers.

Lack of collaboration & business skills.

Conservatism.

Reliance on existing chains e.g. growing for processors generating ‘nanny relationships’.

Competition between growing networks - cannot supply both Coles & Woolworths.

Competition with existing supply chains – if already growing for major customer (e.g. supermarket), little extra capacity for additional chains.

Adopting international outlook on global innovations in production, value chains & markets.

Local & international networking - associated with early adoption.

Few farmers acquire these perspectives.

Strategic relationships with research/knowledge sources (universities, key DPI people).

TIA RD&E capacity is 2nd

largest in Australia. Few farmers engage.

Lack of time commitment & relationship building.

Shift on focus from processed frozen produce to fresh produce.

Niche product opportunities exist.

Poor returns on commodity products.

Diminishing options for processing customers as large companies leave NW Tasmania (e.g. McCains).

Lack of collaboration, marketing & business skills.

Lack of market orientation amongst farmers & marketers/processors.

Requires a change in mental model from ‘processing’ to agile, responsive, values-based relationships & ‘DIFOTQ’ (Delivered, In Full, On Time, on Quality).

Create commercial monopolies Buy the Plant Variety Rights to niche varieties (e.g. Costa’s Berry Exchange, Costa’s Tomato Exchange & Oneharvest Calypso Mangoes).

Requires capital.

Lack of thorough market research.

Lack of risk tolerance.

Lack of thorough technical understanding.


Vulnerable to Australian Competition & Consumer Commission.



In the light of these data what can we conclude about the state of the region?

4.3 THE STATE OF THE REGION

NW Tasmania has wonderful natural capital that presents opportunities for leveraging for advantage, but

also has significant structural issues which will continue to challenge its international competitiveness. The

region’s resilient, supportive culture is somewhat insular lacking global understanding and is resistant to

change with a ‘handout mentality’. Its relatively small farms are serviced by a poor quality agricultural

labour force and whilst the professional agricultural input is of high quality and farmers have good

operational skills, there is a lack of the higher level agricultural management and business skills necessary

to enable the performance necessary for farms to be competitive in world markets. The region’s value

chains are largely transaction-based, opportunistic and often antagonistic so lacking the long term

coordination and co-innovativeness necessary to improve competitiveness. Despite strong social networks,

equally strong culture of independence will hamper collaboration to overcome scale problems that would

improve ability to access domestic and international markets. There is a general feeling of

disempowerment amongst farmers because they feel they are not able to influence the business

environment which they blame for their problems. Government generally is regarded as being focused on

social agendas rather than promoting the business that would provide employment and reduce the reliance

on welfare in the region. Government services at all levels are regarded as slow, siloed, expensive with poor

service quality.

What then is the future for the region? A focus of that discussion could include issues such as:

What are the plausible, probable and preferable futures for agriculture in NW Tasmania?

Within that context:

o What is the role of private versus public investment?

o Is a strategic approach to facilitating the role of agriculture in the region feasible and how

can it be implemented?

o How can collaboration at multiple levels occur (public-public, private-private or public-

private at the strategic and operational levels)?

o How can the constraints to innovation and co-innovation be reduced and the facilitators

enhanced?

The next section identifies the ideas emerging from the project’s interviews and focus groups within the

framework of a new policy platforms approach. This is based essentially on regions constructing their own

futures or ‘constructed advantage’ instead of comparative advantage (natural) or competitive advantage

(technical) (Cooke & Leydesdorff, 2006; Mothe & Mallory, 2006; McCall, 2010).

6 POLICY PLATFORMS FOR CONSTRUCTING REGIONAL ADVANTAGE

Cooke (2007), a key architect of regional innovation systems policy in Europe, has suggested a framework

for policy platforms to assist the development of ‘constructed advantage’. McCall (2009), referring

specifically to Tasmania, explains that constructed advantage has five assets that are fundamentally based

on networks of people and local knowledge in a region: infrastructure, leadership, capital, people and

learning. It is a process of building existing social capital that produces not only product innovation but also

local governance that enables innovation to occur. According to Cooke (2007) this involves:



Economy: a strategic focus on proactively ‘constructing’ future sources of economic competitiveness in the

region, as opposed to accepting the situation as it comes: inter-firm interactions, integration of knowledge

generation, both local and global business networks.

Governance: a strategic focus on seeking out governance mechanisms that support a proactive approach to

the region’s future: multi-level governance of d stakeholder interests, strong policy-support for innovators,

enhanced budgets for research, vision-led policy leadership.

Knowledge Infrastructure: the active involvement of knowledge-based organisations in constructing

advantage in the region: universities, public sector research, public sector agencies, consultancies, etc.

have to be involved collaborative problem-solving.

Community and culture: community and a public cultural orientation toward proactivity and innovation.

Table 5 analyses the data from interviews and focus groups through this policy platforms framework.

Whilst there are examples in each policy area, they appear to have emerged serendipitously and without

coordination which indicates that the agrifood industry in the NW Region’s lacks an explicit strategic

approach to developing regional innovation in the agrifood industry. This is likely to be inadequate if the

NW Region is to develop global competitiveness in agrifood production and marketing and provides strong

evidence from the regional community itself for the application of a systematic approach to developing a

regional innovation system such as McCall’s (2010) recommendation for the employment of a Regional

Development Platform Methods approach.



