Enhancing innovation within the seafood industry; What...

Enhancing innovation within the seafood industry; What helps and hinders relationships between research providers and the industry?

NIWA Client Report: AKL2006-064 July 2006 NIWA Project: AUS03101

All rights reserved. This publication may not be reproduced or copied in any form without the permission of NIWA. This copyright extends to all forms of copying and any storage or dissemination of material in any kind of information retrieval system.

Enhancing innovation within the seafood industry; What helps and hinders relationships between research providers and the industry? Author: Kathryn Nemec Nemec Montague Associates Ltd

Prepared for

Business School, University of Auckland

NIWA Client Report: AKL2006- 0064 July 2006 NIWA Project: AUS03101

National Institute of Water & Atmospheric Research Ltd 269 Khyber Pass Road, Newmarket, Auckland P O Box 109695, Auckland, New Zealand Phone +64-9-375 2050, Fax +64-9-375 2051 www.niwa.co.nz

Contents

Executive Summary 1

1.0 Introduction 6

2.0 Background 7

3.0 Approach and Methodology 8

4.0 Research Findings 9

4.1 Current Initiatives that Enhance Research Provider-Industry Relationships within the Seafood Industry 9

4.1.2 Seafood Innovations Limited 9 4.1.2 Developing a long-term, strategic approach to research 11 4.1.3 SeaFIC’s Tools for Collective Action 12 4.1.4 Information sharing between companies 13 4.1.5 Company strategies that demonstrate good practice 14

4.2 Improving Research Provider-Industry Relationships: Issues within the Sector 15

4.2.1 Balance industry and science input into setting research priorities 15 4.2.2 Shift research priorities towards more added value research 16

4.3 Improving Research Provide-Industry Relationships: Issues for Research Providers 17

4.3.1 Manage relationships while developing commercial opportunities 17 4.3.2 Develop commercial acumen 18 4.3.3 Improve collaboration between research providers 19

4.3.4 Raise the profile of Universities as a research provider for the industry 20

4.3.5 Improve processes for engaging with industry when developing research proposals 21

4.3.6 Improve communication channels about research to the seafood industry 22

4.3.7 Make research more accessible to the audience 22

4.4 Improving Research Provider-Industry Relationships: Issues for the Seafood Industry 23

4.4.1 Improve collaboration within the Seafood Industry 23

4.4.2 Improve information sharing between companies and within the industry 24

4.4.3 Overcome barriers to funding research 25 4.4.4 Develop more experience with research 26

4.5 Strategies to Build Strong Research Provider- Industry Relationships 27

4.5.1 Build a research and development culture 27 4.5.2 Researcher mobility 28 4.5.3 Clustering and physical proximity 28 4.5.4 Build networks 29 4.5.5 Management of Intellectual Property 30 4.5.6 Agreements between Companies and Research Providers 32 4.5.7 Enhance technology transfer 33

5.0 Conclusions 34

6.0 Recommendations 39

Reviewed by: Approved for release by:

Executive Summary There is growing interest in research provider-industry relationships as a determinant of levels of innovation. The Organisation for Economic Cooperation and Development (OECD) noted that the performance of an innovation system increasingly depends on the intensity and effectiveness of the interactions between companies and knowledge based institutions. However, there is evidence that many OECD countries are lagging behind in the performance of these relationships. Within New Zealand, there is some evidence of a weak relationship between research providers and the seafood industry. This study1, as part of a wider research programme on innovation and economic growth in the seafood industry, aims to explore the factors that enhance or hinder relationships between research providers and industry. While previous OECD work on benchmarking industry-science relationships focuses primarily on policy instruments as tools to enhance relationships, this study utilised a qualitative approach to explore attitudes, perceptions and experiences of research provider-industry relationships within the seafood industry. In addition, case studies were used to highlight examples of good practice in relation to research provider-industry relationships. In particular this study aimed to explore; a) initiatives within the industry that are positively influencing research provider-industry relationships, b) areas where research provider-industry relationships could improve, and c) strategies to improve research provider-industry relationships. Initiatives within the industry that are positively influencing research provider-industry relationships: Seafood Innovations Ltd

Seafood Innovations Ltd has been established to facilitate more added value research and industry investment in research and development. It aims to:

• Ensure research is grounded in the commercial realities of companies • Enhance research utilisation through funding relevant research • Enhance collaboration between companies and research providers • Provide a mechanism to enable small and medium companies to collectively fund

research.

New groupings of research providers and companies (including medium sized companies) are coming forward to apply for funding. Seafood Innovations Ltd appears to be providing opportunities for organisational innovations to emerge, and more collaborative activity.

1 This study forms part of a wider research programme to identify some of the underlying factors that stifle and/or lead to successful innovation and economic growth in the New Zealand seafood industry. The programme arose from the overall lack of information about innovation in the seafood industry, and from mid 2003 the Foundation for Research, Science and Technology funded the University of Auckland’s Business School to work with the National Institute of Water and Atmospheric Research to further investigate innovation in the New Zealand Seafood industry over 4 years.

What helps and hinders relationships between research providers and the industry? 2

Research and Development Strategies The recent development of sector-wide research strategies could help to facilitate a long-term strategic approach to research. At a company level, there is some evidence that a more strategic approach to research and development may be emerging. Results indicate that research and development strategies may be increasingly used as a business tool within large and medium sized companies.

SeaFIC’s Tools for Collective Action SeaFIC’s Tools for Collective Action initiative is supporting collaboration and information sharing, and is an important mechanism for building trust and relationships within the sector. A key challenge for the initiative has been to encourage added value research and development projects to become part of the Collective Action project, where commercially sensitive information is more critical. Indeed, low levels of information sharing about research within the industry is frustrating for small and medium sized companies who are aware of research being conducted that would be relevant for their business, but are unable to access it due to propriety and financial constraints.

Information Sharing

There are good examples, such as JEMCO Ltd and NZMIC, where groups of organisations are building relationships and sharing information to address issues of mutual concern. Such groupings are providing the platform to mobilise resources for joint marketing, maintain market value, achieve volume of product, and enter or build offshore markets.

Good Practice at a Local Level

The case studies highlighted examples of strong research provider-industry relationships that demonstrate good practice at a local level. The case studies exemplified mechanisms to build relationships identified by the OECD. These include:

• Researcher mobility between research providers and industry. • Clustering a group of local companies around a research provider. • Encouraging young innovative companies to be spun out of research

organisations.

By exploring these mechanisms in detail, the underlying interpersonal and organisational features that help build good relationships were identified. These included:

• Build a culture of informal communication • Identify opportunities for organisational alignment • Work in partnership • Develop personal relationships • Use good project management strategies • Develop a learning and review culture.

Areas where research provider-industry relationships could improve: Areas where research provider-industry relationships could improve were identified. Some of these related specifically to research providers and others to the industry.


Develop research priorities in partnership

Initiatives are underway to support industry to have greater influence in the process of identifying research priorities. This is in response to the dominance of research providers in this process, and is a key factor to ensure the production of useful and relevant research. However, rather than one party or the other controlling this process, a partnership model should underlie the development of research priorities. The ideal is an iterative process between research providers and industry to develop research priorities that reflects both group’s understanding of key industry needs and issues.

Shift research priorities to more added value research There is strong agreement amongst industry and research providers about the need to refocus research efforts from resource management and biological research, to added value research, and research further along the value chain. Better utilisation of existing environmental and resource management research would enable more added value research to be funded.

Build trust across the sector

Several issues emerged that hinder relationships, not only between research providers and companies, but with each other (i.e. between research providers and between companies within the seafood industry). One of the key themes that emerged for both groups was the need to build trust. Within the context of this project, trust refers to open channels of communication, sharing information and working together collaboratively.

Research providers need to manage relationships while developing commercial opportunities

There is evidence that the commercial orientation of CRIs has negatively impacted on their relationships with companies and the industry, and damaged trust. This is consistent with a UK study on industry-science relationships which notes that the drive to commercialisation by research institutions can disrupt existing relationships and inhibits collaboration with industry.

More collaboration between research providers

The need for greater collaboration between research providers was identified. In part this has been hindered by government policy which encourages intense competition between research providers for funding, and requires CRIs to run as commercial operations, capture intellectual property, and to compete with other research providers for funding in a limited market. The process undermines trust and collaboration between research providers and appears to fragment the research community. One strategy to address fragmentation in the research community is to encourage greater specialisation of research providers and/or implement funding mechanisms which encourage greater collaboration between research providers for accessing government funding.

More engagement of universities with industry Linking graduates to the seafood industry is a key role for universities, and is an important mechanism for building research provider-industry relationships. Indeed, the presence of graduates in companies impacts on whether or not companies can implement newly available innovative technologies to increase their profit. Universities need to form stronger links with industry in order to ensure that graduates receive both the theoretical and the practical knowledge required by industry.


Strategies to improve research utilisation

Several areas for research providers to demonstrate a strong customer focus and improve relationships were identified and include:

- Make research more accessible to their audience - Improve channels for communicating added value research to industry - Engage companies more effectively when developing research proposals.

Mobilise small seafood companies to invest in innovation

Small companies with limited capacity to innovate, yet sharing common innovation issues, are a particular feature of the seafood industry. They represent a significant underinvestment in innovation. A strategy to enable small companies to cluster around issues of mutual concern or interest, jointly fund research, reach critical mass, and share the risks and rewards, needs to be developed. A lack of trust and low levels of information sharing, are barriers to establishing such clusters. However, good examples where these barriers have been overcome, such as JEMCO Ltd and NZMIC, can be followed.

Build research capacity within small and medium sized seafood companies

The understanding that added value research is needed to reduce costs and improve profitability is becoming more widespread. However, it was acknowledged that for small and medium sized companies, investment in research is still in its early days and companies need more experience with planning, commissioning and using research.

Strategies to improve research provider-industry relationships: Strategies and mechanisms to improve research provider-industry relationships were identified from the OECD work, the case studies and interviews. The case studies in particular demonstrated the effectiveness of these strategies. Research mobility and staff exchanges

Researcher mobility from research provider to industry facilitates networking and communication between companies and research organisations, providing the basis for the building relationships. The OECD noted that it is a critical element of industry-science relationships, but low rates of research mobility remains a major obstacle to improving linkages in a number of OECD countries. Within the case study, researcher mobility provided the opportunity to cement relationships and undertake future research and development planning.

Clustering

Linkages within research provider and company clusters that are co-located on one site appear to create very successful research provider-industry relationships. The benefits of physical proximity include the opportunity for ongoing informal contact, sharing resources, exchange of skills and information, networking and mutual problem solving. Clustering means both the research providers and companies have a financial stake in the commercial risk of the new project or venture. As a result, all parties have a vested


interest in the success of the project, ensuring motivation and incentive to build and manage effective working relationships.

Networking

Networking is an important mechanism to build research provider-industry relationships. Indeed, the bulk of research provider-industry relationships take place through informal and indirect channels, such as personal relationships and networking. Such networking provides the opportunity for the sharing and exchange of ideas, knowledge and innovation.

Develop agreements to guide relationship building

The formation of IP or collaborative agreements, or memorandum of understanding (MOU), provides the opportunity for relationship building. The process enables each partner’s contributions to be acknowledged and valued. In addition, agreements, such as MOU and collaborative agreements, between research providers and companies are useful tools to identify how the organisations are going to work together, issues that could arise and how they will be managed. Such agreements can be strengthened by implementing a system to monitor and review the relationship at regular intervals or at project milestones.


1.0 Introduction Innovation through the creation, diffusion and use of knowledge is a key driver of economic growth. Within the knowledge based economy, innovation is resulting from increasingly complex interactions at the local and national levels among individuals, companies and other knowledge based institutions. One of these complex interactions and trends influencing innovation in Organisation for Economic Cooperation and Development (OECD) countries is the growing importance of linkages and relationships between industry and the science base.2 The OECD3 note that the performance of an innovation system increasingly depends on the intensity and effectiveness of the interactions between companies and knowledge based institutions involved in the generation and diffusion of knowledge. However, there is accumulating evidence that many OECD countries are lagging behind in their industry-science relationships.4 Within New Zealand, there is some evidence of a weak relationship between industry and research providers within the seafood industry, which may be a barrier to achieving higher levels of innovation within the sector. For example, research providers have noted that the links between research providers and the industry were inadequate and the uptake of research results was only sufficient or poor.5 And from the industry perspective, the Foundation for Research, Science and Technology (FRST)6 have identified the following barriers to strong relationships:

• Intellectual property issues and commercialisation • Communication • Access to information • Delivery of results • The ‘laboratory’ focus of research, rather than relevance to end users’ needs • Researchers’ attitudes that are not conducive to good relationships with users.

Indeed, Jeffs notes that:

‘Despite capturing a large proportion of the available research funding, research providers do not appear to be seen as a reliable source of innovation for seafood enterprises. The nature of this relationship, and the production and management of valuable intellectual property from research and development activity by research providers warrants further examination’. 7

This study focuses on the factors that enhance and hinder relationships between research providers and the seafood industry in New Zealand. Key research questions concern the nature of the relationship between the industry and research providers, barriers to forming strong relationships, and areas for improvement. 2 Organisation for Economic Cooperation and Development (2002). Dynamising National Innovation Systems. OECD, Paris. pp7&10. 3 Organisation for Economic Cooperation and Development (2002). Benchmarking Industry-Science Relationships. OECD, Paris. pp14. 4 Ibid, pp7. 5 Hamer J, McLeod C. (1994) Fisheries Research Survey: Survey Analysis. New Zealand Fishing Industry Board, NZ. 6 FRST (2002). User Survey 2002, FRST Evaluation Report. pp14. 7 Jeffs, A. (2003). Review of Knowledge on Innovation in the New Zealand Seafood Industry. NIWA Client Report: AKL2003-141.


2.0 Background The OECD8,9 notes that the following factors enhance industry-science relationships and networking:

• Labour mobility between universities/research institutes and industry. • Willingness and ability of firms and institutions to interact and hence share and

exchange information to ensure knowledge flows. • Linking publicly financed research organisations and a cluster of local industries. • Young innovative firms that are spun out of research organisations. ‘Government

rightly attach priority to encouraging spin-offs from public research to stimulate innovation. Spin-offs fill a gap between research results and innovative products and services’.

• Provision of skilled graduates to industry. ‘This is essential to companies wishing to adopt new technologies, new instruments and methods for industrial research and an increased capacity for problem solving’.

In addition to enhancing the effectiveness of an innovation system, effective industry-science relationships also improve the utilisation and impact of research outputs. The study of research utilisation sheds light on why industry-science relationships are important. Research utilisation is traditionally thought of as a linear process; research leads to dissemination which then leads to application. The focus is on getting the word out with the assumption that good ideas will be used by those that hear about them. However, the understanding about knowledge emerging from the literature reveals that the process is complex, transactional, iterative and dependent on the researchers and users pre-existing knowledge, beliefs and experiences. In addition, research knowledge is filtered at various points along the decision-making process, and often political, economic and even ideological issues may hinder or help its application.10 The same applies to the adoption of innovation. As for research utilisation, there is an assumption that organisational decisions to adopt innovation are made in a rational, linear manner, and require a singe decision. However, the empirical evidence on innovation adoption in organisations is ‘more consistent with an organic and often rather messy model of assimilation in which the organisation moves back and forth between initiation, development, and implementation, punctuated variously by shocks, setbacks and surprises’.11

��

A more complex model12 is partly expressed in the following diagram which indicates that diffusion (of research, knowledge, or innovation) is subject to a range of influences. All of these influences are subject of the beliefs and perceptions of the actors involved, and the relationships between them.

8 OECD (2002). Dynamising National Innovation Systems. OECD, Paris. 9 OECD (2002). Benchmarking industry-science relationships. OECD, Paris. 10 Weiss, C.H. (1979) "The many meanings of research utilization." Public Administration Review, (Sept./Oct.), 426-431. 11 Greenhalgh, T. Robert, G., Bate, P., et al (2004). How to spread good ideas: A systematic review of the literature on diffusion, dissemination and sustainability of innovation in health service and organisation. Report for the National Co-ordinating Centre for NHS Service Delivery and Organisation R & D (NCCSDO). 12 Wilson, T. (1994). Monitoring and Evaluating Information Related Research. Department of Information Studies, University of Sheffield. http://informationr.net/tdw/publ/papers/resmon.html


The above diagram highlights the complexity of the research utilisation and innovation process, and reveal how the interdependencies are mediated by relationships, transactions, and linkages. Research provider-industry relationships influence various points within this process. While the OECD recommends a range of government level policy instruments and incentives as interventions to strengthen relationships, this study aims to explore how research provider–industry relationships can be enhanced in practice. Indeed, what does a strong research provider-industry relationship mean in practice? The case studies, conducted as part of this study, and which explored good practice in terms of these relationships, provided insight into what a strong relationship means. The case studies highlighted that building a sense of collaboration and trust are primary building blocks for developing strong research provider-industry relationships. (See Appendix 1 for the case studies). The factors that help build collaboration are especially relevant for the emphasis on partnership building within current business models. While the importance of collaboration is widely acknowledged, the achievement of it is frequently elusive. A recent survey indicated that chief executive officers (CEOs) believe collaboration to be absolutely critical, but while collaborative aspirations were high, actual implementation was dramatically lower. Only half of the CEOs believed their organisations were collaborating beyond a moderate level. Citing a lack of the skills and expertise needed to partner externally, many CEOs refer to partnering as “theoretically easy” but “practically hard to do.”13 This study aimed to explore research provider-industry relationships within the seafood industry and identify; a) current initiatives and trends that are enhancing relationships, b) areas for improvement, and c) strategies and mechanisms to build strong relationships.

3.0 Approach and Methodology The exploration of research provider-industry relationships was the key focus of this study. The methodology required a systems approach which provided the opportunity to identify a range of factors (for example, organisational, interpersonal) within a system, and the

13 IBM Corporation (2006). Expanding the Innovation Horizon: The Global CEO Study. IBM Business Consulting Services, 2006.


dynamics of how they interact.14 These dynamics and interactions were best explored with a qualitative methodology, enabling the exploration of perceptions and beliefs held about research provider-industry relationships, the identification of key factors that influence these relationships, along with current initiatives and areas for improvement. The project was conducted in two phases. The first phase involved in-depth interviews with stakeholders from the seafood industry, research providers, and government. The second phase involved three case studies which highlighted examples of good practice; where seafood companies and research providers are working together effectively and innovatively. Using themes emerging from the OECD work in this area, the case studies explored;

• Features of an entrepreneurial ‘spin-off’ company that enhanced collaboration with a university research group.

• Why and how companies clustering around a single research provider enhance communication and exchange of information.

• The positive impact of staff mobility from a research provider to a company in terms of technology transfer and building research capacity within industry.