Table 5: Evidence of Cooke's (2007) four policy platforms operating in agriculture in the North West Region of Tasmania

Cooke (2007) Policy Element

Opportunities for future policy platforms Constraints to future policy platforms

Economy Strong local business networks, social connectivity

The development of a few highly innovative companies

Formation of the TAPG as a forum for coopetition5 between agribusinesses

Collaboration between retailers & marketers (e.g. on cool climate broccoli; purple carrots & heritage vegetable lines)

Review of Tasmanian GMO status early next year could lead to a proactive construction of future advantage

DED will fund innovation, expansion for export, not local domestic e.g. Tasmanian Innovation Fund

Competition between processor networks

Increasing economic non-viability of many medium to small farms

Growers reluctance to share ideas or source info from local networks

A question of whether the level of public support militates against the development of efficient and effective agrifood chains

Reliance of many on ‘someone else’ (the government) to assist

Historic reliance on the easy solution of processed commodities

Governance The development of production & marketing clusters

Unassisted evolution of new farming business models

New TIA exemplars of alternative business structures and business models

Legislative roadblocks, hindrances and planning constraints

Siloed government information

Lack of understanding of all levels of government about modern agriculture and the needs of innovative businesses per se

Knowledge Infrastructure

Establishment of some farm benchmarking groups

Emergence of ‘big data’ projects as part of Sense-T

The establishment of TIA with distributed bio-physical research capacity

The development of multi-faceted private research capacity (e.g. Serve-Ag, Simplot ideation)

Emerging productivity and value chain focus

Private-public research collaboration

Privately sponsored agricultural travel tours

DEDTA business development workshops e.g. ‘Business with China’

Lack of take-up and persistence of farm benchmarking groups

Decline of the VET training capability at Burnie

Increasing disempowerment and hopelessness by some farmers

Lack of skills to increase economic non-viability of medium to small farms

Rapidly declining enrolments in VET agricultural training

Poor existing knowledge and skill levels

Community and culture

Small longstanding networks that meet to generate ideas

Consultancy that organises focused international farm travel tours

Influence of the ‘kiwis’ on innovation in the dairy sector

The role of networking in new industries (e.g. tulips, truffles, whisky)

Expressed conservatism & risk aversion of farmers

Average age of farmers in the high 50s (varies considerably by LGA)

Low motivation and skill levels amongst young people

5 Coopetition occurs when companies who are otherwise competitors collaborate to solve common problems (Hearn & Pace, 2006; Kotzab & Teller, 2003; Nalebuff &

Brandenburger, 1997).



Therefore, if this is the evidence of what currently exists that facilitates or constrains the

development of the Cooke’s (2007) four policy platforms, what is the role of government in

facilitating the future development of a ‘preferred scenario’ for the future of the North West region?

This then, leads to the question of what are the plausible, probable and preferred scenarios of the

region? The following section outlines the futures envisaged by the respondents consulted by the

planning process.

5 SCENARIOS FOR THE FUTURE OF NORTH WEST REGION OF TASMANIA IN 2025

The future is not predetermined and not predictable, but can be influenced by our choices in the

present. We do not know what will happen in the future, but this ignorance is not complete. There

are methods by which we can conceptualise possible future trajectories and one of those

techniques, scenario development, has been used in this research.

Scenarios are stories about how the future business environment may develop. Good scenarios are

plausible, internally consistent, relevant and challenging and usually involve both the intuitive views

of those involved and quantitative forecasts. Scenarios are not predictions, extrapolations or stories

about the strategies of particular organisation (van der Heijden, Bradfield et al. 2002). Joseph Voros

(2003) has clearly articulated a framework of futures classifications which has been adopted in this

report. This report also recognises that futures are ‘trajectories’ which will be influenced over time

by the ‘drivers of change’.

The farmers, agribusiness personnel and public sector managers consulted provided their views of

the plausible futures for the NW Region which supported and extended the quantitative data

gathered in the first stage of this project. Those have been collated into the following scenarios for

NW Agriculture in 2025:

Figure 2: The futures cone

(Voros 2003)



5.1 “BATTLING THE BOOM AND BUST”

This scenario envisages a continuation of the ‘boom and bust’ cycles that have historically plagued

the NW Region’s farmers since it was settled, but with a continued decline in competitiveness:

Continuing dominance of commodity production from the average 150 ha farm;

Continued fierce independence and separation among and between levels of the chain;

Average ROI for NW farms falls below 2%;

Quality labour inputs are increasingly difficult to employ so these small farms increasingly

rely on labour hire firms and 457 Visas and backpackers which are based mostly on Asian or

European student labour;

As older farmers reach retirement age they increasingly sell their assets to lifestyle farmers

whose main source of family income is off-farm. These farms, although they may contribute

to other sectors such as tourism, are generally of low productivity and will detract from

regional productivity by constraining consolidation and economies of scale;

Some of these properties from older farmers are aggregated into larger farms operated by

existing large farmers or cashed-up new entrants from other industries;

The ‘last man standing’, Simplot (Australia) Pty Ltd’s factory at Quoiba persists till Tasmanian

and Federal Government’s refuse further support and the Simplot family in Boise, Idaho,

demand a move to the Murrumbidgee Irrigation Area, NSW, or elsewhere to improve

factory performance;

Continued industry reliance on centralised processing and distribution options;

Successive State Governments fail to recognise the role of non-farm factors in the industry’s

decline:

o The absence of strategic planning for Agriculture by State Government;

o Over-governance from 29 LGAs state-wide and 9 LGAs in the NW Region.

o The burden of red and green tape exceeding 30% of effort for farm employers;

o Continued anti-business stance of public servants who are increasingly remote from

agriculture (or their customers in general) and lacking in any knowledge of modern

agriculture;

Freight subsidies are removed by the Federal Government following long term lobbying from

the large mining states (e.g. Western Australia, NSW) in return for an increased GST share

for Tasmania’s social welfare agenda;

Small NW farms increasingly focus on local commodity fresh market supply; larger farms

trend towards niche production and bespoke, direct supply to mainland domestic quality

outlets; some farms form production and marketing clusters for national domestic or

international supply.

5.2 “BIG AGRIBUSINESS”

This scenario envisages the increasing engagement of corporate agriculture by Australian financial

institutions looking for long term stable yields and Australian agribusiness companies hedging risk as

climate change affects cool temperate production across the mid-latitudes of the continent as well

as international agribusiness seeking ‘clean and green’ direct supply to major Asian supermarkets:



Reduced disaggregation of 2013 farm holdings to smaller niche producers, lifestyle farmers

and non-traditional farm enterprises (e.g. farm tourism) and increased aggregation of

smaller farms into large corporate farms;

Average ROI for commercial NW farms increases above 2%, but unit costs fall and margins

increase due to improved scale for commodity production;

Division and professionalisation of labour occurs on larger corporate farms but quality

labour inputs are increasingly more difficult to recruit for small farms. The latter increasingly

rely on labour hire firms and 457 Visas based on Asian labour;

Increasing mechanisation as electronics makes smart mechanisation possible on smaller

scale reducing labour demand;

Employees of corporate and large farms increasingly have tertiary qualifications – 50% have

VET diplomas/certificates (currently 25%), 25% agricultural degrees (6%), 5% masters

degrees (0.25%), 2% PhDs (0.2%) and increasing (Bonney 2008);

Some smaller properties are aggregated into larger farms operated by existing large farmers

or cashed-up new entrants from other industries;

Corporate dairy companies have expanded the area from traditional dairy into new dairying

areas (e.g. Tunbridge/Ross, Derwent Valley) and some land has reverted back from

uneconomic smallholder commodity vegetable production. Some smaller, marginal dairy

farms have stayed viable by the use of robotic milking machines;

Larger vegetable producers have similarly employed technology to reduce unit costs and

improve productivity and sustainability with minimum tillage precision drilling and chemical

application equipment and the use of in-field, pre-processing equipment;

Simplot (Australia) Pty Ltd’s factory at Quoiba has been refurbished, other large

agribusinesses (e.g. Costas) and medium-sized processors (e.g. OneHarvest) have moved to

Tasmania to hedge their exposure to climate risk for fresh produce;

Value-adding of commodities is a growing trend across agriculture to improve margins for

domestic markets and gain access to larger food safety conscious niche Asian markets;

State Government has recognised the primary role of agriculture to the state’s economy and

consequently have:

o Developed strategic planning for Tasmanian Agriculture with specific regional plans

which focuses Whole-of-Government effort on regional and state agricultural

strengths that maximise GSP contribution;

o Rationalised local governance in the NW Region;

o Developed a single reference point for development applications and compliance

assistance for SMEs with local access;

Freight subsidies have been continued by the Federal Government, but are increasingly

irrelevant as alternatives are developed with less risk;

Large agrifood marketers and processors have collaborated to run a fast ferry service across

Bass Strait using a fleet of leased fast ferries for the peak 6 months of agricultural

production;

Australian supermarkets increasingly having to compete with Asian supermarket

conglomerates for Australian/Tasmanian food;

Agrifood production has broadened somewhat:



o Larger family farms trend towards niche production and bespoke, direct supply to

mainland quality retail outlets;

o Mixture of small to medium farms for production and marketing clusters supplying

national domestic or international markets;

o Corporate farms using their economies of scale to produce:

Safe, traceable high volume, higher value commodities that are value-added

for national domestic or international supply;

High volume, low value commodities for national domestic supply;

Tasmanian Agriculture at the farmgate is recognised as contributing 5% GSP or $1.65 billion

(excluding aquaculture). The NW Region’s contribution is 50% of this figure, $818 million

representing a regional growth rate for agriculture of 3% when the rest of the state’s

economy has averaged only 1% over the twelve years.

5.3 “DIVERSITY RULES”

This scenario envisages the growth in the broad diversity of NW Agriculture; diversity of products,

methods and business models deriving from the diversity of new entrants (culture, experience,

religion and educational background) and the broadening worldview of many local residents. This is

driven by increasing corporate investment along with increasing viability of family farms through

higher value commodity production and value-adding of commodity products as well as high value

niche production:

Smaller 2013 land holdings are being aggregated into existing larger family farms or those of

cashed-up new entrants from other industries or corporate holdings

Disaggregation of 2013 land holdings into low productivity non-traditional farm enterprises,

lifestyle farms and ribbon development in prime agricultural areas has been halted;

Average ROI for commercial NW farms increases above 2%, but unit costs fall and margins

increase due to improved scale for commodity production;

Division and professionalisation of labour occurs on larger corporate farms but quality

labour inputs are increasingly harder to recruit for small farms. The latter increasingly rely

on labour hire firms and 457 Visas based on Asian labour;

Employees of corporate and large farms increasingly have tertiary qualifications – 50% have

VET diplomas/certificates (currently 25%), 25% agricultural degrees (6%), 5% masters

degrees (0.25%), 2% PhDs (0.2%) and increasing (Bonney 2008);

As older farmers reach retirement age they increasingly access new business models (e.g.

unit trusts, leasing, equity partnerships) to retain ownership, ‘farmer status’ and achieve

retirement annuity;

Corporate dairy companies have expanded the area from traditional dairy into new dairying

areas (e.g. Tunbridge/Ross, Derwent Valley) and some land has reverted back from

uneconomic smallholder commodity vegetable production. Some smaller, marginal dairy

farms have stayed viable by the use of robotic milking machines;

Larger vegetable producers have similarly employed technology to reduce unit costs and

improve productivity and sustainability with minimum tillage precision drilling and chemical

application equipment and the use of in-field, pre-processing equipment;



Simplot (Australia) Pty Ltd’s factory at Quoiba has been refurbished, other large

agribusinesses (e.g. Costas) and medium-sized processors (e.g. OneHarvest) have moved to