(See Appendix 2 for the detailed methodology).

4.0 Research Findings Issues and themes that emerged from the research are grouped within the following three sections:

• Initiatives within the sector that enhance research provider-industry relationships. • Areas where research provider-industry relationships could improve. • Strategies to improve research provider-industry relationships.

The findings in this report draw mostly from the interviews, but findings from the case studies are also incorporated. 4.1 Current Initiatives that Enhance Research Provider-Industry Relationships within the Seafood Industry Initiatives and trends that are influencing the development of research provider-industry relationships within the seafood industry were identified. These are occurring at both an industry level, and with companies. 4.1.2 Seafood Innovations Limited The lack of a mechanism for the industry to influence research and funding decisions, particularly of added value research, prompted the establishment of Seafood Innovations Ltd approximately one year ago. This was achieved via the establishment of a research consortium, financially supported by the Foundation for Research, Science and Technology (FRST), which aims to;

• Enhance the relevance of FRST’s public good science and technology investment.

• Improve the use and uptake of knowledge.

14 Smith, K. (2000) Innovation Indicators and the Knowledge Economy: Concepts, Results and Policy Challenges. Keynote address at the Conference on Innovation and Enterprise Creation: Statistics and Indicators, France 2000.


If you fund what they want they’re more likely to use it, and co-funding research projects with industry is one way to achieve buy in to the process and end results. (Government)

• Enhance collaborative research provider – user networks.

• Increase private sector investment in research, science and technology.15

Seafood Innovations Ltd aims to underpin growth of the $1.2 billion dollar export industry by optimising the returns on the current seafood harvest through developing and commercialising innovative, consumer appealing, added value seafood and marine products. The new joint venture research consortium company is 80 percent owned by SeaFIC (the New Zealand Seafood Industry Council Ltd) with Crop & Food Research holding 20 percent of the shares. The Foundation for Research, Science and Technology (FoRST) has allocated significant financial backing (40%) through its research consortia initiative. The company promotes the carrying out of research relating to the seafood industry in New Zealand. (www.seafoodinnovations.co.nz) The establishment of Seafood Innovations Ltd is a milestone for the industry and represents a number of features that will enhance research provider – industry relationships. In addition to FRST’s aims above, the company aims to:

• Increase research funding available for joint research provider-industry, added value research projects.

Seafood Innovations means there’s more money coming in to the research system which will pull everything up. It’s increasing the resource base for the whole sector. (Industry) From a funding perspective it’s still early days. Only started to see serious investment in the seafood industry in the last 4 to 5 years, it’s only now that things are starting to roll along. Also starting to see more R&D strategies. (Industry)

• Fund research projects that are at the added value end of the spectrum in order to

redress the research focus on resource management that has dominated up until recently.

• Involve seafood companies in the research project to ensure that research is firmly

embedded in the commercial realities of the company.

• Provide a mechanism to enable companies to collaborate within the research process, to pool their resources collectively and to mutually benefit. The approach provides an incentive to bring together companies disenfranchised from the research process, with the rationale that if they all fund research, they can share the benefits.

• Ensure any research funded will generate profit for the company. This places

considerable emphasis on the research provider becoming more customer focused, 15 FRST (2004). Request for proposals for research consortia. FRST, New Zealand.


and attuned to producing on time and within budget. The research providers need to be able to demonstrate that they have a clear understanding of the commercial benefits of a research project.

We’re having to drag research providers to become more responsive to market signals. (Industry)

Early outcomes from Seafood Innovation Ltd indicate that requests for proposals have prompted new combinations of research providers and companies to emerge, and that more medium sized companies are now starting to become involved in research projects. This has implications for more collaboration and trust between organisations, and increased information sharing. Some concerns were raised about whether the incentives offered by Seafood Innovations Limited for industry to collectively invest in research will pan out, especially given the competitive nature of the industry. While it is still very early days for Seafood Innovations, progress toward delivering on their aims should be monitored.

It’s possible but some players won’t go down the industry path – they’re too individualistic. (Industry)

4.1.2 Developing a long-term, strategic approach to research In addition to Seafood Innovations Ltd, recent and current initiatives aim to develop a more long-term, strategic approach to research. These initiatives aim to facilitate industry involvement with setting the research agenda, and ownership of the research results.

Ø Research Strategy Report, LECG16

The LECG research strategy addresses concerns raised previously by LECG17 about the need to improve how research is purchased, and the extent to which the industry can access and influence this process. They described three strategies for industry, which were;

• develop its own framework for assessing the value of research • purchase more research • ensure that research is driven off commercial enterprise and industry strategy

and requirements. The research strategy will be used by FRST as a basis for funding decisions, and will provide guidance to both research providers and industry about broader research needs in the seafood industry.

Ø Aquaculture Sector Strategy

An aquaculture sector strategy is currently being developed and aims to identify key issues, and opportunities for research and growth for the sector. The aquaculture strategy is providing a platform around which industry groups and companies can work together. The process of developing it is helping to engender a

16 Moore D., Birnie D. & Hellstrom J. (2004). Coordination, growth and innovation in the seafood industry: research perspective. LECG, Wellington. 17 LECG (2004). Development framework for the New Zealand seafood industry. Report prepared for the New Zealand Seafood Industry Council Ltd., Wellington.


sense of greater working together and collaboration. It’s providing the opportunity for contact with other industry groups and networking. It’s being recognised across the board that there are opportunities that can be formalised. (Industry)

A more strategic approach will help to address questions raised by some respondents about how decisions about research priorities are currently made. As one respondent commented;

Research providers don’t seem to find out what industry needs are – don’t know how they do it – it (their understanding of industry research needs) all seems to be based on particular relationships and what’s discussed within that relationship. (Industry)

At a company level, several comments indicated a stronger emphasis on developing a more strategic approach to research than previously. And if a company has a research and development strategy, they are more likely to seek out and form relationships with research providers. Amongst the seafood companies that participated in this study, most of the large companies, and one medium sized company, had a research and development strategy. It was noted that during the last 10 years or so, research and development, and business planning by seafood companies has improved significantly.

They now do this (research and development strategies) themselves, and FRST funding for some grants, such as the Technology for Business Growth requires it. Companies now know how to do it and see them (research and development strategies) as being important. They have to have them if they need to raise capital. (Research Provider)

In terms of research and development strategies it’s still early days for the seafood

industry – but the ball is starting to roll and gain momentum. (Industry)

The general rule is that R&D becomes more important as the company gets bigger. We’re now starting to see them (medium sized companies) coming through – and new groups of people working together. We want to see a more strategic approach to R&D. (Industry)

This study has not quantified the extent to which seafood companies now have research and development strategies in place. However, the above comments indicate a possible improvement from a 1996 study that found less than a quarter of marine related companies prepare research plans, though seafood companies had a higher (but unspecified) level of research planning.18 4.1.3 SeaFIC’s Tools for Collective Action Greater cooperation among members of the seafood industry is one of the proposed outcomes from SeaFIC’s Tools for Collective Action project. The project aims to build on existing collective industry initiatives to encourage greater cooperation among members of the seafood industry. Proposals were sought from across the industry for project ideas to take part in the pilot, and a number of projects are now up and running. Projects involve organisations working together to take advantage of development opportunities, maximise the value of seafood industry products, and grow the value of its export projects.19

18 Ocean Blue (1996). Great leagues forward: An investigation of the promotion and development of marine science in New Zealand. Ocean Blue Ltd, Auckland. pp.31. 19 Grondelle, C. (2004). Tools for Collective Action. Seafood New Zealand, Oct 2004, pp10-13.


To date, most of the projects taking part in the Tools for Collective Action initiative concern resource management issues, rather than added value projects. This reflects a concern raised by several respondents about the competitive nature of the industry and the reluctance to share information, particularly commercially sensitive information. A challenge for the Tools for Collective Action initiative is to encourage added value projects to take part, especially where commercial sensitivity is more critical. The projects could be used to demonstrate benefits of sharing information to the sector, and highlight strategies and scenarios for sharing information and building trust between companies. 4.1.4 Information sharing between companies The willingness of companies to exchange information is an indicator of collaboration and trust. The following examples highlight that some organisations are sharing information.

Ø New Zealand Mussel Industry Council It was acknowledged that the New Zealand Mussel Industry Council (NZMIC) is making progress towards facilitating information sharing within the mussel industry.

NZMIC are good at sharing information. (They are) now more willing to share information than before. That’s because they’ve found out that collaboration can be beneficial for them – it can benefit the bottom line. (Research Provider)

For example, they are currently taking part in SeaFIC’s Tools for Collective Action project, with the aim of developing mechanisms for sharing commercially sensitive information. The first phase involves facilitating companies to share environmental related information and establishing processes that begin to build trust. The second phase builds on the first, with the outcome of sharing information about marketing, and with a view towards more collaboration in the future. It is hoped that progress made will underpin NZMIC’s work to further develop their marketing programme in the United States.

Ø JEMCO Ltd – A collective of oyster growers Accessing and developing national and international markets, and the realisation of the effort and investment required to achieve this, was one of the main incentives behind forming JEMCO Ltd. As a result, and in the late 1990’s, five companies formed a joint venture called JEMCO Ltd. The 4 companies involved were four of New Zealand’s largest and most established oyster grower/processors (Biomarine Ltd, Clevedon Coast Oysters, Kia Ora Seafood Ltd, and Pacific Marine Farms 1996 Ltd), and CSI Seafood Ltd who is responsible for marketing JEMCO Ltd products. JEMCO Ltd is now New Zealand’s leading grower, processor and exporter of Pacific oysters, and represents in excess of 70% of New Zealand’s annual production.20

Essentially, JEMCO Ltd provided the platform for a group of companies to undertake joint marketing, maintain market value, and address issues of mutual concern to growers. Furthermore, the commercial collaboration enabled the collective to achieve the volumes of product required to enter into a significant new offshore market. In order to achieve this, it was noted that the relationships between the members have taken considerable time and effort to establish.

20 www.oystersnz.com


Ø Centralised Mussel Processing21

Another example of collaboration in the aquaculture sector is a joint venture formed between Sanford Ltd, Sealord Group Ltd and Kiwigreen Investments Ltd in relation to mussel processing. Again, this is based on a longstanding relationship that has involved a willingness to share information. The joint venture was essentially a consolidation, aiming to reduce the cost structure for production of the product.

(It is a) sign of the times, companies need to develop more cost effective ways of working in order to improve margins. (Industry)

It’s (mussel industry is) seen as a very competitive industry so this (initiative) is a good sign, especially when times are hard. Can’t be this competitive when times are hard. (Industry)

4.1.5 Company strategies that demonstrate good practice The case studies provided insight into company based strategies and initiatives that can enhance research provider-industry relationships, and provide a platform for building a collaborative approach. The following strategies for building strong relationships were identified, several of which overlap and are synergistic; building on each other to reinforce attitudes and behaviours.

Ø Build a culture of informal communication Informal, regular and open communication was consistently described as the most critical factor in building positive research provider–company relationships. For the three case studies, open communication was the key attribute of their relationships and was highly valued.

Ø Identify opportunities for organisational alignment Organisational alignment refers to a mutual understanding that both parties derive benefits from their arrangements and have an interest in each other’s success. Some of the shared strategies, values and aspirations that emerged from the case studies included:

• Shared understanding of the importance of a research and development culture. • Similar strategies for business development and future directions, for example

they have similar ambitions for growth and are motivated to contribute to the industry as a whole.

• Importance of cultivating an organisational learning and self-evaluation culture. • Common understanding of project risks and benefits. • Similar organisational structure, i.e. flat and non-hierarchical. • Support for innovation at a senior level. • Mutual respect for confidentiality.

Ø Work in partnership

It was noted that working in partnership can improve long-term planning and the stability of a long-term relationship through building trust and communication channels. In addition, risks can be managed more effectively within a partnership framework. Strategies to assess,

21 Mussel Processing Centralised, News Review, Seafood New Zealand, Sept 2004, pp.4.


review and improve partnership relationships also need to be considered when research providers and companies work together.

Ø Develop personal relationships Personal relationships appear to strengthen research provider–company relationships, and provide a point of contact within an organisation. These relationships facilitate networking and informal communication. Attributes of a personal relationship that contribute to research provider-company relationships included:

• Based on mutual respect. • Committed to the best possible outcome for their partner. • Realistic and pragmatic.

The case studies also highlighted that attributes of strong relationships arise from a context of wider organisational practices, settings and dynamics. These included:

Ø Use good project management strategies A range of strategies to manage the project relationships were described within the case studies. These included:

• Regular project meetings to discuss progress, issues arising and plans. • Early warning systems for arising issues. • Taking advantage of opportunities for informal meetings, such as doing fieldwork

together. • Informing CEOs about projects when necessary and ensure relationships are

managed at a senior level.

Ø Develop a learning and review culture Internal organisational mechanisms that facilitate the development of a learning and review culture provide the opportunity for organisations to consider the processes of how they work, what factors lead to desired outcomes and how they can improve. Staff discuss, share ideas, make observations about projects, and identify the linkages between then. For one case study organisation, their investment in developing a learning culture was from an appreciation that innovation arises from unexpected and serendipitous events. 4.2 Improving Research Provider-Industry Relationships: Issues within the Sector The following three sections identify issues that currently hinder relationships between research providers and industry. Improving these areas would enhance relationships, collaboration and innovation. Issues for the sector as a whole are described in this section, followed by issues for research providers in Section 4.3, and then issues for seafood companies in Section 4.4. 4.2.1 Balance industry and science input into setting research priorities The previous section described the aim of Seafood Innovations Ltd to ensure greater industry input into setting research priorities. This initiative will address the strongly held view that industry need to be more involved with setting research priorities that forms the basis for funding decisions.


However, will industry involvement in setting the research agenda lead to useable and relevant research? While it is one of the key factors that influence research utilisation, it is not necessarily the only factor. Long-term relationships and partnerships between industry and research providers also enhance the likelihood of research utilisation. Indeed, Hanney et al.22 commented that the ability of research users to set priorities, and the likelihood of them using the eventual research findings, will probably be increased if they are able to develop long-term links with researchers. This is especially the case for researchers in centres where they can build up their own shared reservoir of knowledge on the key issues and discuss this with potential users. Ideally, an iterative process between industry and researchers is the key to developing a research agenda that reflects both industry and researchers’ understanding of key needs and issues. Hanney et al. also note that the more the research agenda is set unilaterally by non-researchers, the less the research community will be committed to working on it. The key is finding the balance between industry and research provider input in setting a proposed research agenda. At this stage, it appears as if the pendulum is swinging towards more industry influence in setting the research agenda in order to balance out the dominance currently held by research providers in this process. 4.2.2 Shift research priorities towards more added value research Both the industry and research providers agree that a shift in research priorities towards more added value research is essential. Research efforts need to focus on added value research, with research further along the value chain, rather than resource management and fundamental biological research, and research in response to regulatory requirements. Until recently, research in the seafood industry has focused on resource management and biological research, at the expense of added value research, which also includes high value processing, and market research on international growth areas and customer requirements. One respondent noted: This was a similar scenario to the meat and diary industries 24 years ago. And the

seafood industry can draw on models from other industries…. Other models and road maps used which can indicate the path… the road ahead (to refocus research spend) is not unknown. (Industry)

Several respondents acknowledged the need to refocus spending on research, so that more projects are undertaken on added value. Indeed, in 2004, and for the first time, the New Zealand Mussel Industry Council (NZMIC) decided their budget for biological research was too large compared to market research, and they have started to shift their budget.

The NZMIC have mostly commissioned environmental research, for example on how to manage the waste from harvest, benthic effects, sustainability, biosecurity. However, the NZMIC research strategy has been re-evaluated and they have refocused on innovative opportunities that add value to the Greenshell™ mussel industry in the areas of generic marketing, environmental ‘better’ practice, and research of strategic value to the industry. The reason for this change is that many individual firms commission specific environmental research when applying for

22 Hanney, S., Gonsales-Block, M., Buxton, M. & Kogan, M. (2003). The utilisation of health research in policy-making: concepts, examples and methods of assessment. Health Research Policy and Systems, 1:2. http://www.health-policy-systems.com/content/1/1/2#B104.


resource consents. They are also required by Councils to undertake on-going environmental monitoring of marine farms. NZMIC’s focus needs to be on market research that supports the future growth and profitability in the industry. (Industry)

In relation to the above quote, there was frustration expressed at the requirements to spend considerable amounts of money on environmental research for resource consents, and on research to meet RMA requirements for environmental monitoring of aquaculture farms.

Always someone that says we need more research. (In relation to mussel farming)… surely after 20 years of mussel farming there’s enough information to know what the impact of mussel farming is. Why not collate it all? (Industry)

The consequences are…

Within this environment, we can’t do added value. The focus on environmental issues completely negates innovation. (Industry)

Another reason for the dominance of research on resource management is that principal science funders are typically government agencies that are primarily supporting more general studies into the marine environment, rather than research that is driven by economic imperatives.23 Changing funding priorities towards more added value research will provide impetus for research providers to respond and build capacity in new areas. They will be required to develop new areas of expertise for the sector.

It will provide the opportunity for existing or new organisations to move into this area. (Industry)

4.3 Improving Research Provide-Industry Relationships: Issues for Research

Providers Respondents identified a number of ways that research providers hinder relationship building with seafood companies and the industry as a whole. A range of different areas for improvement were identified. 4.3.1 Manage relationships while developing commercial opportunities The commercialisation of Crown Research Institutes (CRIs) drives their requirements to be commercially operated businesses, with opportunities being sought to generate income from new business, and in particular from intellectual property. However, from an industry perspective:

Success of a project isn’t about success from an industry’s point of view, but about their commercial gain. They have a commercially driven agenda and they’re driving the projects. (Industry)

23 Jeffs A. (2003). Review of Knowledge on Innovation in the New Zealand Seafood Industry. NIWA Client Report: AKL2003-141.


The information they provide to working groups is self-serving – they’re thinking what’s going to generate more business for them…. They’d (research providers) would be better to pool their resources. (Industry)

Research providers are clearly walking a fine line in terms of managing their commercial activities, while at the same time, ensuring a strong and committed customer base. Of greatest risk is the impact of these perceptions on trust between research providers and industry. Am I getting value for money or am I being milked? How do I tell? (Industry) Research providers are also conscious of this tension. As one research provider noted, they have to find the balance between understanding and anticipating a company’s needs and emergent issues, which may not have been recognised by the company, but not being seen as ‘trying to sell another project’. These findings are consistent with a study on industry-science relationships in the United Kingdom.24 It was noted that the drive to commercialisation by universities or research institutions can easily inhibit collaboration with industry, disrupt existing patterns of industry-science relationships, and lead to conflicts over the ownership of intellectual property. 4.3.2 Develop commercial acumen Linked to the above issue, is the perceived lack of commercial experience within research providers. This issue has been identified in previous studies. For example, several research and development managers in a 1996 study commented that they had seen little to convince them that marine science providers were capable of delivering innovations or advances that would improve the effectiveness or profitability of their businesses.25 Respondents in this study identified the need for research providers to understand commercial needs and direct research to business goals. In particular, the need to listen to clients’ needs and concerns, and add value with different perspectives and insight, is a core requirement for working in a customer focused environment. Comments indicated room for improvement.

Scientists are just working on what they’re interested in. They’re thinking about something obscure rather than the management issues. Research providers need to develop good relationships and more respect of the industry position and where they need to be, such as positioning products on the world market and new technology for processing factories. (Industry)

The perception of scientists can be improved by working alongside company staff, and being able to ‘muck in and get their hands dirty’, and ‘be prepared to come out of the lab’. And while research providers are now starting to develop commercial activities, it was noted that they tend to focus on the production side of species and potential volumes, rather than the whole value chain, i.e. quality, products, and branding.

24 OECD (2002). Benchmarking industry-science relationships. OECD, Paris. pp.143. 25 Ocean Blue (1996). Great leagues forward: An investigation of the promotion and development of marine science in New Zealand. Ocean Blue Ltd, Auckland.


Some research providers have appointed business managers to help develop commercial opportunities. However, while business managers are required to work as entrepreneurs and risk takers, which innovation requires, some organisations are risk averse and lack customer orientation. In some cases, business managers have to encourage scientists to also become more commercially oriented. The above point illustrates contradictions in how industry perceives the commercial activities of research providers – on one hand they are too commercially driven, but on the other, they lack commercial experience. It demonstrates how research providers and the industry ‘talk past each other’. This is consistent with C.P. Snow’s 196426 description of the gulf between scientists and users. He described the gulf as a ‘vast chasm, across which communication ceased to exist…. a disparity in perspectives that contributed to misunderstanding, incomprehension, and distorted images of the other.’ It is apparent that research providers need to consider how they are perceived by industry, and their approach to commercialisation. 4.3.3 Improve collaboration between research providers Although there were several examples of positive research provider collaboration described by respondents, it was noted that the industry would benefit from more collaboration between research providers. The competitive relationship between research providers was considered detrimental to the industry. The perceived lack of collaboration between research providers may in part be due to the change in government policy which encourages intense competition between research providers for funding, and saw the establishment of CRIs as commercially run organisations who are encouraged to capture intellectual property and compete with other research provides for funding in a limited market. This results in a lack of willingness to share information about projects, undermines trust and collaboration between research providers and appears to fragment the research community. As noted previously, a similar situation arose in the United Kingdom where the drive to commercialisation by universities or research institutions disrupted collaboration with industry and existing patterns of industry-science relationships. One option to address fragmentation within the research community is for greater specialisation by the research providers. At this stage, the dominant research providers do appear to have some specialisations which should provide the grounds for collaboration between research providers. Specialities have been broadly identified as:

• Food innovations – Crop and Food • Chemistry – IRL • Finfish and crustacean, and marine bioactives - NIWA • Shellfish production – Cawthron

However, while these specialisations appear to have provided the basis for some collaborative work, it was noted that there is scope for more collaborative activity which builds on specialisations. It was noted that research providers currently offer a range of different disciplines, knowledge areas and services to clients that enables them to behave more competitively on several levels. However, they tend to be generalists (with some specialisation) rather than fully developing

26 Snow, C.P. (1964). The Two Cultures and a Second Look. New York: Cambridge University Press.


specialist niches. The size of New Zealand lends itself to several specialist and complementary research providers, rather than a range of generalist organisations with undifferentiated knowledge and services. Further specialisation could be encouraged by the funding system, and this would provide the basis for further networking across organisational boundaries of research organisations. Another approach to reduce the amount of fragmentation would be to introduce mechanisms into the existing competitive funding model that reward truly collaborative arrangements among research providers and industry. At a very practical level, one suggestion, which would require research provider collaboration and be of benefit to the industry, was to produce a combined list of researchers from the various research providers, with their specialisations identified and contact details. It was acknowledged that research providers have significant research capacity and expertise which crosses a broad range of subject areas. Research providers need to make their expertise more widely know, especially if they are to reach small and medium sized companies who are typically not big research users. A combined list would enable companies, both large and small, to better match researcher skills to their identified problems or issues. 4.3.4 Raise the profile of Universities as a research provider for the industry Universities play a critical role in terms of industry-science linkages and the provision of graduates with appropriate skills to industry. An OECD report notes that the provision of skilled graduates is essential to companies wishing to ‘adopt new technologies, new instruments and methods for industrial research and an increased capacity for problem solving’.27 It is this supply of high-quality graduates that determines whether or not companies can implement newly available innovative technologies to increase their profits.28 Therefore, it is important that through their training, graduates are equipped with an understanding of the industry and develop linkages with the industry. For example, a number of New Zealand universities currently run well developed programmes on marine resource management, but none runs a programme dedicated to training tertiary students in value adding for seafood. In general, linkages between universities and industry do not appear well developed. It appears that Universities have primary relationships with CRIs, rather than directly with the seafood industry. This is due to the ability of CRIs and private research organisations to better respond to the commercial demands of seafood companies, compared to Universities. Indeed, as one respondent commented:

Universities and CRIs are quite different and can’t compete - CRIs are much bigger (more staff) than University departments. We need to clearly identify our strengths to seafood companies……we have access to students, but the timing requirements of seafood companies usually doesn’t match what we’re capable of providing – industry needs answers yesterday and universities are not set up to do research within this timeframe, it’s too reactive for us – we need 6 months to get a graduate on board. Industry therefore turns to CRIs”. (University)

This is consistent with comments by seafood companies who wondered why they do not receive responses from universities when they put out Requests for Proposals.

27 OECD (2000), cited in OECD (2002). Benchmarking industry-science relationships. OECD, Paris, pp.16. 28 Gauldie B. & Giesbers W. (2006). Profiting from innovation. Unlimited, March 200,6-7.


Despite these barriers, universities need to form stronger links with industry in order to ensure that graduates receive both the theoretical and the practical knowledge required by industry. In the UK, industrial links to undergraduate teaching take a wide variety of forms. At a general level, advisory committees to faculties which offer courses of vocational relevance typically contain industrial representatives. Involvement of industry in university courses also includes provision of visiting speakers (and occasionally lecture series), validation of courses, membership of examination boards, carrying out of student projects in collaboration with companies (i.e. work and project placement schemes with industry), and sponsorship of student prizes. Also widespread is a trend towards seeking to develop students’ transferable skills relevant to the industrial environment, including for example team working skills, or entrepreneurial skills. At a masters and doctoral level, mechanisms include joint university/industry funding of research, and joint academic/industry supervision of students.29 Other options should be explored, for example, a centre where the seafood industry and universities are co-located. Strengthening existing linkages between universities and research providers will also enhance the provision of graduates to the sector. It was noted that the potential for existing linkages to be fully maximised is limited by the funding system whereby universities capture funding for tuition and blue skies research (Marsden Fund), and research providers capture funding for industry research. It is critical that these elements are brought together in order to achieve an integrated research and innovation system. 4.3.5 Improve processes for engaging with industry when developing research proposals Developing research proposals is an opportunity to engage with a company or group of companies and involve them as partners. Typically research providers have involved companies in their applications to FRST for research funding. While there have been improvements in industry involvement in the research planning process, there are more opportunities for genuine industry engagement.

Their (FRST’s) requirements to have industry involvement in the research proposal and project have significantly improved over the last several years, but there’s still some way to go. It used to be a tick box exercise. (Research Provider)

Using participative tools to work together is another approach, as one respondent described;

It’s (research) still not perceived as coming from the industry. It’s their (research provider) process of how the industry is included. We don’t feel like a partner, and only heard about it after it was funded. There needs to be real commitment to engage the end user. One project was particularly well run. The potential users of the research were involved as partners. There were a range of industries and researchers and we were all involved in scoping the project and ongoing meetings. This was quite a complicated process in a commercial environment but it was a good model. (Industry)

It should be noted that some respondents, who were actively involved in commissioning and conducting research, thought there were plenty of opportunities to be involved in research.

We can approach research providers before FRST funding rounds and get ideas and support for projects, we can call for expressions of interest from research providers,

29 OECD (2000). Benchmarking industry-science relationships. OECD, Paris. pp144.


and if you ring and tell them (research providers) what the problems are, they know what the issues are for the next round. (Industry)

4.3.6 Improve communication channels about research to the seafood industry Some channels for research dissemination were identified, such as the Seafood Industry magazine. This magazine is widely read and respondents described it as an important and useful source of information about innovation within the industry. It contains a wide range of information including industry news, research, events, company and people profiles, and special interest articles. SeaFIC also host electronic press releases which disseminates news about innovations. Other trade magazines were also mentioned, such as the New Zealand Aquaculture Magazine. However, no particular structures for disseminating research were identified. And while all research providers publish updates on current research, news and publications on their websites, no industry respondent described these as a source of information about innovation. Some of the published material was described as public relations and too general for industry’s needs. It was noted that research providers need to regularly use a number of different channels to disseminate information, such as:

• write regular reports to funders (industry) and for industry groups, • verbal updates at forums, • use the trade press, such as the NZ Aquaculture Magazine, • ensuring key people are informed in an informal way, and • organise workshops on topical issues.

4.3.7 Make research more accessible to the audience

The desire to hear and read more about research being conducted by research providers was expressed by industry respondents on several occasions. However, it was noted that if they do read a research report, the information is typically presented in an inaccessible manner, with little application for what it might mean in practice.

We need to hear from research providers what they’re doing. There’s a sense that research gets lost. CRIs need to take on practical people who can speak to the industry. It’s a question of language, and there seems to be nothing in the middle. A research report has too much detail, and I want to know what the relevant bits are. Someone needs to translate. (Industry)

Invite researchers to give presentations to industry, but in a practical way – what does this mean for us. Information needs to be tailor made, and they need to know their audience and the audience needs. The industry also needs to take a role here and maybe this is an opportunity for research providers and industry groups to work together and identify the best way to communicate to industry. (Industry)

Effective communication is an ongoing role for research providers, and the desire of industry to understand the implications of research on their business should not be underestimated.


4.4 Improving Research Provider-Industry Relationships: Issues for the Seafood Industry

Respondents identified a number of areas where the industry could improve relationships with each other and research providers. This would have a positive impact on innovation and growth of the industry as a whole. 4.4.1 Improve collaboration within the Seafood Industry In a recent survey, CEOs stressed the overwhelming importance of collaboration for innovation, with major strategic partnerships topping the list of significant business model innovations.30 However, there are structural features within the seafood industry that hinder collaboration and the development of relationships. The seafood industry is made up of a number of small companies (including individuals) that are dominated by a handful of large companies. Companies focus on either fishing or aquaculture, or a combination of the two. The seafood industry is generally described as comprising two sectors: fishing and aquaculture. Fishing includes deep-water, mid-water and inshore activities, and is recognised as essentially a ‘hunting’ practice, managed via the quota management system. Aquaculture is a farming activity and involves the seeding, growing and harvesting of a variety of seafood which include mussels, salmon and paua.31 Various comments were made that reinforce the distinction between the two sectors and illustrated the tension and sense of one sector being better than the other.

• Fishers lack control over the production of their catch, whereas aquaculture can control production and harvest.

• Some consider that the future of the industry lies in the wild fish brand that can be marketed internationally as a sustainable resource.

We need to grow the international perception that NZ has wildfish. This is where the dollars are, and it provides a strong marketing platform. And it’s sustainable. (Industry)

Whereas others, believe the future lies in aquaculture that has more long-term benefits.

Internationally aquaculture is on the rise and feral catch is on the decline. (Industry)

• Opposition to farmed fish on the basis that it competes with the wild fish brand and cannot compete on a cost basis with farmed fish from developing countries.

• Aquaculture is more aligned to land farming than fisheries, and should be located within the farming sector.

In addition, and particularly within the aquaculture sector, there are a wide range of sub-sectors which comprise groups of organisations specialising in particular species. This appears to reinforce the sense of industry fragmentation that a number of interviewees described. 30 IBM Corporation (2006). Expanding the Innovation Horizon: The Global CEO Study. IBM Business Consulting Services, 2006. 31 Pavlovich, K. & Akoorie, M. (2004). Cluster analysis: Mapping the Nelson seafood industry. University of Auckland Business Review, 7(2):44-63.


It’s not an industry, but made up of little sub-industries. Even aquaculture is different with different issues, such as the nature of the species they’re growing. We actually have a whole range of separate industries which is very difficult to lump together. Can see why it happens but it’s not very helpful. (Research Provider)

Some respondents commented that fragmentation results in a lack of long-term industry wide research planning within the industry. This has implications for promoting a strategic approach to the role of research in industry growth. However, recent initiatives, such as the establishment of Seafood Innovations Ltd, and the development of the Aquaculture Sector Strategy, are aiming to address this issue. 4.4.2 Improve information sharing between companies and within the industry

Concerns and frustrations regarding the sharing of research information were raised by several respondents.

..groups are very secretive – they’re not willing to share information. (Research Provider)

If you’re wanting to engage with a number of companies in the same group, it doesn’t work so well. They become very quiet. Because they’re so reluctant to give anything away it doesn’t create a dynamic environment. (Research Provider)

In a couple of cases, industry respondents knew about research being conducted that would be highly relevant and useful for their business. However, they are unable to access it because the research was propriety. This makes it particularly difficult for smaller companies that cannot afford to purchase research. One respondent noted the need for coordination around identifying common issues and problems, and joint funding of research. This is an activity that Seafood Innovations Ltd is aiming to address.

At the moment we’re seeing different solutions to the same problems. It’s ad hoc and all a bit of a shambles. The industry is too small for this. (Industry)

One large company described how they help out with sharing information as much as they can, but obviously do not share commercially sensitive information. While acknowledging this is a problem, no solutions were offered.

We own the information we buy, it’s ours, but it means others can’t access it. (Industry)

Competitiveness was also described as manifesting in an overall reluctance to share information, and not surprisingly, particularly information that was regarded as commercially sensitive.

Industry appears comfortable to work together in fisheries resource management research. However, there’s less comfort (to work together) around innovative, value added research because of the commercial sensitivity. Means there’s barriers at the wealth creation end (of the research spectrum) and intense competition. (Industry)

It was also noted that the large companies position themselves to be in competition with each other, and generic marketing brands are necessary.


They’ve got to realise they’re competing against the rest of the world. They’ve got to work together to do this. (Industry)

Both Seafood Innovations Ltd and the Toolkit for Collective Action, as described previously, are key initiatives aiming to address the issues identified within this section. 4.4.3 Overcome barriers to funding research While respondents acknowledged the importance of industry funding and co-funding research for the industry as a whole, barriers to funding were identified. The strongest determinant of funding research and development is company size. In this study (and with exceptions), large companies tended to fund research, while small and medium sized companies did not.

Ø Financial constraints Financial constraints for small and medium sized businesses, which dominate the industry, are a barrier to funding research. Owners and staff are primarily concerned with operational activities, with limited resources for strategy development and planning activities. Therefore, research and development is an activity that is done ‘around the edges’, it addresses problems as they arise, and reflects individual interests and concerns, rather than a core strategic activity. This is consistent with previous findings that indicate that company size is the strongest determinant of funding research and development. A survey of marine science activity in 1996 noted that larger companies tended to spend a higher proportion of their turnover on research and development, while most small companies spent little or nothing.32 These results are similar to a survey conducted a year earlier by Hamer and McLeod33, who found that the seven largest companies funded 47.4% of the research, while 48% of the companies funded no research. As the industry is largely made up of small companies, this represents a significant underinvestment in innovation.

It’s (the seafood industry) dominated by small companies that don’t have the capital to invest in innovation, it’s left to the large companies. More investment is required, and government needs to support this research. (Research Provider) Industry needs to get better at funding research - there’s a problem getting research dollars out of industry. This appears to be a consequence of small companies who don’t have the capital to put into R&D. (Research Provider)

As noted previously, opportunities where groups of small companies can share resources to purchase research, and therefore engage in research and innovation, should be developed. Seafood Innovations Ltd has a particular role to play in this area.

32 Ocean Blue (1996). Great leagues forward: An investigation of the promotion and development of marine science in New Zealand. Ocean Blue Ltd, Auckland. pp.27. 33 Hamer, J. & McLeod, C. (1994). Fisheries research survey – survey analysis. Novatech (NZ) Ltd, Wellington.


Ø Economic and regulatory climate Some respondents noted that the economic and regulatory climate means that funding research is not a reality – ‘it’s expensive and difficult to justify’. Indeed, these costs were described as hindering innovation, especially for small to medium sized companies. The implications of the current economic environment are that margins are slim, and there are few incentives and resources (personnel, financial) to undertake research and innovation. However, and as one commentator noted, this is generally typical of primary sector industries; high throughput, low margins, and commodity driven. As a result producers are cost conscious, but at the same time, prepared to pay to reduce costs.

They’re aware that the labour and machinery are big costs and the more they can automate, the smarter they can be in the business – and the better off they will be. They also know that they need research to increase value and reduce costs. (Industry)

In addition, others argue that this is exactly the time when investment in research should be made. It should be noted that ‘payment-in-kind’ is commonly used when companies cannot afford research. It was noted that in-kind contributions that seafood companies make to research projects are good examples of research providers and companies working together.

Contributions in-kind go a long way – we get a line. Companies are more than willing to do contributions in-kind rather than pay actual dollars for research. For example, they’ll give us a line on the mussel farm. (Research Provider)

Ø Uncertainty with the research process

This is especially the case for small companies who lack experience with commissioning research and working with research providers. They are either not interested, do not regard research as a priority, and may be what was described as a ‘lifestyle’ or hobby business. For owners of ‘lifestyle’ businesses, the motivation for operating their business is unlikely to include contributing to growing the industry as a whole, funding research, and contributing to industry associations.

We don’t use research as well as we should. One thing impacting on this is the size of the enterprise. Some are very small, and you can enter the industry with $40-100K. People work on their farms in the weekend, and there isn’t enough drive or momentum to grow their business, and therefore the industry as a whole. We need more corporates in our species. (Industry)

Ø Satisfaction with the status quo

Existing markets have been working well for us, and there’s enough profit in existing products. (Industry)

4.4.4 Develop more experience with research Interviews with small and medium sized enterprises highlighted a low level of experience with commissioning and using research, an understanding what it would involve and the questions research can help answer.