Tasmania to hedge their exposure to climate risk for fresh produce;

Value-adding of commodities is a growing trend across agriculture to improve margins for

domestic markets and gain access to food safety conscious Asian markets;

State Governments has recognised the primary role of agriculture to the state’s economy

and consequently have:

o Developed strategic planning for Tasmanian Agriculture with specific regional plans

which focuses Whole-of-Government effort on regional and state agricultural

strengths that maximise GSP contribution;

o Rationalised local governance in the NW Region;

o Developed a single reference point for development applications and compliance

assistance for SMEs with local access;

Freight subsidies have been continued by the Federal Government;

Large agrifood marketers and processors have collaborated to run a fast ferry service across

Bass Strait using a fleet of leased fast ferries for the peak 6 months of agricultural

production;

Australian supermarkets increasingly having to compete with Asian supermarket

conglomerates for Australian/Tasmanian food;

Agrifood production has diversified:

o Small NW lifestyle farms increasingly focus on high quality local fresh market supply;

o Larger family farms trend towards niche production and bespoke, direct supply to

mainland quality retail outlets;

o Mixture of small to medium farms for production and marketing clusters supplying

national domestic or international markets;

o Corporate farms using their economies of scale to produce:

High volume, higher value commodities that are value-added for national

domestic or international supply;

High volume, low value commodities for national domestic supply;

Because diversification has costs, Tasmanian Agriculture at the farmgate in this scenario

contributes 5.5% GSP or $1.72 billion (excluding aquaculture). The NW Region’s contribution

is 50% of this figure, $867 million representing a regional growth rate for agriculture of 3.5%

when the rest of the state’s economy has averaged only 1% over the twelve years.

A ‘PREFERRED FUTURE’ FOR NORTH WEST TASMANIA

All three scenarios outlined are plausible, whilst two scenarios, “Big Agribusiness” and “Diversity

Rules” appear probable. However, the “Diversity Rules” scenario has the most appeal because it

preserves the fundamental social and natural characteristics of the North West region through a

combination of family-based farm businesses combined with the strength and stability that comes

from competitive large agribusinesses thus ensuring its prosperity and contribution to GSP.

If we adopt this preferred future, what actions by government may be necessary to support and

overcome the constraints to its development?



8. APPLYING THE RDPM AND COOKE’S (2007) POLICY PLATFORMS TO NW TASMANIA

“Regional policy needs to evolve, capitalising on region-specific assets, rather than

selecting from a portfolio of policy recipes that owed their success in different

environments.” (Asheim, Boschma and Cooke, 2011. P. 900).

More recent theories of regional development focus on human and social capital, innovation and

spatial dynamics as key components in understanding how small sub-national peripheral economies

are challenged to respond to global economic pressures, which highlight competition and the need

to construct some form of advantage over simply continuing to do what was good enough in the

past (competitive advantage) (McCall 2010). Critically, theorists agree that regional development

policy must be endogenous, moving away from a “cargo cult mentality” towards a knowledge-based

decision-making model. This places renewed emphasis on education, research and development as

the fundamental tenets of a new knowledge economy. Enhanced adaptation to contemporary

contexts requires skills, research and development, entrepreneurship and leadership, supply of risk

capital, investment friendly, macro-economic settings and a risk accepting community culture

(Cooke 2007).

It is generally agreed in the regional development literature that regional policy should focus beyond

comparative advantage, towards the construction of competitive advantage which maximises the

potential of regions. A key step towards achieving this is the creation of a regional innovation

system, based on a range of components including collective entrepreneurship, exploitation of social

capital advantages (and building networks where these do not exist), specialist small scale enterprise

and innovation support systems, regional financing and investment vehicles and labour market

adjustments (Cooke 2007). A regional innovation system develops, promotes and supports regional

knowledge capabilities, in an attempt to move away from natural or comparative advantage towards

constructing advantage. Constructing regional advantage is not an easy thing to do, as it requires

integrating and exploiting a range of assets from economic strengths to knowledge assets, good

governance and creativity (Cooke 2007). Thus the key question for regions becomes how to

configure a viable environment for stimulating individuals, organisations or regional economies to

adopt new practices and continuously innovate (Cooke 2007).

Constructed advantage, unlike its precedents of comparative and competitive advantage, embraces

the new dynamics of innovation and the capacity to exploit them which are essential to growth

(Cooke 2007). It highlights a knowledge based construction requiring interfacing developments in

various directions:

Economy: the regionalisation of economic development, “open systems” inter-firm

interactions, integration of knowledge generation and commercialisation, smart

infrastructures, strong local and global business networks.

Governance: multi-level governance of associational and stakeholder interests, strong

policy-support for innovators, enhanced budgets for research, vision-led policy leadership,

global positioning of local assets.

Knowledge infrastructure: universities, public sector research, intermediary agencies,

professional consultancies, all being actively involved as structural puzzle-saving capacities,

with commercial and public interest links to the market place – regionally and globally.



Community and culture: cosmopolitanism, sustainability, talented human capital, creative

cultural environments, social tolerance; all public factors which provide an exemplary

background for constructed advantage dynamics in a triple helix of university-industry-

government relations (Cooke 2007).

As an aspiration, a regional innovation system seeks to integrate its industries, stakeholders and

policies around ensuring, as far as possible, that regional advantage is created by judicious support

where required. Constructing advantage requires the relational embedding of institutions that assist

regions to evolve spatial knowledge domains. These emerge from existing comparative advantage

to form localised clusters that specialise in one thing, such as vegetable production. The link

between a regional innovation system and constructing advantage lies in the system becoming the

missing knowledge switching mechanism, which codifies and transforms tacit knowledge to

commercialisable knowledge (Cooke 2007).

The term 'regional innovative capability' refers to the ability of the regional innovation networks to

(Kautonen and Sotarauta 1999): (i) perceive and process the changes in the operational

environment, (ii) treat the available resources based on new information, (iii) acquire totally new

resources, (iv) combine these resources with the competencies aiming to increase competitiveness

and (v) transmit and process information and knowledge in large networks (Haarmakorpi and

Pekkerinen 2003).

The competitive advantage of a region greatly depends on its innovation, learning, networking and

leadership processes, shaped by its (specific) asset position, and the paths available to it. The

processes should lead to building regional capabilities, competences and core competences based

on regional resources, in order to enhance a sustainable competitive advantage (Prahalad and

Hamel 1990, Javidan 1998, Teece et al. 1997, Sotarauta 2000) leading to sustainable regional

competitiveness characterised by high productivity and innovativeness.

Since every regional economy is in practice an idiosyncratic mix of present resources and future

opportunities, there can be little in the way of routine approaches to actual implementation

programs. Successful development programs must inevitably be judicious combinations of general

principle and localized compromise, reflecting the actual geography and history of each individual

region” (Scott 2000, p. 116).

Mapping the preferred scenario against the four key directions (or policy platforms) identified by

Cooke (2007) helps us to understand what facilitates development in agriculture in North West

Tasmania and where the gaps lie (see table #). Doing this allows us to start to determine the actions

that stakeholders must take to capitalise on agriculture’s place based factors and construct

advantage in North West Tasmania.

By identifying and addressing the gaps, we can then start to inform future development activities in

the sector – what do these successes (evident in the opportunities table) tell us? We can identify

which ones have been driven by interventions, and which ones have simply occurred as serendipity.

What do they say about the intervention activities that have occurred? How much of these things

have happened as a result of serendipity and not through any targeted, or particularly innovative,

action? We can also determine what these things say about the state of the region and how it might

go about constructing competitive advantage.

So, what do these things tell us we need to do, in terms of both learning and acting?



In particular, the opportunities:

Suggest that NW Tasmania needs more of these things;

Are, in some cases, happening only in very small steps (or limited diffusion)

Highlight that we must determine how to accelerate these.

But the constraints also:

Suggest that there are long term matters of high concern that still need to be addressed;

Highlight that the agriculture industry in NW Tasmania has a significant way to go to be

viable (not sure if that's the right word);

Provide evidence that careful, integrated planning and actions will be required to turn these

factors around;

Act as baseline measures to chart the path from the point we are at, to where we need to

go.

If we conceptualise this in terms of the region’s dynamic capabilities, any action to construct

competitive advantage will depend on its visionary, innovative, learning, networking and leadership

processes, shaped by its specific asset position and the paths available to it (Haarmakorpi and

Pekkarinen 2003).

The answers should lead to building regional capabilities, competences and core competences based

on regional resources, in order to enhance a sustainable competitive advantage.

Cooke took the view that “if the local was to be the winner” a careful and methodical approach was

required. This will involve configuring regional resources based on the past development

trajectories, but presenting the future potential to produce competitive advantage existing in the

defined resource configurations.

This study adopted the view expressed by the stakeholders interviewed that the role of government

is to support community and market initiatives and refrain from interventions unless market failure

exists. With this approach, where there are existing activities that facilitate the policy platforms then

it is the role of government to support where appropriate. Table 6 following provides an analysis of

the preferred scenario, “Diversity Rules” in this regard; that is, it answers the question “What can

government do to support emergent community activities that will facilitate this future?”



Table 6: Supportive actions for Scenario 3 - "Diversity Rules" based on Cooke’s (2007) policy platforms


Opportunities for future policy platforms that support constructed regional advantage

Actions Scenario 3: Diversity Rules

Actions in this area will focus on doing more of the same, that is, supporting, coordinating & ensuring the environment for serendipitous achievement of innovation & entrepreneurship

Economy Strong local business networks, social connectivity

The development of a few highly innovative companies

Continued creation of opportunities for development & strengthening of social capital;

When issues arise, use these local networks to bring people together to explore their resolution;

Tell the success stories – celebrate the achievement of these innovative companies;

Understand & communicate the elements of their success;

Provide opportunities for exposure to new research, technologies & opportunities;

Agrifood production has diversified

Collaboration between agribusinesses has led to a fast sea-freight service across Bass Strait for peak periods;

Expansion of dairying via corporate investment, land conversion & technological innovation;

Reduced costs & increased sustainability via technological inputs;

Formation of the TAPG as a forum for coopetition between agribusinesses

Continue;

Collaboration between retailers & marketers (e.g. on cool climate broccoli; purple carrots & heritage vegetable lines)

Continue activity in this area;

Identify areas where collaboration may bring highest advantage (& match programs & support to these);

Review of Tasmanian GMO status early next year could lead to a proactive construction of future advantage

Watching brief;

DED will fund innovation, expansion for export, not local domestic e.g. Tasmanian Innovation Fund

Ensure DED program meets & understands the requirements of agribusiness;

Governance The development of production & marketing clusters

Project: o Identify agribusinesses in the region according to

product/scale/market; o Bring potential participants together; o Explore models for the development of

production/marketing clusters that offer synergy with regional situation & businesses;

Small lifestyle farms focus on high quality local fresh market supply;

Larger family farms trend towards niche production & bespoke, direct supply to mainland quality retail outlets;

Production & marketing clusters supplying national domestic or international markets;

Corporate farms using their economies of scale to produce: o High volume, higher value, value



added commodities for national domestic or international supply;

o High volume, low value commodities for national domestic supply;

Unassisted evolution of new farming business models

New TIA exemplars of alternative business structures & business models

Ensure that new farming business models & TIA exemplars are communicated broadly to industry;

Provide opportunities for farmers to understand & skill up to adopt them where appropriate.