Small and medium sized seafood companies are not very experienced with research, and there has been inadequate attention given to building research capacity within these companies. This inhibits the level of research understanding and application within the sector. (Government)

The lack of experience, and absence of research and development strategies, highlights the opportunity for engaging with small seafood companies. The process of developing a research and development strategy can be an important capacity building exercise for an organisation as it requires reflection on their current situation, future directions, and the role of research and development in achieving short-term and long-term goals. 4.5 Strategies to Build Strong Research Provider- Industry Relationships Addressing the issues identified in the previous sections would help build research provider-industry relationship. In addition, a further set of strategies were identified. These draw on the OECD strategies identified on page 4, the interviews and case studies. 4.5.1 Build a research and development culture The presence of a research and development culture within a company is an indicator that the company will be more likely to seek out and form relationships with research providers. One of the manifestations of a research and development culture is the appointment of research and development managers. Most of the large companies that took part in this study had research and development managers. These roles mostly provide a clear focus for research and development within the company, and indicate the willingness of a company to invest in research and development with the anticipation that such an investment will grow bottom line profits.

When you get this position (research and development manager) a company gets the role, responsibility, budget and a strategy. Research and development gets valued in the company and it gets credibility and profile. (Industry)

…they (research and development manager) are not necessarily specialised in seafood. The key thing is that they understand research and the purpose of it. They also understand the time and cost of it. (Research Provider)

A couple of the large seafood companies had integrated research and development functions, with an internal team of researchers working alongside staff on both long-term and short-term projects. They had a high level of research capacity within their organisations and; a) proactively engaged with research providers, b) had a range of different relationships with different research providers, c) were directive about their research needs, and d) understood research and the role it can have as a strategic tool. An internal research function also has benefits for staff to understand the role of research within the business, and provides the opportunity for researchers to demonstrate relevance and usefulness of research and build relationships with other staff.

They have their own staff (researchers) working on projects. Over a beer or morning tea, ideas can be shared informally, problems and solutions identified. They can spend time together, it’s not about going to a presentation once a month. (Industry)


4.5.2 Researcher mobility Building on the above point, and the benefits of research being located within a company, is the notion of researchers moving from research providers to industry. The OECD34 notes that labour mobility between universities/research institutes and industry facilitates networking between firms and public research organisations, and is a critical element of industry-science relations. However, low rates of mobility of scientists and researchers remain major obstacles to improving industry-science linkages in a number of OECD countries. They describe three key objectives from programmes aiming to encourage mobility;

• Promote the training of students/graduates in small and medium enterprises (SMEs). This stimulates the transfer of knowledge to SMEs which may lack technical and financial resources, and provides industry training and job opportunities for graduates.

• Promote the training of established researchers in industry, where established researchers work with industry on specific research projects.

• Encourage contact and training of industry researchers in a research provider environment.

Staff mobility from a research provider to industry provides the opportunity for researchers to immerse themselves in the reality of different organisational contexts and constraints, and focus attention on the needs and requirements of research users. The benefits of researcher mobility were demonstrated in one of the case studies. It provided a mechanism to cement relationships and to undertake future planning. Particular advantages included the opportunity to:

• Demonstrate support for partners. • Develop networks between research provider and company staff. • Demonstrate practical orientation of research provider staff, with ability to work

effectively in the commercial sector. • Support of technology transfer from a research provider to industry. • Avoid research provider staff being ‘poached’ by industry.

Most OECD countries have schemes to promote researcher co-operation with industry. Within New Zealand, FRST supports this strategy through the Technology for Industry Fellowships (TIF) which supports students and graduates to work and apply their skills in a commercial environment. In addition, FRST funds experts to work with companies on specific issues. However, to date, researchers from research providers tend not to take up this scheme. FRST are supportive of researcher mobility and believes there is scope for the seafood industry to take further advantage of their programmes in order to build relationships. However, it is apparent that barriers to taking up this opportunity exist, which may include the lack of financial incentives. 4.5.3 Clustering and physical proximity Two case studies demonstrated the positive impact of research providers and companies co-location on one site. Physical proximity provides the opportunity for ongoing informal contact, sharing resources, exchange of skills and information, networking and mutual problem solving. Indeed, links within such clusters are reportedly the most successful research provider-industry relationships.35

34 Ibid. 35 OECD (2002). Benchmarking industry-science relationships. OECD, Paris.


The case studies also highlighted that this situation facilitates both the research providers and company having a financial stake in the commercial risk of the new project or venture. As a result, all parties had a vested interest in the success of the project, ensuring motivation and incentive to build and manage effective working relationships. 4.5.4 Build networks Networks that cross the research provider-industry interface are a mechanism for collaboration and for creating, maintaining and developing research provider–industry relationships. The advantages of collaboration and networking across the boundaries of research organisations and knowledge based companies were documented by Liebeskind.36 He found that ‘scientists at two new biotechnology firms enter into a large number of networks and collaborative research efforts with scientists at other organisations, especially universities. Their exchange of scientific knowledge, which is then used within their respective organisations, is rarely governed by formal contracts. Rather, the networks increased their opportunities for learning and their flexibility in ways that would not be possible within a self-contained hierarchical organisation’. Critical to such networks and exchange is the notion of trust. It is the mechanism whereby information exchange is supported, and trust is engendered by shared norms. It has been noted that information exchange through inter-organisational networks constitutes a separate and distinct form of organisation in which exchange is based on trust.37 Respondents emphasised the importance of informal networks, based on personal relationships that span companies and research providers. They noted that projects being undertaken, and informal discussions, are underpinned by a range of existing relationships and informal networks, which in some cases have lasted for several years. Indeed, the OECD noted that the bulk of research provider-industry relationships take place through informal and indirect channels, and while difficult to measure these human resource-related linkages should not be underestimated. These networks are likely to facilitate interaction, and the sharing and exchange of knowledge, ideas and innovation. Events, conferences and forums organised by industry and sector groups also support the maintenance of research provider - industry networks. Respondents gave several examples of networking activities that are considered helpful.

• Once a year the New Zealand Mussel Industry Council organises a boat trip.

The NZMIC pull the CRIs and industry together to network, and for their own benefit. They’ve done this several times. They get everyone on a boat that travels to the Marlborough Sounds. They provide food and drink, and no phones. The purpose it to get people talking. Everyone hears the management issues, the research ideas and opportunities are identified. (Research Provider)

• Workshops are organised by research providers for industry. One recently bought

together a range of companies to discuss packaging, and new products/plastics. Attendees discussed funding opportunities for further research and development.

36 Liebeskind, JP., Oliver, AL, Zucker, L. & Brewer, M. (1996). Social Networks, Learning and Flexibility: Sourcing Scientific Knowledge in New Biotechnology Firms. Organisational Science 7(4), 428-443. 37 Ibid


These forums facilitate networking and information sharing between a range of different organisations, encouraging the formation of inter-organisational links. Respondents commented that there could be more networking and information sharing opportunities that are clearly targeted. Certainly, the outcomes of networking events need to be identified, and relevant to potential attendees. For example, events that are aiming to generate links between research providers and industry could focus on particular issues or species, or sharing collective wisdom, market intelligence or contacts. And for people who think they are too busy…

People might say they’re too busy to attend such a forum, but this doesn’t stack up – this is what’s going to take us all forward. (Industry)

Several commentators noted that networks and relationships within the industry will build over time, and as the cost of participating in networks outweighs the cost of not participating.

Suspect that over time the industry will get better at networking and forming relationships. The industry will have to grow that way, and for the seafood industry it’s early days. (Industry)

Also linked to networking is innovation and leadership. ‘Network-building activity must occur both within the organisation and in the larger community of which it is a part. Creating these intra- and extra-organisational infrastructures in which innovation can flourish takes us directly to the strategic problem of innovation, which is institutional leadership’.38 Leaders within organisations are critical. Firstly, in creating an organisational context that fosters innovation and, secondly, in establishing organisational strategy, structure and systems that facilitate innovation. �It was noted that there is a shortage of leadership for research and innovation within both research providers and the industry.

There needs to be a champion for research. Someone who can take it up, turning it into a product. We’re short of these people in the industry, people who are forward looking. (Industry)

4.5.5 Management of Intellectual Property Agreement on how a research provider and company will manage intellectual property (IP) is one of the most significant agreements that organisations will enter. As such, it is a key mechanism for relationship building, as well as addressing issues concerning research propriety. To date, it appears as if IP arrangements have done more to damage, rather than build relationships. The seafood industry and research providers are currently grappling with a range of IP issues, which will resolve with time and more experience.

Researchers say that the industry undervalue it, and companies say that research providers overvalue it. (Government)

38 Ibid


The area of IP is difficult. CRIs are now competing and the success of CRIs is being measured by it, and this generated a lot of interest in IP. However, IP is of no value unless it’s being used. When it’s being used it’s valuable. (Research Provider)

Feel that a certain amount of common sense needed to be adopted when thinking about IP. Companies need to be realistic about the chances of making a fortune from IP. (Research Provider) Don’t necessarily want to own the IP but do want to access it. (Industry)

During discussions about IP, all respondents noted the importance of an IP statement up front so all partners know where they stand. For example, FRST require an IP management plan between research providers and industry in proposals. Their experience has shown that project management issues can arise if IP arrangements have not been agreed. From a funders perspective;

FRST require an IP agreement and provide advice to companies on how to set one up. They would look at what’s reasonable and if it’s not a commercially reasonable agreement we would flag it and wouldn’t proceed with the funding until it’s sorted out. (Government)

FRST have no ownership over IP and it rests with the contract holder, but there is an expectation that it will be used for the benefit of NZ. Comments highlighted a range of issues and concerns regarding IP arrangements.

• Lack of clarity about whose going to commercialise the IP. (One of the case studies noted that identifying the commercialising partner at an early stage helps avoid IP problems further down the track.)

• Difficult to differentiate who has discovered what as the relationship between research provider and company means that they are building on each other’s knowledge and expertise.

• IP is value-less unless it is being used, and others are building on it. Various people commented that it is counter productive to sit on knowledge, especially if it was funded with public money.

• Research paid for with public good money should be freely available to other organisations.

• Seafood companies and research providers are receiving public funding to develop commercial opportunities from IP. It was highlighted that in one case, three companies are receiving public funding to develop technology in response to the same problem and develop commercial opportunity from the IP. This is possible due to the type of grant they have received from FRST.

• Companies requested to make a significant contribution to research, but the research provider want to own the IP.

Before we didn’t have to pay much (for the research) but now we have to make a genuine investment and we want to benefit from our investment….. Industry is being asked to pay the cash but they (Universities and CRIs) want to profit from it. (Industry)

A collaborative strategy for developing an IP agreement emerged from one of the case studies. The approach involves negotiating the value of each partner’s contribution at the beginning of a project. Financial contribution is the easiest to value, but other types of in-kind contributions, such as finding investment money, providing a physical space, or finding


a marketing partner, also need to be valued. Within this case study, it was acknowledging that the process of valuing the IP contribution of each partner (company and research provider) is vitally important. A company needs to be realistic about the benefits that it brings to an IP agreement - it cannot achieve its goals without the intellectual contribution of research providers. The same applies to the research provider; their intellectual contribution is not the most important aspect. A project cannot be realised without a company’s investment, commercial drive or other resources.

Everyone has a role and it needs to be valued. Nobody’s one role is most important – companies and science providers both need each other. (Case study)

All IP needs to be negotiated on a case-by-case basis – every input has a different

value and it needs to be explored. (Case study) 4.5.6 Agreements between Companies and Research Providers In addition to IP agreements, seafood companies and research providers enter into a range of other agreements which are an opportunity for relationship building. Agreements are typically purchaser/supplier contracts. However, these can be a blunt instrument in terms of symbolising different phases of a relationship between organisations. Some of the more subtle elements of a relationship can be better reflected through agreements that provide a framework for how organisations will work together, how they will move into the future, and overcome issues. Organisations will usually already have an effective working relationship prior to entering such agreements, and the agreements will provide the basis for strengthening the relationship further. Agreements commonly described were memoranda of understanding, and collaborative agreements.

Ø Memoranda of understanding

Memoranda of understanding (MoU) were described as a useful mechanism for formalising relationships between companies and research providers when an ongoing arrangement is desirable, and to formalise an informal relationship. As a result, personal links can become strategic relationships.

When these (personal relationships) get valued to the point that we want to formalise them we create a MoU. It provides a way to acknowledge each other’s importance, and keep it in mind when decisions are being made. It also takes the emphasis away from individual relationships. (Research Provider)

One interviewee noted that organisations are ready to enter a more formal agreement and sign a MoU when the company recognises that;

• the research provider genuinely wants to work with them, • the researchers know how to ‘work in the real world’ (i.e. understand the

company’s business needs), and • the organisations trust each other.

Ø Collaborative agreements

A collaborative agreement is more detailed than a MoU, and is more appropriate when a company and research provider have agreed what they are collaborating on. It may be agreed prior to a contract being signed, and appended to a contract. It specifies an agreement about


how the organisations are going to work together and identifies a range of relationship issues that can potentially arise within the project and include strategies for managing them. A collaborative agreement could include:

• The project plan. • How the project will be managed, such as frequency of meeting, who will attend,

what will be covered, and how progress will be reviewed. • Obligations of each party to each other and the project. • A strategy for conflict resolution. • Responsibility for product commercialisation (if appropriate). • The value of each parties input into the project (for the purpose of assigning

intellectual property). • How the intellectual property and value derived from it will be shared once it is

commercialised. • How the product will be presented to customers and the role of each party at such

presentations. (Case study) Memoranda of understanding and other agreements can be strengthened by partners agreeing to and developing a system to monitor and review their relationship, and their progress in relation to the agreement. This can be combined with regular project meetings, and can take place at regular intervals or project milestones. Giving attention to wider process issues and the relationship context of any project is a good risk management strategy, and helps develop a learning and review culture. 4.5.7 Enhance technology transfer Effective transfer of technology and innovation is underpinned by relationships and understanding the perspectives held by partners. Within seafood companies, technology transfer will be enhanced if they have internal staff who can work alongside research providers, ensuring usefulness and relevance from a company perspective. And for research providers, their role will be enhanced if they are considering the attitudes and beliefs held within the company. The following points reflect some of the key issues that companies may be looking for when making decisions about the utility of research or an innovation.

• A clear, unambiguous advantage in terms of either effectiveness or cost-effectiveness, which is recognised and acknowledged by all key players.

• Compatible with the values, norms and perceived needs of intended adopters. • Simple to use. However, perceived complexity of an innovation can be reduced

by practical experience and demonstration. • Experimented with and trialled with by users. • Visible and observable (for example, through demonstrations) to users. • Can be adapted, refined or otherwise modified to suit the user’s needs. • Relevant to the performance of the intended user’s work. • Improves task performance. • Feasible and workable in the users setting. • Broken down into more manageable parts and adopted on an incremental basis. • Knowledge required for the use of the innovation can be codified and separated

from one context so as to be transferred to a different context.39

39 Greenhalgh, T. Robert, G., Bate, P., et al (2004). How to spread good ideas: A systematic review of the literature on diffusion, dissemination and sustainability of innovation in health service and organisation. Report for the National Co-ordinating Centre for NHS Service Delivery and Organisation R & D (NCCSDO) pp13.


Some of the above points reflect organisational features that indicate an organisation’s ‘absorptive capacity’. That is, an organisation’s ability to identify, capture, interpret, share, re-frame, and re-codify new knowledge, to link it with its own existing knowledge base, and to put it to appropriate use.40 Organisations that are able to do this will be better able to assimilate innovations. Organisational features that facilitate the assimilation of innovation include an organisation’s existing knowledge and skills base, a culture of learning and review (explicit goals that support the capturing and sharing of knowledge), and proactive leadership directed towards sharing of knowledge both internally within the organisation and externally via networking and collaboration

5.0 Conclusions Initiatives positively influencing the development of research provider-industry relationships within the seafood industry Seafood Innovations Ltd

Seafood Innovations Ltd has been established to facilitate more added value research and industry investment in research and development. It aims to:

• Ensure research is grounded in the commercial realities of companies • Enhance research utilisation through funding relevant research • Enhance collaboration between companies and research providers • Provide a mechanism to enable small and medium companies to collectively fund

research.

New groupings of research providers and companies (including medium sized companies) are coming forward to apply for funding. Seafood Innovations Ltd appears to be providing opportunities for organisational innovations to emerge, and more collaborative activity.

Research and Development Strategies

The recent development of sector-wide research strategies could help to facilitate a long-term strategic approach to research. At a company level, there is some evidence that a more strategic approach to research and development may be emerging. Results indicate that research and development strategies may be increasingly used as a business tool within large and medium sized companies.

SeaFIC’s Tools for Collective Action SeaFIC’s Tools for Collective Action initiative is supporting collaboration and information sharing, and is an important mechanism for building trust and relationships within the sector. A key challenge for the initiative has been to encourage added value research and development projects to become part of the Tools for Collective Action project, where commercially sensitive information is more critical. Indeed, low levels of information sharing about research within the industry is frustrating for small and medium sized companies who are aware of research being conducted that would be relevant for their business, but are unable to access it due to propriety and financial constraints.

40 Ibid. pp21.


Information Sharing

There are good examples, such as JEMCO Ltd and NZMIC, where groups of enterprises are sharing information to address issues of mutual concern. Such groupings are providing the platform to mobilise resources for joint marketing, maintain market value, achieve volume of product, and enter or build offshore markets.

Such initiatives should be used to demonstrate benefits from sharing information to the sector, and highlight strategies to achieve this goal. Effective models for sharing information and building trust within added value research projects need to be promoted within the industry, with funding opportunities made available to apply these models in different contexts.

Good Practice at a Local Level

The case studies highlighted examples of strong research provider-industry relationships that demonstrate good practice at a local level. The case studies exemplified mechanisms to build relationships identified by the OECD. These include:

• Researcher mobility between research providers and industry. • Clustering a group of local companies around a research provider. • Encouraging young innovative companies to be spun out of research

organisations.

By exploring these mechanisms in detail, the underlying interpersonal and organisational features that help build good relationships were identified. These included:

• Build a culture of informal communication • Identify opportunities for organisational alignment • Work in partnership • Develop personal relationships • Use good project management strategies • Develop a learning and review culture.

Practical interventions (such as clustering and co-location, staff exchanges, combined staff events, and networking and conferences) that provide the opportunity to develop the above features need to be promoted within the industry.

Areas to improve research provider-industry relationships Develop research priorities in partnership

Initiatives, led by Seafood Innovations Ltd, are underway to support industry to have greater influence in the process of identifying research priorities. This is in response to the dominance of research providers in this process, and is a key factor to ensure the production of useful and relevant research. However, rather than one party or the other controlling this process, a partnership model should underlie the development of research priorities. The ideal is an iterative process between research providers and industry to develop research priorities that reflects both group’s understanding of key industry needs and issues.