Farmer retirements funded via access to new business models (trusts, leases etc);


Emerging productivity & value chain focus Support Value-adding of commodities is a growing trend;

Emergence of ‘big data’ projects as part of Sense-T

Ensure Sense T team have regular contact with agribusiness interests;

Provide opportunities for farmers to understand & potentially participate in the roll out of Sense T;

Ensure that farmers have access to data generated by the project;

The establishment of TIA with distributed bio-physical research capacity

Promote opportunities for information sharing &/or participation;

Establishment of some farm benchmarking groups

Promote existence of groups & opportunities for involvement;

Ensure that they are farmer driven;

The development of multi-faceted private research capacity (e.g. Serve-Ag, Simplot ideation)

Private-public research collaboration

Communicate & encourage information & sharing between organisations;

Create opportunities for industry to explore & collaborate with public research organisations;

Privately sponsored agricultural travel tours Travel scholarships for innovative farmers;

DEDTA business development workshops e.g. ‘Business with China’

Continue;

Community & culture

Small longstanding networks that meet to generate ideas

Facilitate continuation if necessary

Consultancy that organises focused international farm travel tours

Work with industry bodies to target potential areas for exploration & expand;

Influence of the ‘kiwis’ on innovation in dairy Ongoing learning – offer study tour to NZ, Europe, USA?

The role of networking in new industries (e.g. tulips, truffles, whisky)

Research



However, where there is evidence of market failure then government needs to consider the co-

design of public-private interventions to overcome the constraints to the development of the policy

platforms. Table 7 outlines some of the possible interventions that may overcome the market

failure.

Interviews with regional stakeholders strongly supported the notion of endogenous (bottom-up)

interventions. Several respondents urged caution regarding simplistic, mechanistic cause and effect

systems views for designing regional interventions. They emphasised the independence of regional

players and stakeholders and the complex, emergent nature of development.

Stakeholders strongly believed that small, ad hoc, problem-based interventions addressing high

priority problems was the most successful in generating the motivation of the key players. Such

interventions needed to be managed by a few of the key stakeholders and avoid large bureaucratic

‘steering committees’ that required formal government funding and support and all the

accountability mechanisms associated with this approach. A case in point being the way in which key

stakeholders are currently addressing the constraints to dairy industry expansion. Such an approach

adheres to the adage to “Start small, gain small wins to build commitment and do it again and again

and again...”

Hence, this approach underpins the development of Table 7.



Table 7: Designed interventions to facilitate Scenario 3 - "Diversity Rules" based on Cooke’s (2007) policy platforms


Constraints for future policy platforms that support constructed regional advantage

Actions required Scenario 3: Diversity Rules

Actions in this area will involve the design of joint interventions,

Economy Competition between processor networks

Remove/reduce competition between networks where it has negative impacts on sector viability by: o Understanding commercial realities; o Creating initial communication

opportunities including identifying no go areas;

o Identify areas of shared interests exist or common concerns;

o Identify areas of synergy between networks;

o Cooperative action;

Increasing economic non-viability of many

medium to small farms

Trial project - increasing the viability of small to medium scale? o Determine the success factors for small to

medium farms to survive and flourish o Create a business planning tool (business

diagnostic) with particular emphasis on agriculture;

o Understand small scale latent demand/markets;

o Explore the path to resource sharing and cooperation to increase scale;

Aggregation of smaller land holdings into larger units with diverse ownership

Loss of agricultural areas to non-productive uses halted;

ROI increases, costs fall, margins increase, improved scale for production;

Growers reluctance to share ideas or source

info from local networks

Create informal mechanisms to share ideas and information;

Use TIA and other organisations who can showcase projects and research to create enthusiasm;

Provide opportunities for farmer exposure to successful sectors or other regions;

Focus on building social capital initially;



A question of whether the level of public

support militates against the development of efficient and effective agrifood chains

Historic reliance on the easy solution of processed commodities

Reliance of many on ‘someone else’ (the government) to assist

Review public funding models and subsidies to: o Ensure that they recognise that some

returns will take longer to achieve; o Ensure that they do not in fact constrain

innovation and development; o Reflect the needs of agribusiness first;

Ensure that public funding does not result in lock in;

Ensure that public funding is not seen as the bail-out solution, thus stifling market evolution and change;

Increased contribution to GSP by Tasmanian agriculture;

Regional growth rate for agriculture greater than that of the rest of the state’s economy;

Governance Legislative roadblocks, hindrances and planning constraints

Review red and green tape burden on agribusiness and cross reference this against industry requirements (such as QA and other accreditation);

Increase integration in the planning system so that food security and supply becomes an essential part of land use planning considerations (e.g. British Columbia model – understand the food requirements of the population, the contribution of agriculture to economic development and build the system from this point);

Strengthen Right to Farm legislation to protect legitimate and appropriately conducted farming activity;

Develop a planning directive for agriculture, which offers a streamlined process and reflects contemporary agricultural practice.

Industry and private infrastructure is modernised and meets contemporary requirements;

Tasmania, and in particular, North West Tasmania is recognised as a cool climate growing location where establishment is streamlined and doing business is achievable;

Siloed government information

Create a regional strategic plan for agriculture and food (which is a flow on from this process);

Within this plan, identify opportunities where advantage already exists for NW Tasmania and include actions to market and promote these;

Rationalising local governance may include creating a regional networking platform via Cradle Coast Authority for council stakeholders

State Governments has recognised the primary role of agriculture to the state’s economy and consequently have: o Developed strategic planning for

Tasmanian agriculture; o Rationalised local governance in the NW

Region; o Developed a single reference point for



to participate in and share information around innovation, opportunities and constraints to agriculture;

Create a key contact central point for small to medium agricultural businesses to seek assistance through local and state government regulatory processes;

development applications and compliance assistance for SMEs with local access;

Lack of understanding of all levels of

government about modern agriculture and the needs of innovative businesses per se

Potential scoping project – agribusinesses articulate to government what they need: o Identify how NW agriculture needs to

interact and communicate with government and vice versa;

o What does government need to know; o What are the needs of innovative business

in this sector? o How can these be facilitated?

OR

Regional agriculture showcase, promoting the successes of the region and the needs of innovative businesses;

Freight subsidies have been continued by the Federal Government;


Lack of take-up and persistence of farm benchmarking groups

Take up of technology?

Decline of the VET training capability at Burnie

Rapidly declining enrolments in VET agricultural training

Project to explore this: o Is there a place for VET training in the

system anymore? o How do other places do it? o Are on farm models preferable/more

successful? o Create a new model – private operation of

facility?; buy in of expertise for training? Mobile service (on farm training)?

Quality labour inputs are increasingly harder to recruit for small farms resulting in reliance on labour hire firms and 457 Visas based on international labour;

Increasing disempowerment and hopelessness

by some farmers

Lack of skills to increase economic non-viability

of medium to small farms

Tap into existing project looking at agricultural skills and education

Provide opportunities for farmers to access

Employees of corporate and large farms increasingly qualified;



non-farm skills that are required for business success;

Community and culture

Expressed conservatism & risk aversion of farmers

Create opportunities for farmers to explore succession;

Provide resources for the development of exit strategies;

Average age of farmers in the high 50s (varies

considerably by LGA)

Explore a regional land trust model (or similar) that may allow farmers to consider retirement whilst remaining on the farm;



9. CONCLUSIONS

The research processes employed in this project have, for the first time, integrated the use of three

existing theoretical frameworks for developing a holistic, systems-based Regional Agricultural

Development Strategy:

The 7 Capitals Framework (Emery and Flora 2006);

A holistic framework for defining agrifood innovativeness and entrepreneurship framework

based on the work of Schumpeter (1934) an Austrian economist widely credited as the

‘father of innovation’;

The data generated by the above frameworks has then been interpreted through Cooke’s

(2007) policy platforms framework to identify appropriate forms of government support and

intervention.

The final interviews with stakeholders have elicited unanimous and unequivocal support for the

utility of these frameworks as a planning tool for regional planning to enhance the role of place-

based agricultural development.

Further critique of the project framework and the development of the ‘toolbox’ will be the subject of

the final Milestone report due on 31st December 2013.



APPENDIX A: SCALE SOURCES OF THE AGRIFOOD VALUE CHAIN INNOVATION & ENTREPRENEURSHIP SURVEY (FARM VERSION)

This survey is being conducted by the Tasmanian Institute of Agriculture (TIA) in partnership with the TFGA and other regional stakeholders (e.g. Cradle Coast Authority) as part

of a Rural Industry Research and Development Corporation (RIRDC) project to assist the development of agriculture to North West Tasmania’s regional economy. All input is

anonymous and individuals are not identifiable.

In this survey, we use the following definitions:

‘Innovation’ is changing an existing or creating a new product, business process, raw material input, market or way of managing the supply chain to improve the

efficiency and/or effectiveness of delivering value to consumers and the overall competitive advantage of the chain.

Where the term ‘product’ is used it refers to the crop produce, fibre or animals that you supply or market.

Your customer is the next person in the supply chain. Your consumer is the person who ultimately buys and consumes your products.

Your suppliers are the businesses from whom you buy farm inputs (e.g. fertiliser, seed, chemicals, technical advice).

PARAMETER OR CONSTRUCT SCALE (SOURCE)

Integration Form of governance

1. For our main enterprise we supply (Tick box): a. A spot market (we sell what we like, where we like, when we think we will get the best price) b. Our main customer on a specifications-based contract; c. Our main customer in a relationship-based alliance where we agree to work together and trust each

other; d. A company formed with our main customer where we each invested and shared our resources (equity-

based alliance); e. Vertical integration (the whole chain is owned by one company) (Gereffi & Frederick 2009; Peterson,

Wysocki & Harsh 2001; Wysocki, Peterson & Harsh 2006).

Demographic cross-cut 2. My level of education is (Tick box): a. Certificate 1-4 (apprenticeship, traineeship etc) b. Associate Diploma c. Diploma d. Degree e. Graduate Certificate f. Graduate Diploma g. Masters h. Doctorate i. My qualification is in Agriculture j. My qualification is in another field of study

Business size 3. The number of permanent employees our farm has is



Production scale 4. The number of hectares under production is

Innovation activities Human innovation efforts Type of innovation (after Schumpeter)

Firms in our value chain frequently (Yes-No-Don’t know-Non-applicable for introduction of innovation activities): 5. Invest in employee training, seminars, self-study, study tours and company visits (Hino 2010). 6. Invest in or host experimental trials. 7. Improve the packaging, quality or convenience of our products. 8. Seek new geographical markets (Schumpeter 1934). 9. Seek new sources of raw material inputs. 10. Improve marketing of our products. 11. Introduce new management structures and systems in the chain. 12. Introduce new production technology. 13. Participate in activities to build regional networks.

Innovation results In the last two years, the following activities done by value chain firms enhanced our own business success. Extent of significant contribution of applied innovation activity to business success – seven-point Likert scale with ‘Don’t know option’) 14. Improved the packaging, quality or convenience of our products (Hino 2010). 15. Entered new geographical markets or expanded supply to existing markets (Schumpeter 1934). 16. Accessed new sources of raw materials. 17. Improved marketing. 18. Introduced new management structures and tools. 19. Introduced new production technology. 20. Increased participation in regional networks.