Shift research priorities to more added value research There is strong agreement amongst industry and research providers about the need to refocus research efforts from resource management and biological research, to added


value research, and research further along the value chain. Better utilisation of existing environmental and resource management research would enable more added value research to be funded.

Build trust across the sector

Several issues emerged that hinder relationships, not only between research providers and companies, but with each other (i.e. between research providers and between companies within the seafood industry). One of the key themes that emerged for both groups was the need to build trust. Within the context of this project, trust refers to open channels of communication, sharing information and working together collaboratively. The link between trust and economic prosperity was described by Fukuyama (1994). He argues that social capital, especially trust, develops through norms of reciprocity and successful cooperation in networks of engagement. Such trust plays a crucial and underappreciated role in fostering economic prosperity.41

Research providers need to manage relationships while developing commercial opportunities

There is evidence that the commercial orientation of CRIs has negatively impacted on their relationships with companies and the industry, and damaged trust. This is consistent with a UK study on industry-science relationships which notes that the drive to commercialisation by research institutions can disrupt existing relationships and inhibits collaboration with industry. This highlights the need for research providers to;

- carefully manage their commercial activities while maintaining a strong customer base

- consider how they are perceived by the industry - build a stronger customer focus, and - listen to clients’ needs and concerns, and add value with different

perspectives and insights. More collaboration between research providers

The need for greater collaboration between research providers was identified. In part this has been hindered by government policy which requires research providers to compete intensely for limited government funding, and for CRIs to run as commercial operations, capture intellectual property, and to also compete for funding in a limited market. The process undermines trust and collaboration between research providers and appears to fragment the relatively small research community for the seafood sector in New Zealand.

One strategy to address fragmentation in the research community is to encourage greater specialisation of research providers. Currently, research providers competing in the seafood industry offer a range of different disciplines, knowledge areas and services to clients. While this enables them to behave more competitively on several platforms, they tend to be generalists (with some specialisation), rather than fully developing specialist niches. Indeed, the small size of New Zealand lends itself to several specialist and complementary research providers, rather than a range of generalist organisations with undifferentiated knowledge and services. While some specialisation already exists, the funding system needs to encourage and support specialisation within research providers, and/or implement funding mechanisms which encourage and reward greater collaboration between research providers for accessing government funding. This would provide the basis for further networking across the organisational boundaries of research institutes, which has been found to enhance the exchange of scientific knowledge, opportunities for

41 Fukuyama, F. (1994). Trust: The Social Virtues and the Creation of Prosperity. New York: Free Press Paperbacks.


learning and innovation. At a very practical level, this might involve the publication of a combined list of researchers from the various research providers, with their specialisation identified and contact details. Other options for addressing fragmentation within the research community should also be explored.

More engagement of universities with industry Linking graduates to the seafood industry is a key role for universities, and is an important mechanism for building research provider-industry relationships. Indeed, the presence of graduates in companies impacts on whether or not companies can implement newly available innovative technologies to increase their profit. Universities need to form stronger links with industry in order to ensure that graduates receive both the theoretical and the practical knowledge required by industry. For example, a number of New Zealand universities currently run well developed programmes on marine resource management, but none runs a programme dedicated to training tertiary students in value adding for seafood. More proactive collaboration between universities, research providers, industry and funding agencies is necessary to design and implement mechanisms which will foster university engagement with the industry, and industry involvement in the training of graduates. Options should be explored, for example, a centre, with a focus on valuing adding for seafood, where the seafood industry and universities are co-located.

Strengthen linkages between universities and research providers

Opportunities for student training and linking graduates with research providers should also be explored as another mechanism to build theoretical and practical knowledge amongst students. In part this is currently hindered by the funding system whereby universities receive funding for tuition and blue skies research, and research providers receive funding for industry research. It is critical that these elements are brought together in order to achieve an integrated research and innovation system. Mechanisms that can address this funding issue and achieve an integrated approach to funding training, industry research and blue-skies research should be fully explored.

Strategies to improve research utilisation

Areas for research providers to demonstrate a strong customer focus and improve relationships also include

- Make research more accessible to their audience - Improve channels for communicating added value research to industry - Engage companies more effectively when developing research proposals.

Mobilise small seafood companies to invest in innovation

Small companies with limited capacity to innovate, yet sharing common innovation issues, are a particular feature of the seafood industry. A strategy to enable small companies to cluster around issues of mutual concern or interest, jointly fund research, reach critical mass, and share the risks and rewards, needs to be developed. A lack of trust and low levels of information sharing, are barriers to establishing such clusters. However, good examples where these barriers have been overcome, such as JEMCO Ltd and NZMIC, can be followed. SeaFIC’s Tools for Collective Action has a part to play in further development of small company clusters. Learning that has been derived from the establishment and development of cluster systems needs to be described and codified, and supported by funding small company innovation clusters in the seafood industry.


This issue also highlights the role of Seafood Innovations Ltd as a mechanism to enable joint funding of research, particularly amongst small companies who may lack experience with research, but who represent a significant under-investment in innovation.

Build research capacity within small and medium sized seafood companies

The understanding that added value research is needed to reduce costs and improve profitability is becoming more widespread. However, it was acknowledged that for small and medium sized companies, investment in research is still in its early days and companies need more experience with commissioning and using research. There is scope for an initiative to build research capacity within seafood companies, such as develop skills in managing innovation, and leadership training for research and innovation within the sector. This would also contribute towards building a research and development culture, a key contributor to building relationships with research providers.

Strategies and mechanisms to improve research provider-industry relationships Research mobility and staff exchanges

Researcher mobility enhances communication and contributes to the development of research provider-industry relationships. Three key objectives from programmes aiming to encourage mobility have been described; • Promote the training of students/graduates in small and medium enterprises (SMEs).

This stimulates the transfer of knowledge to SMEs which may lack technical and financial resources, and provides industry training and job opportunities for graduates.

• Promote the training of established researchers in industry, where established researchers work with industry on specific research projects.

• Encourage contact and training of industry researchers in a research provider environment.

At this stage, FRST funded TIF expert schemes are a mechanism to facilitate this movement and associated opportunities. However, researchers from research providers tend not to take up this scheme. It is apparent that barriers to taking up this opportunity exist, which may include the lack of financial incentives. While there is scope for the industry to take advantage of this programme as a way of building relationships, barriers must be identified and addressed so that the scheme can achieve its goals.

Clustering

Linkages within research provider and company clusters that are co-located on one site appear to create very successful research provider-industry relationships. The benefits of physical proximity include the opportunity for ongoing informal contact, sharing resources, exchange of skills and information, networking and mutual problem solving. Clustering means both the research providers and companies have a financial stake in the commercial risk of the new project or venture. As a result, all parties have a vested interest in the success of the project, ensuring motivation and incentive to build and manage effective working relationships.


Networking

Networking is an important mechanism to build research provider-industry relationships. Indeed, the bulk of research provider-industry relationships take place through informal and indirect channels, such as personal relationships and networking. Such networking provides the opportunity for the sharing and exchange of ideas, knowledge and innovation. There is scope to improve networking and information sharing opportunities that identify outcomes and are relevant to potential attendees. For example, events that are aiming to generate links between research providers and industry could focus on particular issues or species, or sharing collective wisdom, market intelligence or contacts.

Develop agreements to guide relationship building

The formation of IP or collaborative agreements, or MOU, provides the opportunity for relationship building. The process enables each partner’s contributions to be acknowledged and valued. In addition, agreements, such as memorandum of understanding and collaborative agreements, between research provider and companies are useful tools to identify how the organisations are going to work together, issues that could arise and how they will be managed. Such agreements can be strengthened by implementing a system to monitor and review the relationship at regular intervals or at project milestones.

6.0 Recommendations

• Learning that has been derived from existing clusters of small companies that are effectively sharing information and building trust (e.g. JEMCO Ltd, NZMIC, plus projects emerging from SeaFIC’s Tools for Collective Action) needs to be described and codified. Further development of these models needs to be promoted within the industry, with funding opportunities made available to apply them in different contexts within the seafood sector. For example, serious consideration should be given to funding action research projects whereby self-nominated clusters undertake model development so the successful elements of the model are identified through the research and can be replicated through additional cluster developments throughout the sector. SeaFIC has a key role to play in this process as it builds on their successful Tools for Collective Action initiative.

• Practical strategies that help build the organisational features that underlie strong

research provider-industry relationships should be promoted by both groups. Strategies might include clustering and co-location of research providers and companies on one site, staff exchanges, combined staff social events, networking events (for clearly defined purposes) and conferences.

• The processes for developing research priorities within the seafood sector needs to

utilise a partnership model between research providers and the industry, and reflect both groups understanding of key industry needs and issues.

• Greater specialisation of research providers is one strategy to address fragmentation

in the seafood sector research community. Options for how the funding system could be adjusted to encourage and support specialisation and/or greater collaboration among research providers should be explored. At a practical level, research providers could produce a combined list of researchers from the various institutes, with specialisations identified, for the industry.


• Proactive collaboration between universities, research providers, industry and funding agencies is essential to foster university engagement with the industry, and industry involvement in the training of graduates. Options, such as a centre, with a focus on value adding for seafood, and where the industry and universities are co-located, should be explored. This issue could be further supported by developing links between the tuition and blue skies research funding that universities receive, and the industry research funding that research providers receive. Options for integrating these funding streams should be explored.

• Initiatives that facilitate researcher mobility and staff exchanges between research

providers and industry need to be encouraged. However, barriers to these exchanges currently exist. Barriers need to be explored and addressed. If costs are a barrier, financial incentives need to be put in place for both organisations and personnel.

• Low levels of research capacity within small and medium sized companies needs to

be addressed. An initiative which builds research capacity, develops skills in managing innovation, and leadership training for research and innovation should be considered by the industry.


Appendix 1: Case Studies

The three case studies are entitled:

1) SeaDragon Marine Oils: Forming Collaborative Industry-Science Relationships

…………………………………………………………………………….p2 2) Bream Bay Aquaculture Park: Does being close enhance research provider and

industry collaboration? ………………………………………………….p11 3) Mussel Spat Hatchery Project: Exploring the Features that Underlie an Effective

Partnership ………………………………………………………………..p22


April 2006

SeaDragon Case Study42

SeaDragon Marine Oils: Forming Collaborative Industry-Science

Relationships

By Kathryn Nemec

Introduction Young innovative firms that spin off research organisations play a key role in linking science to markets.43 ‘Governments rightly attach priority to encouraging spin-offs from public research to stimulate innovation. Spin-offs fill a gap between research results and innovative products and services’. ‘Spinning off is the entrepreneurial route to commercialising knowledge developed by public research and as such is attracting a great deal of attention, given the current ‘start up fever’ in many countries. There is special interest in this specific type of industry-science linkage because it may be one of the factors that explain differences in performance in new, fast-growing science based industries, especially biotechnology. Some are tempted to see the spin-off formation rate as a key indicator of the quality of industry-science relations, prompting public research organisations to place greater priority on this aspect of their commercialisation strategy and to publicise their achievements in this area’.44 The focus of this case study was SeaDragon Marine Oils, a company that produces marine oil products and nutraceuticals.45 Its parent company, Merinova Ltd, was formed as BioProducts New Zealand and was spun off from AgResearch in 2004. An innovative added-value project between Merinova and the Bioactivity Investigation Group (BIG) of the University of Otago, provided the opportunity to explore collaborative industry-science relationships. Background Seadragon Fish Oils (now known as SeaDragon Marine Oils) was established in Nelson in 1996. SeaDragon operates one of only three molecular distillation units in the southern

42 This case study has been prepared as part of a project on industry-science relationships in the New Zealand Seafood Industry, one of the projects in a wider research programme on innovation and economic growth in the Seafood Industry. In 2003, the Foundation for Research, Science and Technology funded the University of Auckland's Business School to work with the National Institute of Water and Atmospheric Research to undertake this wider programme of research over a 4 year period. 43 Organisation for Economic Co-operation and Development (2002). Benchmarking industry-science relationships. OECD, Paris. pp.10. 44 Ibid 45 A nutraceutical is a food or part of a food that may provide medicinal or health benefits, including the prevention and treatment of disease. A nutraceutical may be a naturally nutrient-rich or medicinally active food, such as garlic or soybeans, or it may be a specific component of a food, such as the omega-3 fish oil that can be derived from Hoki and other cold-water fish.


hemisphere (used to concentrate omega-3 in fish oil)46 in order to manufacture fractions from shark liver oil and fish oil from hoki. The previous owner of SeaDragon, Angus McNeill, who established the company, saw the potential for the company to develop and commercialise specialised fish oil products as by-products of the oil extraction. In 2003 a sample from the fish oil production was sent to BIG, following a meeting between Angus McNeill and Paul Davis, the director of BIG (based at the University of Otago in the Wellington School of Medicine). A test of the fish oil revealed a range of interesting bioactivities when tested in very low concentrations. In general, BIG conducts tests on naturally occurring substances in order to identify products or compounds that could be derived from them. Their specialist scientific expertise and methodologies assist industry and researchers to identify, characterise, evaluate and develop natural health and pharmaceutical products.47 Indeed, ‘BIG is the only unit in Australasia which has the expertise and the wide range of models and assays for testing both in-vitro and in-vivo’.48 They work with a range of partners, including the Lipid Group at Industrial Research Ltd (IRL) who were also involved in the early analysis of the fish oil from SeaDragon. BIG and IRL had worked together previously on several occasions, and in some cases had referred clients to each other if the others’ particular expertise is required. SeaDragon, being a small company with limited resources for research and development, couldn’t afford to fund the research, and BIG, realising there was a potential opportunity, did the analysis without a contract. “We did it because we thought it was worth looking at”. (BIG) BIG, via the University of Otago, subsequently filed a provisional patent on a bioactive compound identified from fish oil in July 2004. And while Angus McNeill realised there was something to be developed, he didn’t have the capital to invest. He was due to retire and so the company was put on the market in 2004. Establishing a New Company In 2004, when Merinova bought the assets of Seadragon Fish Oils, Seadragon had an excellent reputation and an established customer base in fish oil products. At that stage, Merinova had also bought BioProducts (NZ) Ltd which was engaged in the development and manufacture of bulk deer velvet extracts. BioProducts was a subsidiary of Celentis, the commercial arm of the Crown Research Institute AgResearch Ltd. The Celentis business model was to either license technologies or set up innovative technology based companies, with the aim of spinning them off once established, and using the proceeds to re-invest in research. After 8 years of operation AgResearch decided it was timely to divest its interests in BioProducts. This prompted the formation of Merinova through a management buy-out of BioProducts and the subsequent purchase of the assets of Seadragon Fish Oils. Merinova Ltd is the holding company for the deer velvet (BioProducts) and fish oil (SeaDragon Marine Oils) businesses. Merinova is owned by 6 shareholders, who were all involved in the management buy out and 5 of whom now work or were directors in the company. In terms of the business case for purchase, SeaDragon Fish Oils was considered a small but strong organisation, with potential for growth. The opportunity for innovation had been identified, and the new owners believed they could take it further – beyond commodity fish oil products to develop a range of higher value health products focussing on nutracueticals.

46 McCallum, M. (2004). Angus and the SeaDragon. Seafood New Zealand, September 2004, pp 46-47. 47 BIG, Wellington School of Medicine and Health Sciences, University of Otago. Promotional material. 48 Talbot, A. (2004). Big Time. University of Otago Magazine. Issue 8, pp20-21.


For example, product ideas being developed included enhancing fish oil by adding other products, deodorised fish oil, powdered oils and marine bioactives. Their product development process was specified and consisted of the following steps:

Ø Scan for product opportunities by attending trade shows, reading industry magazines, or identifying new customers.

Ø Internal screening and weighting of product ideas. Ø Decide which ideas to develop based on strategic goals. Ø Project plan. Ø Identify potential partners based on organisational alignment. Ø Conduct risk analysis for trials and patents.

In addition to new products and markets, Merinova was developing a range of services that support their products. They provided training, information and advice to their customers, especially if they were on-selling the fish oil products. Their customer service orientation ensured customers (predominantly bulk suppliers) were fully informed about SeaDragon products and the market opportunities, and had sufficient information to help overcome downstream buyer scepticism or resistance to a new product. Fortunately, the evidence base for health benefits from fish oil has been accumulating over the last several years and this information has been used to inform new customers. Indeed, the medical profession were starting to promote the consumption of fish oil because results of randomised control trials were demonstrating associated health benefits. Staff background and experience was a key driver for their innovative approach. All their staff had scientific backgrounds, but had been working in the commercial sector for several years as, for example, business development managers, senior managers or food technologists. Their science backgrounds gave them credibility, not only with their customers, but also when engaging or working with science providers. And their commercial background lent itself to a more entrepreneurial approach, with ability to develop and maintain a strong customer base. In terms of the seafood industry, Merinova was a new player. The company’s strengths were:

Ø Developing strategies to build innovation into all aspects of their business – operations, products, markets and partner collaborations.

Ø A fresh approach to an existing industry with a strong focus on building collaborative relationships. For example, since starting up they had presented themselves to a range of potential collaborators (seafood companies and research providers) and had described what they wanted to achieve, their strengths and weaknesses, and how they could work together.

Ø A focus on what they could achieve with their partners provided a key platform for building relationships.

Ø Using a sustainable marine by-product with health benefits (i.e. hoki oil). Their use of by- products formed the basis for collaboration with industry partners.

Collaborative use of by-products maximises the value of important resources. (SeaDragon)

Ø A willingness to share information, network and make links in order to grow the nutraceutical/seafood sector as a whole.

Ø A strong research and development culture internally, with support for innovation at a senior level.

Some of the key challenges Merinova had faced included:


Ø Balancing the development of a customer base while developing new products. This involved generating customer interest, but being explicit about the stage of product development, and managing expectations.

Ø Balancing the development of new product concepts and projects while ensuring staff were not overloaded with day to day administration.

Ø Raising funds and finding investors had taken longer than expected. However, they had recently received a grant from New Zealand Trade and Enterprise (NZTE) which would enable them to proceed with market development.

In a growing business finding appropriate investment will always be a challenge to help realise our strategic goals. (SeaDragon)

Changes in the Bioactivity Investigation Group Since the project began, BIG had appointed a business development manager and incorporated a more commercial focus (i.e. staff required to allocate time to projects). Their aim was to ensure projects were managed in a way that ensured ongoing growth and the long-term economic viability of the group. For example, all work undertaken by the group needed to be conducted on a cost recovery basis. BIG’s commercial development needed to be considered within the wider context of the University of Otago’s research and enterprise activities. BIG was a small group operating in a commercial environment - they were client focused, recognising that in order to maintain and develop their customer base, they needed to be highly responsive. The University, as with all universities, was a large organisation with a legacy of bureaucracy and systems. As a result, the challenges for a small, dynamic research group interfacing with a large organisation had become apparent. For example, the University managed BIG’s research contracts but lacked the flexibility to be able to respond quickly to clients needs; signing a contract could take a couple of months whereas clients’ expectations were that a contract would be signed in a week. In addition, one option for BIG to increase client responsiveness and income was to operate the laboratory for longer hours and provide the opportunity for staff to undertake shift work. However, the University’s human resources requirements necessary for BIG to implement shift work was going to take some time to develop. A key question was what impact the above situation had on developing strong industry-science relationships. An OECD report49 noted that universities increasing emphasis on research and development and enterprise activities, have had mixed results in terms of successful industry-science relationships. ‘A major reason is that decentralised university systems, in which universities enjoy more freedom in their research policy and relationships with industry, are more responsive than centralised ones to opportunities for industry-science relations. Although the latter may be justified on other grounds, governments should realise that they are increasingly costly in terms of commercialisation potential’. Despite this, there were considerable advantages for BIG to be located under the University umbrella; in particular it provided financial security and assistance with intellectual property rights. In terms of the SeaDragon project, while it may have been practice to conduct the occasional analysis without a contract prior to the arrival of the business development manager, it was no longer the case. This had put the SeaDragon project in a unique category for BIG, especially 49 Organisation for Economic Co-operation and Development (2002). Benchmarking industry-science relationships. OECD, Paris. pp.60


as the new owners had to raise funds and find investors in order to progress the project. Certainly, this situation is one in which many small ‘start up’ companies find themselves – with a potential product or compound that could be commercialised once bioactivity is confirmed, but without the capital to undertake the research and development. For such cases, BIG frequently assisted companies to prepare Foundation for Research Science and Technology (FRST) or NZTE grant applications for research and development. BIG also found themselves in this situation - holding intellectual property that could be developed, but without the funds to do so. Ideally, and once sufficient income was being generated, BIG saw the potential to establish an innovation fund for their own commercial development. Forming Collaborative Working Arrangements: What underlies it? Even though the previous owner had initiated contact with BIG, Merinova (as the holding company for SeaDragon) was happy to continue the relationship with BIG for a number of reasons:

Ø BIG were willing to continue the relationship until Merinova secured funding. Ø The business development managers of both Merinova and BIG had successfully

worked together before. They knew each other from previous jobs and respected the others’ competence.

Ø The skills and expertise within BIG were highly regarded and credible. They had a reputation for their ability to deliver.

Ø BIG had previous experience within the seafood industry, and had successfully commercialised a shark extract (in partnership with IRL) and taken it to market in Japan.

Ø If the product was commercialised successfully, Merinova was confident that BIG’s research would stand up to peer review and scrutiny.

Ø BIG had an established customer base in Japan that could assist with future marketing.

Merinova also wanted to continue IRL’s involvement in the project as they had been involved in the early analysis of the fish oil. As a result, Merinova had contracted IRL to undertake research analysis of various fish oil components with a contract-for-service arrangement, rather than as a collaborative partner. SeaDragon had a previous relationship with IRL and knew their experience and skills matched the project, and knew their approach was professional and timely. There were a range of other factors that cemented the relationship between Merinova and BIG, as described below. Memorandum of Understanding: Shortly after SeaDragon Marine Oils was formed, Merinova (as the holding company for SeaDragon) and BIG had to sign a Memorandum of Understanding (MoU) as a matter of urgency. While negotiations with BIG had commenced and a provisional patent had been taken out, the project had stalled. The MoU signalled that the organisations were committed to working together, and planned to take the project further. The MoU enabled expectations about the status of the project, how the two parties would work together, and how the project would develop, to be clarified at the beginning of the relationship. The next step was to develop a collaborative agreement. At the time of this case study, the agreement was due to be signed within the next couple of months. It would define:

Ø The project plan.


Ø How the project would be managed, such as frequency of meetings, who would attend, content of meetings, and how progress would be reviewed.

Ø Obligations of each party to each other and the project. Ø A strategy for conflict resolution. Ø Responsibility for product commercialisation (Merinova had this responsibility). Ø The value of each parties input into the project (for the purpose of assigning

intellectual property). Ø How the intellectual property would be shared once it is commercialised. Ø How the product would be presented to customers and the role of each party at

presentations, i.e. BIG would present scientific data. It was anticipated that the collaborative agreement would identify a range of relationship issues that could potentially arise within the project and include strategies for managing them. Intellectual Property (IP): BIG filed a provisional patent in July 2004, and a PCT patent in July 2005, and it had been agreed that Merinova would commercialise the product. (It was noted that identifying the commercialising partner at an early stage helps avoid IP problems further down the track). BIG and Merinova were negotiating an IP arrangement with a view of sharing the IP on a sliding scale; based on the value of their various inputs into further developing the IP over time, i.e. Merinova would take a larger and larger share of the IP as their investment increases. BIG was willing to accommodate the needs of future investors in the resultant arrangement to ensure a win-win outcome. The process of negotiating the value of each partner’s contribution to the project was a key element of the IP arrangement. Financial contribution was considered the easiest to value, but other types of in-kind contributions, such as finding investment money, providing a physical space, or finding a marketing partner, also had to be valued. BIG’s contribution was valued through the negotiation process – it won’t just be a fee for their service, their IP input will also be valued (SeaDragon). IRL didn’t hold a share of the IP, but they could potentially develop IP from the analytical methods that they had developed for the project. The process of acknowledging the value of each other’s input was vitally important. If one party felt their value was not being acknowledged, they would feel resentful. Both research providers in the case study expressed this sentiment, especially if a company wanted to own 100% of the IP. It was considered more helpful and productive when there’s collaboration between a research provider and a company – when the IP is shared and reviewed at subsequent project milestones. If they want to own 100% IP, well, we’ll do it but it’s not ideal. Needs to be more

than ‘just a job’, better when it’s something we have a real vested interest in. (BIG) It was noted that a company needs to be realistic about the benefits that it brings to an IP agreement - it cannot achieve its goals without the intellectual contribution of research providers. The same could be said for a research provider; their intellectual contribution is not the most important aspect. A project cannot be realised without a company’s investment, commercial drive or other resources.

Everyone has a role and it needs to be valued. Nobody’s one role is most important – companies and science providers both need each other. (SeaDragon)

All IP needs to be negotiated on a case-by-case basis – every input has a different

value and it needs to be explored. (SeaDragon)


Organisational Alignment: Organisational alignment had made a significant contribution towards the relationships formed between Merinova and BIG. Areas of alignment included:

Ø Fostering a learning culture. Both organisations had established internal mechanisms to facilitate the development of an evaluation and learning culture. BIG held staff forums to discuss and share ideas about projects – what was working, what wasn’t, and what were the links between projects. This arose from an appreciation that innovation arises from unexpected and serendipitous events. Within Merinova, regular stop/go project review meetings were held.

We review what we did well and what we could do better – the process helps reduce tension and subjectivity. (SeaDragon)

Ø Strong leadership for innovation within the organisation and at a senior management

level. Both organisations had a research and development culture. Ø Similar visions for business development and future directions, for example they both

had ambitions for their own and their sectors growth. Ø Committed to the success of their partners. Ø Face similar challenges in terms of balancing growth while not outstripping

resources. Ø Share a common understanding of project risks and potential benefits.

Relationship Attributes: A key feature of the relationship was trust. The project wouldn’t have progressed if a strong basis of trust was not present within the relationship.

A lot of it is based on trust, goodwill and understanding. We’re a young start up company but having difficulty raising funds. They’re helping us keep the project alive. (SeaDragon)

We’re not legally bound to this project yet we’re choosing to work on it – which is in

keeping with the spirit of the MoU. We know there are more benefits if we work together. (BIG)

Regular communication was considered critical to ensuring the relationship was maintained, especially when SeaDragon was looking for investors, and the project was essentially on hold for BIG.

There’s lots of communication – we know what’s happening. (BIG) Another element of trustworthiness related to the size of New Zealand and professional reputations.

New Zealand is so small that trust is a big deal. We’ll hear about reputations through the grapevine. People in this industry have been known for a long time – a lot depends on their reputation. (BIG)


Future Directions A sense of frustration was apparent for both parties. Merinova had taken longer than anticipated to raise funds and find investors, and BIG had been carrying the risk of holding a patent while the project was on hold.

We have to take it to the next stage – BIG don’t have the money for this. (SeaDragon)

However, and as mentioned previously, this situation is not uncommon for start up companies. They can be in a catch-22 situation – until the project gets started there’s nothing to offer investors, and it’s not until a project has progressed to a certain point that it begins to look attractive to investors. Merinova has had to be honest with BIG about their situation and not raise false expectations. Merinova was certainly aware that they had a lot at stake with this project. They knew that as a new company, they had to get ‘rungs on the ladder’.

We need to demonstrate that we can achieve what we set out to do and build a history of our ability. (SeaDragon)

In addition, the nature of an innovative project implies risk;

In this area you can get very excited about what you see in the test tube and can think it’s going to translate to animals and subsequently to humans – it doesn’t always work out that way in research. (SeaDragon)

In vivo trials were very expensive. For Merinova they constantly had to balance how much is spent, with potential commercial benefits and market opportunities. Aside from these delays, no significant relationship issues were identified. This was ascribed to the high level of communication, detailed and up front planning, complementary skills and respect for each other. And at the time of the case study, the situation appeared close to resolution. There is no doubt that the good collaborative relationships would see the project through to the next stage.


April 2006

Bream Bay Aquaculture Park Case Study

Bream Bay Aquaculture Park: Does being close enhance research

provider and industry collaboration?

By Kathryn Nemec

Introduction Strong relationships between industry and science providers are recognised as a key determinant of research utilisation and innovation. Different models can be used to build industry-science relationships, one of which is to link research organisations and a cluster of local industries. A recent OECD report on industry science relationships notes that the most successful industry-science partnerships involve links between publicly financed research organisations and a cluster of local industries.50 This model is being implemented at the Bream Bay Aquaculture Park (BBAP) and provided a good opportunity to explore the factors that underlie and enhance industry-science relationships. A particular feature represented in this case study was the positive influence of physical proximity and co-location on organisations based at the aquaculture park. The Establishment of the Bream Bay Aquaculture Park The BBAP was officially opened on the 24th April 2002. The park was an initiative by the National Institute of Water and Atmosphere Ltd (NIWA) to establish an aquaculture development site – providing core facilities, infrastructure and skills to companies wanting to develop new commercial opportunities. The plan was to develop an incubator and cluster concept, with scientists, companies and students working together. The park was located in a rural setting next to the beach on the outskirts of Ruakaka, a small seaside town located between Auckland and Whangarei. The site was dominated by the adjacent power plant owned by Mighty River Power Ltd, with massive buildings that overshadowed the park. Mighty River provided sea wells and the pipe system that transports seawater onto the aquaculture park (which is leased from Mighty River Power Ltd), and NIWA monitored the seawater for any transferable, water borne disease. In addition to ‘clean’ sea water, NIWA supplied compressed air, filtration equipment, pumps, fresh water, and electricity (and supply back up) to companies on site. The facility had four separate buildings which covered an area of 3000m2, including a hatchery, nursery, office space, conference room, accommodation, wet and dry laboratories, a workshop and storage area.

The hatchery and nursery complex has extensive live-feed production facilities, including those for many microalgae species. The hatchery has specialised finfish and shellfish research and production areas, and a heat and light controlled

50 OECD 2000, cited in OECD (2002). Benchmarking industry-science relationships. OECD, Paris, pp.11.


broodstock room for out-of-season spawning. There is also a wet laboratory and dedicated marine pathology unit with quarantine facilities for when animals are brought on site from the wild. Overseas experts helped to design the concrete floor of the hatchery, which has an extensive drainage network.

NIWA Fisheries and Aquaculture Update. No.1, 2002. When companies moved on site, NIWA constructed buildings according to their specifications, and the company leased them from NIWA. This was a particularly beneficial arrangement for companies that couldn’t afford the capital outlay for a production area. Once built, the companies run their operations within their designated areas. NIWA had 22 staff based on site, including marine biologists, technicians, and hydrologists. A regional manager, hatchery manager, and administrative staff were also based at the aquaculture park. NIWA staff undertook their own aquaculture research and production projects, or projects in conjunction with the companies on site. In addition, they were available for consultancy work for on site companies. The concept of an aquaculture park was not entirely new to NIWA. In addition to the BBAP, NIWA had operated a marine aquaculture facility at Mahanga Bay, Wellington, for many years. However, Mahunga Bay had limited capacity to expand, and sea temperatures were cooler than Bream Bay. In addition, NIWA wanted to establish an aquaculture park that was capable of extending aquaculture products, developed with intellectual property from NIWA’s research activities, to commercial scale production. In about 2000 NIWA started to look for a second site; one that would also be suitable for kingfish fingerling production, along with the potential to be used for a range of other aquaculture species. Who was based at the Bream Bay Aquaculture Park and what were they doing? In addition to ensuring the park runs smoothly, and providing infrastructure, skills and expertise, NIWA also had some commercial interests on site. One of them was producing yellowtail kingfish fingerlings, which were then on-sold to kingfish farmers. Kingfish were a prized fish for sashimi in Japan, and while other countries grow them, excellent stocks of them exist naturally in the waters around Bream Bay. Indeed, the first pilot scale commercial production of yellowtail kingfish in New Zealand was developed at the aquaculture park. NIWA were also involved with developing:

Ø Technology for growing eels. The elvers could potentially be on-sold to commercial growers.

Ø Single seed oyster hatchery. Ø Aquaculture system for producing flounder.

OceaNZ Blue Ltd (referred to as OceaNZ from here on) was one of two companies based at the aquaculture park. ‘The company was established in 1999 to commercially produce paua (a native abalone), beginning with feral broodstock, and farming them through to marketable size. This involves the spawning, settling, on-growing, processing, and marketing of premium quality paua to international markets. Paua is a much sought after shellfish but natural global resources are being depleted rapidly whilst consumer demand worldwide is increasing’.51

OceaNZ specifically chose the aquaculture park on which to establish their business because:

51 www.oceanzblue.co.nz


Ø They could access water supply and infrastructure. Ø Buildings could be leased from NIWA and built to OceaNZ specifications. Ø Access to NIWA’s paua breeding expertise that had been developing at Mahanga

Bay since the 1970s. NIWA conducted a range of different research projects and consultancy assignments for OceaNZ. For example they had a Foundation for Research, Science and Technology (FRST) Technology for Business Growth (TBG) grant which provided some financial support for investigating selective breeding in paua. The research and development input was critical for OceaNZ.

We conceptually know what to do, but practically don’t know how to do it. The need for research and development is strong as we need to be fine tuning the principles. … we don’t want to reinvent the wheel, but we need to make it better. (OceaNZ)

OceaNZ were planning to sell their first paua in 2006, and start to see financial returns on their investment in 2007. Ninety percent of their product would go to Japan. However, the Japanese prefer white abalone, which is another species of paua that doesn’t grow in New Zealand waters. As a result, OceaNZ were planning to conduct research on breeding a white paua from the New Zealand species with NIWA. Sealord Shellfish Ltd was also based at the BBAP and had established a greenshell mussel hatchery, which was still in the research and development phase but with a view towards producing commercial volumes of spat. They had developed their own techniques for producing mussel spat. As for OceaNZ, their establishment on the site did not require capital outlay, but did require Sealord Shellfish Ltd to ‘fit out’ the building and ‘reduced the time to set up the hatchery’. In addition to the mussel hatchery, Sealord Shellfish Ltd and NIWA also had a joint venture, funded through a TBG grant, to conduct preliminary investigations into the feasibility of growing hapuka commercially. The main attraction for Sealord Shellfish Ltd to move on site was the infrastructure and facilities, rather than the opportunity to be located close to a science provider. This is understandable as they already had significant internal research capacity, but they did enjoy the accessibility of ‘extra hands to help out for a few hours at short notice’. While it didn’t eventuate, Moana Pacific Fisheries Ltd was also a potential partner on site during the early days of establishing the BBAP. In fact they were instrumental in encouraging NIWA to consider supply of kingfish fingerlings as a commercial enterprise as Moana Pacific could see the market potential. However, due to the difficulty Moana Pacific experienced with obtaining consent to establish a kingfish farm in coastal waters nearby, they decided not to proceed. Three Stakeholders – Three Different Relationships The relationships between the organisations were all different due to the type of organisation and the nature of their work. NIWA and Sealord Shellfish Ltd: Sealord Shellfish Ltd was a large organisation with parts of their operations scattered throughout New Zealand. As such their operations at the BBAP represented a very small aspect of their business. They had 3 people on site; the manager of the mussel spat hatchery


project, and 2 technicians. The relationship between NIWA and Sealord Shellfish Ltd on site was mostly informal (i.e. structured meetings weren’t held), with daily and continuous communication to resolve tenant-landlord, and purchaser-supplier issues. The NIWA and Sealord Shellfish Ltd hatchery managers had worked together previously, which enabled issues to be raised and discussed in an open manner. NIWA and OceaNZ: OceaNZ was a young start-up company, backed by a group of investors, and their entire operations were based on site. There were approximately 5 employees. Compared to Sealord Shellfish Ltd, their business with NIWA was undertaken with a more structured format, with regular meetings to raise and discuss issues. Regular and informal contact with NIWA staff also took place on a daily basis. As OceaNZ didn’t have internal research capacity they utilised the skills and expertise of NIWA, both formally and informally. For example, when OceaNZ moved on site they engaged NIWA to help investigate and resolve problems as they were identified by OceaNZ. They paid a lump sum that enabled them to have ready access to NIWA’s knowledge and expertise, especially regarding growing paua. This was especially important during their implementation phase as problems and issues were arising on a regular basis. Once the set-up phase was completed, and the focus of the business changed to ongoing improvement and fine tuning of the operating systems, their relationship with NIWA changed. They subsequently used NIWA as consultants for specific problems on a contract basis. This work involved designing or improving the efficiency of a piece of equipment, resolving a water quality issue or staff training. While OceaNZ didn’t have a preferred supplier agreement with NIWA, they acknowledged that they wouldn’t enter into a competitive tender situation with anyone else, unless NIWA was unable to supply the required services.

We have a good relationship with them – this is more important than saving a few dollars. (OceaNZ)

Sealord Shellfish Ltd and OceaNZ: The relationship between Sealord Shellfish Ltd and OceaNZ was moderated by commercial sensitivity. And while the social contact and a very positive working relationship, especially in a remote working environment, was highly valued, there were limited commercial benefits.

Professionally we don’t go into their site and visa versa. We need to consider commercial sensitivity arrangements. However, benefits from being alongside another operation mean that there are resources to call on in case of an emergency. (Sealord).