Collaboration for innovation In our value chain there is effective collaboration to innovate between Extent of significant contribution of applied

innovation activity to business success – seven-point Likert scale with ‘Don’t know option’) 21. Food manufacturer (processors) with marketer and retailer(Hino 2010) 22. Farmers with food manufacturer (Hino 2010) 23. Food manufacturer (processor) or marketer with freight provider(Hino 2010) 24. Other (please specify)

Market intelligence Market intelligence Market response

Please tick your level of disagreement or agreement with the following statements concerning how we do business Extent of significant contribution of applied innovation activity to business success – seven-point Likert scale with ‘Don’t know option’) 25. In our farm we actively focus on serving the needs of downstream customers and consumers (Jaworski & Kohli

1993; Zielke 2010). 26. We regularly meet with our immediate customers to better understand their needs (Sellers-Rubio & Más-Ruiz

2009). 27. We develop solutions to the problems that affect our immediate customers and final consumers of our products



Market intelligence Market intelligence Competitor intelligence Long-term outlook Chain communication Whole-chain thinking Intelligence dissemination Strategy Strategy Customer orientation Communication Strategy, Information dissemination Non-coercive power Coercive power

and services without being asked to by our downstream chain partners (Goldman, Ramaswami & Krider 2002). 28. Our chain has processes to systematically and regularly measure consumer satisfaction (Goldman, Ramaswami &

Krider 2002). 29. We monitor how changes in the economy, technology and regulations may influence our immediate and ultimate

customers’ decision to buy from us (Jaworski & Kohli 1993; Zielke 2010). 30. We evaluate the strengths, weaknesses and competitive position of our competitors (other farmers), and the

competitors of our immediate customers (e.g. other processors, marketers) (Jaworski & Kohli 1993; Zielke 2010). 31. We strive to establish long-term relationships with our suppliers and customers (Zielke 2010). 32. Value chain members tend not to share information with other chain members (Jaworski & Kohli 1993; Zielke

2010). 33. We have a clear understanding of our ‘business model’, that is, how our business creates and delivers value to the

final consumer (Jaworski & Kohli 1993; Zielke 2010). 34. We use all information at our disposal to modify and develop products to satisfy our consumers (Jaworski & Kohli

1993; Zielke 2010). 35. We attempt to differentiate our products from other market alternatives (Jaworski & Kohli 1993; Zielke 2010). 36. Our business invests significantly in the market research and promotion of our products, not just through

commodity levies (Jaworski & Kohli 1993). 37. We gather information about our supply performance from our downstream customers and communicate that

information to our employees (Goldman, Ramaswami & Krider 2002). 38. The chain systematically shares experience and new information that will benefit the whole chain (e.g. on-line

databases, benchmarking groups, communities of practice, regular grower meetings with our customers etc) (Zielke 2010).

39. The chain provides information technology that provides a supply forecasting and planning capability through-out the supply chain to make the entire chain more efficient and effective (Zielke 2010).

40. Our farm business receives benefits from our supplier/customer when we regularly meet their needs/requirements (technical support/free advice/financial support/market information etc.) (Hino 2010)

41. We are sure our supplier/customer would drop us as a supplier/customer if we had a bad year/accident affecting production (Hino 2010).

Innovation orientation Innovation Risk orientation Risk orientation

Please tick your level of disagreement or agreement with the following statements concerning innovation

Extent of significant contribution of applied innovation activity to business success – seven-point Likert scale with ‘Don’t know option’) 42. In general the businesses in our value chain do not have a strong emphasis on developing new and innovative

services and/or products (Covin & Slevin 1988). 43. In general businesses in our value chain firms are willing to accept risks that have high potential social or

economic returns (Covin & Slevin 1988). 44. Our businesses may bend the contract/supply agreement rules where we think it’s appropriate (Hino 2010). 45. Our suppliers/customers share in the costs of the resources for new products and developing ideas (e.g. time,



Innovation orientation Innovation orientation

money, equipment, staff) (Hino 2010). 46. Our suppliers are actively involved in our innovation processes (Zielke 2010). 47. Our customers are actively involved in our innovation processes (Zielke 2010).

Entrepreneurial orientation Trust, strategic alignment Leadership and followership Trust, strategic alignment Strategic alignment Leadership and followership Collaboration/co-innovation Multi-level boundary-spanning Corporate incentivation, Power, value-sharing Form of governance Trust

Please tick your level of disagreement or agreement with the following statements concerning innovation

Extent of significant contribution of applied innovation activity to business success – seven-point Likert scale with ‘Don’t know option’) 48. Our chain has the ability to adapt new process and strategies to enhance performance (Bonney 2011). 49. Chain members have similar values, ethics and attitudes in the way we do business (Goldman, Ramaswami &

Krider 2002). 50. Our company has a low degree of confidence in our customers and suppliers (Bonney 2011). 51. Chain members believe that other chain partners will be reliable, trustworthy and honest (Bonney 2011). 52. The businesses in the chain regularly discuss chain strategy and have developed common strategies and business

goals (Bonney 2011). 53. The chain has a shared understanding of which firm is the chain’s lead firm (Bonney 2011). 54. Members of the chain rarely work together on joint projects or investments (Bonney 2011). 55. Our business regularly talks to our suppliers and customers at the strategic, management and operational levels

(Bonney 2011). 56. The lead company shares the risks and rewards of innovation with other businesses according to our contribution

to creating consumer value (Bonney 2011). 57. Disagreements/disputes are discussed amicably and resolved fairly without impact on relationships (Bonney

2011). 58. We don’t need contracts, just supply schedules at the most (Bonney 2011).

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