Benefits of Co-location at the Bream Bay Aquaculture Park Physical proximity and co-location of the companies at the aquaculture park were a key feature of this case study and provided the opportunity to explore how this facilitates industry-science relationships. Opportunities for Communication: The benefits from ongoing and informal communication that resulted from the organisations being located within the same site cannot be underestimated. There were numerous opportunities for staff to interact in an informal manner in the shared lunch and kitchen area,


when walking around the site, or in the administration/office building. In addition, the rural location and isolation of the BBAP created a sense of camaraderie, and increased opportunities for socialising together, whether at the pub or community sports events which provided further opportunity to cement relationships. Indeed, the boundaries between formal and informal channels of communication overlaped as conversations about the content of formal meetings (i.e. projects, outstanding issues) were continued in informal settings. It was noted that this was reinforced by being able to interact easily with people at a range of different levels ‘from people on the floor to doctors in genetics. Everyone is approachable’. (OceaNZ). OceaNZ in particular valued the informal communication that took place concerning their projects.

We had a problem with chlorinated tanks in the nursery - they had to be sterilised and then chlorinated. We were washing away and flushing, and scrubbing out the tanks with bleach in a very laborious way. In the smoko room we asked them how they’d do it and do you mind spending half an hour showing us how to do it. We wouldn’t have heard about the procedure they said and it has speeded up our process. We’re the recipients of a lot of good information just because we’re on site, and we don’t pay for it. (OceaNZ)

While acknowledging that they were recipients of valuable information as a result of being on site, OceaNZ also believed that NIWA benefited from these exchanges. For example, NIWA could observe and be part of the issues and challenges of operating a commercial venture. These comments implied an implicit agreement to exchange information in order to build a sense of reciprocity and goodwill. Relationship Building: Communication helped to build relationship between individuals and organisations on site. Other elements also contributed to building relationships. These included:

Ø Organisational culture: A strong informal ethos held sway at the BBAP and within the organisations on site. It was noted that this was distinct compared to head office cultures that were more established. The isolated location provided the opportunity for distinct organisational cultures to develop. In general, this is not an unusual scenario for organisations – different cultures emerge at different locations. The distinction between the local and head office perspective of the site was illustrated by the following comment:

At the informal level there are no barriers in the smoko room, problems are being discussed, solutions offered, the information is flowing. However, at a formal level, there is no contact at all. When the head people come we show them around so they can see the potential, but at a corporate level there are no advantages or benefits of working together. (OceaNZ)

Ø Organisational investment in research and development: For all three organisations,

research and development was a critical element of their business and their ability to be innovative, i.e.

o NIWA was a research organisation, o Sealord Shellfish Ltd stood out as one of the few seafood companies that

invest significantly in research and development, and o the innovative nature of OceaNZ’s enterprise meant research and

development was essential.


Technical Input: As noted previously, the technical input from NIWA was especially valued by OceaNZ.

We’re learnt how to spawn paua from NIWA staff. Wouldn’t have been able to do this. Also how to settle the animals in the tank. Settling is the most difficult aspect of the process. In the beginning it was a dream to get this up and running. There was a lot of work that went into the practicalities of figuring out how to actually do it. Still get people from NIWA to help us. Some of the really innovative aspects of the project are now complete – now the key issues concern ongoing improvement and how we’re going to make it better. (OceaNZ)

The above comment highlights how different types of technical input were required at different phases of development. OceaNZ relied significantly on NIWA’s paua growing expertise in the past, and acknowledged changing research needs as they entered the improvement and fine tuning phase of their development. Certainly NIWA was well placed to meet changing needs as it offered an extensive range of different disciplines, expertise and technology. For example, NIWA had recently developed a unique seawater cleaning pump for OceaNZ.

It’s very unique in the world, very few people have this. NIWA gave us all the advice for this and give us ongoing training in monitoring the pump. (OceaNZ)

In addition, the NIWA network was extensive, with people based throughout New Zealand.

We use NIWA people from all over New Zealand, use water quality people, abalone people in Mahunga Bay. People on this site have specific knowledge, but others have more relevant knowledge for our business. (OceaNZ)

Problem Resolution:

We interact with our commercial partners on a daily basis. We’re the first to hear if there’s a problem. We work on the problem together – it’s not just a NIWA problem, it’s a shared problem. (NIWA)

However, it was acknowledged that getting to the point of it being a shared problem had taken a lot of work, mostly communication in an ongoing and consistent manner. Most problems had been associated with microalgae production, a living food used in raising juvenile fish and shellfish. However, systems and methods for production were constantly being improved. Issues raised generally related to customer service, especially managing clients’ competing demands. In addition, combining production and research in the same facility also leads to competing demands for microalgae.

In a commercial operation scenario it is straight forward. You’re trying to maximise production for a minimal outlay. However, in a research operation, you’re producing what you need for the research, and this is often high cost. As a result, commercial production of microalgae, and production of algae for research purposes do not sit side by side. And the algae room is producing algae for many different species – it’s not dedicated. (Sealords)


Opportunities to Access Networks at the Bream Bay Aquaculture Park Being close to NIWA has bought a range of opportunities for companies at the BBAP to access networks and other resources. In some cases, the advantages from these opportunities weren’t appreciated until they’d moved on site. Access to National and International Networks: NIWA has access to an international network of scientists and people with experience in aquaculture. It provided the opportunity for cross fertilisation of ideas, experience and insight.

We can sit up here in splendid isolation but we always need more exposure. NIWA is bringing in new people and we can see that making a difference. New people are coming in with commercial experience and they have a very practical orientation, making small adjustments that help immensely. (Sealords)

In addition, NIWA had the ability to recruit international expertise for a particular project. For example, if a company structured their project with TBG assistance funding in partnership with NIWA, then NIWA could then recruit the appropriate expertise to the project. Direct and bottom line benefits were attributed to having access to such a network. OceaNZ noted that this had enabled them to implement a ‘world class water recirculated system’. This had reduced costs and enabled the company to achieve more control over the life cycle and growth during the whole year. They noted that ongoing access to technology would enable continual improvement. Access to Students and Other Resources: The BBAP provided a focus for research activities with other institutes, such as the School of Marine Science at Auckland University, and the Auckland University of Technology. Doctorate and masters students conducted research projects, and students undertook work experience at the BBAP. Work experience in an applied research and commercial environment was noted as a valuable asset for graduates, and provided a resource for NIWA and companies based on site to utilise. This was a significant contribution to the sector as a whole. The importance of the provision of graduates cannot be underestimated. An OECD report noted that the provision of skilled graduates is essential to companies wishing to ‘adopt new technologies, new instruments and methods for industrial research and an increased capacity for problem solving’.52 Other Crown Research Institutes could also be encouraged to work on site in collaboration with commercial partners and NIWA. Visiting international scientists had also worked at or visited the park. All companies based on site had ready and easy access to the skill and expertise of visiting scientists. Raising Profile: Joint ventures between companies and NIWA at the BBAP implied common and vested interest in project success. Knowing that positive spin-offs (i.e. more companies moving on site, enhanced reputation) can be derived from successful projects motivated partners to be 52 OECD 2000, cited in OECD (2002). Benchmarking industry-science relationships. OECD, Paris, pp.16.


equally concerned about success, of their partners as well as their own. Joint ventures on site raised the credibility of all partners as it demonstrated their ability to work together in a productive manner.

They have also got credibility riding on having a success story right beside them, and they’re helping us. (OceaNZ)

Managing Intellectual Property Most of NIWA’s work at the BBAP was undertaken as part of joint ventures with companies. Therefore ownership of intellectual property (IP) was governed either as part of a specific project’s IP agreement, or established as a more general IP agreement between NIWA and covering all the companies operations on the site. Difference in IP arrangements differed between the companies, and the stance of each company in relation to IP (and commercial sensitivity) was treated with respect. For example, the Sealord Shellfish Ltd mussel spat hatchery work was commercially sensitive, and only Sealord personnel entered their area at the BBAP. On the other hand, OceaNZ had a very different approach.

We want to shout our success to the world – we’ll share our knowledge with anybody. We’ll share our knowledge about how to grow them. (OceaNZ)

For us the more paua farmers there are with quality standards, the better. (OceaNZ)

For OceaNZ, they owned IP in relation to gene marking. In the future it was anticipated that IP was more likely to concern management systems and marketing. The difference in IP between the companies on site possibly reflected the different life cycle of the business in relation to the species. Certainly growing paua commercially was a very new venture compared to growing mussels commercially. Due to the number of companies now growing mussels, the effort to achieve competitive advantage becomes more critical, and IP becomes increasingly valuable. Issues Emerging and Areas for Improvement Lack of Formal Agreements during Set Up Phase: The rush to get the BBAP operational during the set-up phase meant that some agreements were made in principle and on the basis of a handshake. This was in response to the need to resolve some issues urgently. Things were developing so fast that when it was realised something was needed it was a matter of urgency. (NIWA) However, recollection of what was agreed differed over time. While such an approach was in keeping with an informal operating ethos and an emphasis on the establishment of goodwill at the beginning, there were risks associated with this approach. And while it didn’t lead to any major problems, it did need to be rectified after the event. With the wisdom of hindsight, it was acknowledged that written agreements would have made resolution easier. Agreed service specifications for microalgae supply was also identified as an area that could have been formally agreed at the beginning. Impact of Growth of the Bream Bay Aquaculture Park on Relationships: The BBAP was expanding quickly, and if the site continued to expand, additional buildings would need to be built. Growth would need to be balanced with ensuring daily interaction


between personnel on site was maintained. It was apparent that this feature of the site was highly valued. A future scenario is that each new entrant to the BBAP has their own compound, which may in fact be a necessity for biosecurity reasons. However, even if this does eventuate, mechanisms for ensuring regular contact between companies and NIWA, and between companies, should be considered. Growth would also impact on the way in which NIWA engages with companies based at the BBAP. For example, NIWA conducted projects in response to problems identified by OceaNZ. However, this would change if the BBAP grew and more demands were placed on NIWA. This would require NIWA to development new systems for how they respond to such requests, while at the same time managing the informal, but highly valued aspect of their relationships with companies on site. Developing Commercial Experience: NIWA’s need to develop commercial experience was noted on several occasions. For example, NIWA were still building a culture of delivery and customer orientation, rather than a culture of ‘got the funding and expectations for delivery are low’.

They’re excellent technically, but the commercial side to their business is limited, they learn from us about how to do it commercially, i.e. how to grow larvae into a production line. (OceaNZ)

For example, some of the spawning work done on site was highly timing dependant and delivery of services by NIWA cannot be delayed. For example, the consequences of not spawning would impact 3 years down the line. If something doesn’t happen now it has to happen in the next minute. (OceaNZ) However, NIWA were learning from exposure to commercial operations. Indeed, OceaNZ believed that NIWA benefited from them being on site, especially with regard to operating in a commercial environment.

Discussions we have and questions we get indicate they … want to learn about the commercial aspects of the business. (OceaNZ) It’s all very well to do research, but the challenge is to make it commercially viable, and that’s a struggle for NIWA. These issues get bought up as part of informal interaction and makes NIWA aware of the reality – that if you don’t get it right you fail. (OceaNZ)

Linked to the development of commercial experience was the growth of a customer service ethos towards companies on site. A respondent from OceaNZ commented that: We can be treated like a subsidiary of NIWA rather than a customer – can be a bit

relaxed towards us. People can overlook things – which can happen in any operation.

Other aspects of developing a commercial focus that were raised included:

Ø Develop long term markets for species being developed on site. Ø Develop plans for scaling up from experimental aquaculture systems to commercial

level production. Ø Maximise marketing opportunities from the number of national and international

visitors to the BBAP.


Ø Attract more companies on site.

I wonder how many people even know this is here, even in the seafood industry. They probably just think it’s a research station, not realising there’s the opportunity to come and set up a business here…. Try and attract more farms on to the site, or nearby. That would be good for their consultancy, and also for their commercial position – more chance for that. (OceaNZ)

It should be noted that NIWA established Natural Solutions Ltd to identify novel products and explore opportunities for commercialisation. Thinking about the Future Continuing to develop the research activity at the BBAP was a more likely development scenario than building a large production facility. Certainly, access to research services in an informal setting was a key feature of the site to date. The key challenge as the BBAP develops will be to maintain informal relationships and open communication channels with companies on site, while at the same time fulfilling commercial obligations for service provision to their clients. This case study highlighted two different types of relationships that NIWA had with companies on site. Different configurations of engagement and relationships with new companies may emerge in the future. When new companies express an interest to move on site, NIWA should also consider the potential new entrant’s ability to maximise the opportunities for informal engagement, take advantage of the research services, and benefit from co-location with NIWA and other companies. Of critical importance was NIWA’s ability to continue to demonstrate trustworthiness as a reliable and effective partner.


April 2006

Mussel Spat Hatchery Case Study53

Mussel Spat Hatchery Project: Exploring the Features that Underlie

an Effective Partnership

By Kathryn Nemec

Introduction Some of the most successful industry-science partnerships involve links between publicly funded research organisations and clusters of local industries.54 This case study, of two distinct yet parallel industry research projects, with a single research provider, illustrated the nature and characteristics of these unique partnerships. Another key feature of this case study is mobility of staff between the research provider and industry. The Organisation for Economic Co-operation and Development (OECD) notes that worker mobility is a critical element of industry-science relations. However, low rates of mobility of scientists and researchers remain major obstacles to improving industry-science linkages in a number of OECD countries. Background The mussel aquaculture industry and its trademarked Greenshell mussel is one of New Zealand’s most successful exports. The technology that had been developed to farm mussels successfully, especially the long-line farming system, was regarded as the world standard for mussel farming (www.seafood.co.nz). In order to farm mussels, baby mussels (or mussel spat) are settled on to long-lines and then hung in the sea. Typically, mussel spat was collected from the wild where it washes up on beaches attached to seaweed. The wild spat was then carefully transported to farms to be placed on long-lines. However, the production of wild spat could be unpredictable. While most years spat was plentiful, there are occasional years when natural phenomena (i.e. no seaweed) results in poor or non-existent supplies of wild spat. Over time, the industry learnt to manage occasional years of low spat availability. However, with increasing need to ensure consistent mussel supply to overseas markets, some seafood companies started to explore mussel spat hatcheries. While mostly in an experimental phase, hatcheries raise larvae from eggs and then settle spat in a controlled environment. Once the spat is settled, they are grown to a certain size before being placed in the sea. This method enabled greater control over the production of mussel spat, without having to rely on the 53 This case study has been prepared as part of a project on industry-science relationships in the New Zealand Seafood Industry, one of the projects in a wider research programme on innovation and economic growth in the Seafood Industry. In 2003, the Foundation for Research, Science and Technology funded the University of Auckland's Business School to work with the National Institute of Water and Atmospheric Research to undertake this wider programme of research over a 4 year period. 54 OECD (2002). Benchmarking industry-science relationships. OECD, Paris. pp.11.


vagaries of nature. Ideally, the mussel industry will eventually obtain its entire spat supply from mussel hatcheries. The two projects examined in this case study aimed to identify ideal conditions to produce mussel spat in hatcheries. The projects also went hand-in-hand with a selective breeding programme run by the Cawthron Institute that aimed to improve farmed mussel stocks through developing selective breeding for traits such as shell colour and shape, volume of meat, and rate of growth. These superior or ‘stud’ mussels will eventually be used in the hatcheries to breed spat commercially. Cawthron can now reliably produce large numbers of mussel families for selective breeding. The first batch of 75 mussel families was produced in 2002. These have been tagged and are growing at seven NZ mussel farming sites. The best animals from the best families will be selected to breed from. The second batch of 69 families was produced in 2003 and will be ready for harvest and assessment in 2005. www.nzmic.co.nz This case study explored two mussel spat hatchery projects and the industry-research provider relationships that govern and manage them. The Mussel Spat Hatchery Projects What were the projects? The overall aim of the two mussel spat hatchery projects was to lift mussel aquaculture to a new level of sophistication through hatchery technology and selective breeding. They were innovative for a number of reasons:

Ø Methodology: The projects were concurrently investigating two different technologies for spat growth, and the impact of these technologies on spat retention rates on long-lines.

Ø Shared resources: The two projects shared an early phase in common, that is using algae resources and growing larvae to the point of spat settlement, before diverging to explore different conditions for spat growth.

Ø Common research provider: Both projects shared the same research provider, the Cawthron Institute.

Ø Technology transfer: The Cawthron Institute was working closely with the companies to develop and train company staff, and transfer skills and expertise.

Ø Located in the same research facility: Both projects were based at the Glenhaven Aquaculture Centre.

Who was involved? The stakeholders in the case study were:

1) Foundation for Research Science and Technology (FRST). Both projects were funded with a Technology for Business Growth (TBG) grant from FRST. TBG targeted projects that move companies towards high added-value, high-margin, technology-based products. Under TBG funding companies received up to 50% of eligible project costs, and had to be capable of funding subsequent commercialisation costs.

2) Cawthron Institute was an independent, privately-funded, not-for-profit organisation governed by a board of trustees based in Nelson, New Zealand.

3) Marlborough Mussel Company Ltd (MMC) was one of the first mussel growing enterprises in the Marlborough Sounds. Bought by the Skeggs Group in 1998, the


MMC was ��

�� 4) Aotearoa Seafood Ltd (ASL) was owned by Wakatu Incorporation and was the

country's fourth largest producer of Greenshell mussels. The company was comprised of Te Tau Ihu Kutai (TTIK), responsible for cultivating and harvesting mussels, and Marlborough Seafoods, the processing, marketing and sales arm of the business.

Both MMC and ASL were planning to build commercial hatcheries located near the Glenhaven Aquaculture Centre at the conclusion of their projects. Who was working on the projects? Each company (MMC and ASL) employed a hatchery operations manager. They worked alongside each other at the Glenhaven Aquaculture Centre and were responsible for the day-to-day operations of their respective projects. Where were the projects being run? The two projects were being run in the same facility, the Glenhaven Aquaculture Centre, which was a joint venture between the Cawthron Institute and local farmers. The facility was remote, located at the end of a gravel road on the coast but sheltered inside the Nelson Boulder Bank, about 10kms north-east of Nelson. (See Exhibit 1). Functioning of the Centre depended on piped seawater and production of large quantities of microalgae, used to feed shellfish at various stages of development. All of Cawthron’s aquaculture research projects were run at this site. Commercial clients, who were involved in the two mussel spat hatchery projects, leased space and equipment from Cawthron at the site. The site was relatively small and busy. The close working environment was conducive to a high level of interaction between staff. The shared office space and a shared kitchen/staff room created an environment where work issues could easily be discussed. Project Features that Facilitate Research Provider – Company Relationships A number of issues emerged from stakeholder discussions that highlighted a range of factors that contribute to positive and effective research provider and company relationships. These are described below. Organisational Alignment: Organisational alignment provided the foundation for forming relationships between the Cawthron Institute and the two companies. For example, they were:

Ø Engaged in proactively scanning their environments to identify current issues, opportunities, and potential risks.

Ø Supportive of innovation, and research and development. (This occurred at most levels, but there was room for improvement.)

Ø Aligned in terms of strategies for business development and future directions, for example they had similar ambitions for growth and were motivated to contribute to the industry as a whole.

Ø Committed to the success of their partners.


It’s important for us all to succeed. Their success is hugely important for us because it will show that we’ve succeeded as well. We’re all in it. FRST also want to see success. (Cawthron Institute)

Ø Shared a common understanding of project risks and benefits, i.e. kept risks

minimised and didn’t set unrealistic expectations. In addition to the above, the three organisations supported building and strengthening industry-science links, which was reflected in the way they approached the mussel hatchery projects. Such a stance arises from the organisational cultures, and can take some time to develop. The Cawthron Institute had a history of forming alliances with commercial partners. For many years the Institute operated a commercial laboratory, along with a group of research focused scientists. The CEO at the time placed considerable emphasis on ensuring the two groups learnt how to talk to and understand the world view of each other. This prepared scientists for subsequently working with the private sector, and taught skills for forming, building and managing relationships with companies in the future.

This provided the training ground and understanding of the need to spend time with people, become clear about the world of clients and try to understand where they’re coming from. It also helps to understand expectations and discuss these. (Cawthron Institute)

Both research and development managers within the companies reported commitment to research and innovation within their own organisations. Their companies had made significant investment in a range of research activities and were developing new and innovative ways to produce and process their core products. However, such an approach was not necessarily widely accepted within their organisations. Indeed, one of the research and development managers described how he advocated for science within the organisation. He challenged comments within his organisation that perpetuated stereotypes about scientists (i.e. they’re too expensive, or not practical enough), and explained their cost and what they do. The role of a research and development ‘champion’ can be pivotal in the development of an organisation’s research and development culture. However, this manager noted that greater transparency in terms of the Cawthron Institute’s cost structures would be helpful in these situations. Relationship Management: In many ways, the relationships that formed reflected the personal philosophy of those involved. The relationships were pragmatic, built on trust, committed to the success of their respective partners, and a shared view of how to take research and development within the seafood industry into the future. While there was some familiarity amongst the parties prior to embarking on the application to FRST, a more formal relationship needed to be developed. Discussions took place between us – we looked at the people involved, the personal

relationships that already existed. We had to learn about each other, how do they tick, their goals, their foibles – they did the same with us. (Cawthron Institute)

However, it was stressed that you can’t build a formal relationship without an existing informal relationship between partners. An existing relationship facilitates understanding of when to move in and out of formal relationships at the appropriate time, for example, if a technical issue arises.


In relation to the actual projects, and day to day operations, the following attributes of the relationships were described as:

Ø Trustworthy Ø Realistic Ø Ability to get on Ø Focus on tasks Ø Good communication Ø Enthusiasm

A range of strategies to manage the project relationships were also described:

Ø Regular project meetings (separate meetings for both projects) to discuss progress, issues arising and plans.

Ø Early warning systems, especially for those with responsibilities for the project but who can’t be involved on a daily basis, such as regular communication with those involved.

Ø Taking advantage of opportunities for informal meetings, such as doing fieldwork together.

Ø Informing CEOs about the projects when necessary and ensuring relationships were managed at a senior level.

Managing relationships at a broader industry level were also considered central to facilitating effective relationship development at a project level, especially for the Cawthron Institute. Important relationship management issues for the Institute were:

Ø Understanding and anticipating companies’ needs and emergent issues, which in some circumstances may not be recognised a company.

Ø Building industry perception that the Institute is a partner in problem solving, rather than being driven by commercial imperatives.

Ø Balancing the generation of industry interest in projects without raising unrealistic expectations of what can be achieved.

Co-location: The importance of the co-location of the projects at the Glenhaven Aquaculture Centre cannot be underestimated. Co-location appeared to cement the relationship on a day-to-day basis.

The projects physically bring the organisations together – we’re all involved at the hatchery. (Cawthron Institute)

At the hatchery everybody helps out. From our perspective this helps break down the

barriers (between science and industry). (MMC) In addition, the location provided the opportunity for the companies to access the ‘huge wealth of skills and knowledge’ of Cawthron staff. While the relationship was considered mutually beneficial, all participants acknowledged the need to maintain and build the relationship. Respondents believed that this will be beneficial to all parties in the long-term. There’s more security for the Cawthron Institute to have a secure group of companies

around it, as a science provider. We’re in their interests and they’re in ours… and we’re looking 10 years down the track. (ASL)


Flexibility: Another important element of the relationship, and mentioned on several occasions, was a sense of flexibility and willingness to accommodate the needs of partners. However, a sense of flexibility needed to be balanced with requirements for accountability.

We have to manage flexibility of staff and their individuality along with making a more structured, accountable system. (Cawthron Institute)

Certainly, innovation and creativity are more strongly associated with a less structured, flexible and informal work environment. However, the implications of flexibility in an increasingly commercial environment, as with the construction and management of the commercial hatcheries, need to be considered. For example, there was sufficient flexibility to allow for competing needs for microalgae to be managed. However, in a commercial environment, such flexibility may not be available. Flexibility manifested in a number of ways within the projects.

Ø Modifications to the TBG application: Given the innovative, long-term nature of the projects, there have been adjustments and fine tuning as each project has progressed. This has included rewriting the TBG grant, which has been acceptable to FRST. It is in the nature of innovative projects, and the funding system needs to be flexible to allow for unexpected findings to alter the course of a project, or require a different approach. It was noted that the process of reviewing the TBG application was very helpful. It provided the opportunity to:

..look at the whole picture and where to focus resources. It’s the opportunity to take stock, look at where we are and plan. (ASL)

Ø Changing project staff roles: Project staff roles have changed as the projects has evolved. For example, the roles of two Cawthron Institute scientists have changed as they have moved from a ‘hands-on’, to a more advisory role. This was an inevitable process – company staff became more skilled, less reliant on scientific expertise, more independent, and formed their own relationships with FRST case managers. In addition, budget constraints and costs associated with ongoing scientist involvement became more of a consideration for hatchery operations managers. Cawthron staff acknowledged the inevitability of ‘letting go’ of a project, but it is not without a sense of disappointment. The process of ‘letting go’ also needed to be underpinned by a reassurance that the projects were proceeding as planned, and with sufficient communication channels to enable issues emerging to be identified.

Staff Mobility: Staff movement from research provider to industry was a key feature of this case study. As mentioned previously, the OECD describes this movement as a critical element of industry-science relations, providing the opportunity to cement relationships and provide a platform for future planning. For one of the projects, a series of circumstances created a work opportunity for a Cawthron Institute staff member within a partner company. A Cawthron Institute researcher, who had been working at the Glenhaven Aquaculture Centre for 3-4 years, had been considering leaving when the TBG grant was approved, creating a new position for a hatchery operations manager on site. The opportunity to project manage the day-to-day operations for ASL provided an excellent opportunity for the researcher to move into a more commercial


environment, while remaining on site, and retaining links with Cawthron scientists, technicians and colleagues. Another Cawthron staff member had also recently moved to ASL, remaining on site and retaining links with Cawthron staff. Two ASL staff members (ex-Cawthron) on site provided support for each other, reduced project risks related to over-dependence on one person, enabled more work to be undertaken, and enabled commercially sensitive information to be discussed with a colleague on a day-to-day basis. This scenario may also be suitable for MMC to pursue. These moves, when initially discussed, did not happen quickly - succession planning took 3-4 months in both cases, and careful thought was given to the impact of such changes on the dynamics and nuances of the workplace. For Cawthron, there were a number of advantages in supporting their staff to move to ASL, which included:

Ø Demonstrated strong support for partners. Ø Maintained a collegial work environment with good interpersonal relationships. Ø Developed networks between Cawthron and industry staff. Ø Offered a career path for Cawthron staff into industry on site. Ø Retained institutional knowledge about site operation and systems. Ø Demonstrated the practical orientation of Cawthron staff with ability to work

effectively in the commercial sector. Ø Supported technology transfer from a research institute to industry. Ø Avoided staff being ‘poached’ by creating a relationship based on trust and

understanding.

This movement is encouraged by Cawthron – it’s seen as good for science and promoting the role of research in industry. (Cawthron Institute)

However, success in these roles was not dependant on working at the site previously. The MMC hatchery operations manager that was appointed once the TBG grant had been approved, was new to the Glenhaven Aquaculture Centre. He came from a practical and research background in the paua industry, and quickly and successfully adapted to the new research environment. In line with the grant, he worked closely with a Cawthron Institute researcher for the first couple of months until he became proficient, and ‘started asking the right questions’. The researcher then started to withdraw and was subsequently available for consultancy on particular issues or problems as they arose, and for informal discussions. The hatchery operations manager also had strong support from the MMC research and development manager who regularly visited the Glenhaven Aquaculture Centre. For any company that has individual staff members located off site, the staff member’s sense of organisational orientation is more likely to be towards the group with whom they associate regularly. This is a natural phenomenon – in most cases, working and socialising together creates a sense of belonging. This was evident on site:

I feel more a part of Cawthron, it gets forgotten that I’m a company employee. (MMC)

While such a sentiment is helpful in the circumstances, companies need to pay attention to ensuring staff based off site are included in company events, and feel part of their employer organisation.


Managing the Project Interface: The situation of two company projects being run alongside each other requires a clear understanding of boundaries, along with an appreciation of the benefits the projects accrue from the hatchery operations managers working together. Benefits accrue from having a good understanding of each others project and joint problem solving. The two hatchery operations managers had a pragmatic view of their working arrangements, and a common understanding of how to manage their commercially sensitive information. For example, data on results, what was happening in the nursery, and any unexpected finding that could be considered commercially sensitive, was not shared. However, they also acknowledged a grey area of information that is discussed between them, but goes no further. I have important information which I keep to myself – I have to do this – however,

there are huge benefits from our communication. Reality is though that you can play your hand too close to your chest and you won’t get anywhere. (MMC)

Agreed protocols, in the form of a Memorandum of Understanding, defined how commercially sensitive information was managed. We did have something drawn up – an MoU about what we’re doing. It identified the

bits that were going to be unique. Our managers knew we had to work it out at an operational manager level. (ASL)

It was also noted that the company research and development managers communicated regularly, kept up to date with the projects, and managed the projects interface at their level. Managing the commercially sensitive nature of the two projects linked to trustworthiness, a core relationship attribute. Long term credibility in the industry requires being known for being trustworthy. I

have to treat what goes on here and what I’m party to with confidentiality – if you talk your reputation soon spreads – it’s a small industry. (ASL)

Thinking about the Future Testing Relationship Robustness: No major issue had arisen to test the strength of the relationship. Those involved were aware of this, but had strategies in place for any issue that might arise in the future. For example:

Ø Regular meetings. Ø Regular communication. Ø An exit strategy built into each milestone of the TBG grant, when any party,

including FRST, have the right to discontinue with the project if deemed necessary. Intellectual Property (IP): In some ways the IP rights were simplified as the Cawthron Institute will not claim ownership of IP generated by these two projects. However, the area of IP cross over between the two projects and potential implications was flagged by all interviewees as an area that required further clarification and definition.


Commercialisation and Scaling Up: Both MMC and Wakatu (owner of ASL) had plans to build commercial hatcheries next to the Glenhaven Aquaculture Centre. Wakatu had already bought 60ha at Wakapuaka to build a hatchery, although this venture was still a few years away. The land would be developed into large algae-growing ponds, and used to feed the spat. The venture is in preparation for supplying spat to Wakatu mussel farms, and potentially selling spat to marine farmers (Nelson Mail, 2003). In addition, the Cawthron Institute had plans to expand their operations at the Glenhaven Aquaculture Centre. They had recently obtained resource consent for 16 ha of ponds. A large scale, commercial hatchery producing millions of mussel spat per year would be a very different enterprise to the current experimental hatchery. In addition, understanding at what point experimental data indicates economic viability, and the various phases of the transition process, will be a challenge for both companies. It’s going to be a steep learning curve to translate this into a commercial

environment. (ASL) Cawthron will also face a new set of challenges, particularly with being highly responsive within a commercial environment, and managing clients competing needs and expectations. The effect of commercialisation on the existing relationship should be carefully monitored. A system for reviewing working arrangements and relationships regularly, and a process for doing this, should be considered. It could potentially include performance indicators and an early warning system. Biological Control: Cawthron must be able to demonstrate that it can effectively manage biological control, and the impact of unusual micoalgae or viruses on the hatchery. Water quality issues are critical, and if left unaddressed, could potentially damage trust between the partners. Indeed, there were plans to implement a new pumping system in order to address some of these concerns. Conclusions By considering the wider context of the projects, this case study identified key factors that facilitate an effective partnership. These were:

Ø Organisational alignment Ø Relationship management Ø Co-location Ø Flexibility Ø Staff mobility Ø Management of the project interface.

These features were underpinned by stakeholders’ enthusiasm for both projects, not only in terms of the actual projects and plans for commercialisation, but also for the future of the industry as a whole.

It’s going to change the industry, we’re all trying to achieve the same thing. (MMC)

Time and effort had been invested in developing and building an effective relationship, and it was supported by good project and risk management strategies. In particular, staff mobility


strategies appeared to have contributed significantly to the relationship, especially with regards to technology transfer and building research and development capacity within the companies. Exhibits Exhibit 1: Glenhaven Aquaculture Centre, Nelson

Glenhaven Aquaculture Centre Source: www.cawthron.co.nz


Appendix 2: Detailed Methodology

Research Approach: The exploration of research provider-industry relationships was the key focus of this study. The methodology required a systems approach which provided the opportunity to identify a range of factors (for example, organisational, interpersonal) within a system, and the dynamics of how they interact.55 These dynamics and interactions were best explored with a qualitative methodology, enabling the exploration of perceptions and beliefs held about research provider-industry relationships, and identify the key factors that influence these relationships, along with current initiatives and areas for improvement. Qualitative research methods were used, in particular in-depth interviews and case studies. Qualitative methods are useful to understand and explain social phenomena. They enable the gathering of exploratory data that has both depth and detail, rather than a comprehensive sample of all industry stakeholders. Methodology: The project was conducted in two phases. The first phase involved in-depth interviews with stakeholders from the seafood industry, research providers and other government and industry groups. The second phase involved three case studies. Prior to both of these activities, a review of relevant literature was conducted to inform an initial framework for data gathering and analysis.

Ø In-depth Interviews The aim of the interviews was to capture the views and opinions of company managers and staff, researchers, and staff from stakeholder organisations, about research provider-industry relationships. Interviews were conducted with the following groups. The list was compiled in consultation with the project sponsor.

Stakeholders Number of Interviews

Seafood companies • Large companies 6 • Medium sized companies 3 • Small companies 4

Research Providers 5 Others, e.g. Government, industry groups. 6 TOTAL 24

In addition, informal discussions were held with a range of individuals from various parts of the industry. Interviews lasted approximately 1-2 hours, and were tape-recorded. A topic guide was developed for each stakeholder group and in general, the guide covered the following areas:

55 Smith, K. (2000) Innovation Indicators and the Knowledge Economy: Concepts, Results and Policy Challenges. Keynote address at the Conference on Innovation and Enterprise Creation: Statistics and Indicators, France 2000.


• Context: Perception of the sector as a whole, particular dynamics within the sector, ability to develop and apply innovation, strengths and weaknesses.

• Networking: Types and strengths of networks (for different stakeholder groups), purpose and effectiveness of networks, barriers to networking, areas for improvement.

• Identifying research needs: Decision making on research needs, sources of information for informing decision making.

• Dissemination and communication of research: Sources of information about research, perception and use of research, areas for improvement.

• Other stakeholders: Perception of other stakeholders, nature of relationship with them, barriers to forming relationships, areas for improvement.

• Diffusion of innovation: Organisational features that enhance utilisation and diffusion, capacity for innovation, barriers to diffusion, areas for improvement.

• Information sharing and IP: Examples of information sharing, management of IP, barriers and areas for improvement.

Ø Case Studies

The second phase involved a series of case studies which aimed to; a) highlight examples of good practice in relation to forming strong research provider-industry relationships, and b) identify the factors that facilitate organisational cooperation, mutually beneficial working arrangements, effective use of information, and innovative practice. A case study approach is consistent with literature on the factors which influence innovation. Innovation is not a linear process, and companies do not innovate alone. Rather, innovation occurs within a context of structured relations with other firms, infrastructure, and networks (Smith, 2000).56 Case studies also provided the opportunity to explore in more detail issues identified in the in-depth interviews. Criteria for case study selection were developed in conjunction with the project sponsor. These included groups of companies working together that had a reputation for:

• Working innovatively, incorporating organisational or product innovation. • Ability to develop relationships and work collaboratively. • Working on a novel or unique project.

Once a key contact person had been identified and approached, and had agreed in principle of participate as a case study, agreement and final sign off was sought from all companies who would take part in the case study. A total of 8 projects were approached, of which 4 agreed to participate. Final selection of the 3 was based on the above criteria. Reasons for non participation included concerns about confidentiality, time involved, and a new organisation who considered participation in a case study too early. Following approval from all case study participants, detailed discussions were held with the key contact person about the nature of the project, the role of the various participants, and the types of research activities that might be appropriate (i.e. in-depth interviews, visits to field sites, observation, focus groups). Within each case study, between 4 and 6 in-depth interviews were conducted with a range of participants. In addition, and where appropriate, document review, observation, informal interviews and focus groups were conducted. A research guide was developed prior to conducting the case studies, setting out the range of activities to be conducted at each site, and with whom.

56 Ibid


Topic guides for the case studies broadly covered the following areas:

• The context from which the initiative arose • Description of the organisation and innovative features • Development and management of the product/process innovation activities • Factors which have influenced the development of cooperative working relationships • Governance arrangements • Issues that have arisen and how these have been managed • Management of intellectual property and information sharing • Future directions and anticipated challenges • Lessons learnt that would have wider application for the industry.

Once the case studies were written, they were distributed to all interviewees. The content of all case studies was approved by interviewees prior to final sign off. This will ensure no breach of confidentiality upon release to the public domain. Data Analysis: A thematic classification framework was developed and provided the basis for coding and analysing the data from both the interviews and case studies. All comments incorporated within the report and case studies have been approved by interviewees.

Enhancing innovation within the seafood industry; What...

Documents

Transcript of Enhancing innovation within the seafood industry; What...