2 Forest owner and innovation strategies Miika Kajanus

2. Forest owner and innovation strategies Miika Kajanus Savonia Polytechnic

Assessing forest strategies by applying a value-focused continuous strategy process model in a rural enterprise Miika Kajanus Savonia Polytechnic

Contents Background n Objectives n Results n Conclusions n Miika Kajanus Savonia Polytechnic

Entrepreneurship and local assets n n Employment, regional income and value-added production in rural areas Entrepreneurial development strategy leans on • Local assets • Initiativeness and creativeness of individual enterprisers n Innovations as a source of competitive advantage n Innovations as a source of economic development Miika Kajanus Savonia Polytechnic

Sound entrepreneurship is based on n Clear choices of values n Strategic insight n Creativity Miika Kajanus Savonia Polytechnic

Need for a strategy and innovation model n n There are various models helping forest owners in multiple planning situations However, there is a lack of strategy and innovation models helping individual forest owners in their endeavor to develop innovative strategies for utilizing forest resources as part of rural enterprising Miika Kajanus Savonia Polytechnic

Objectives n n n To apply Value-Focused Strategic Planning Model (Kajanus 2001) in defining strategies for a rural enterprise To assess forest strategies for managing “the forest business unit” in the case enterprise To discuss the usability of the models Miika Kajanus Savonia Polytechnic

The structure of the strategic planning model n n n n Framing the decision context Objective analysis Analysis of external and internal environment Identifying decision opportunities Formulating the set of decision alternatives Selecting the strategy Continuous planning concept: • from values (objectives) into strategies • from strategies into actions Miika Kajanus Savonia Polytechnic

Results 1 n n n According to theoretical framework, four issues and the interactions between them are emphasized in any strategic planning situation, also in rural enterprises, these being objectives, capabilities, future uncertainties and creativity. This study resulted in indicative support for using the approach of strategy as a position in the NIPF context. This result encourages the use and further development of internal and external analysis tools such as SWOT and portfolio planning in the strategy planning of NIPF owners Miika Kajanus Savonia Polytechnic

Results 2 n n n The thesis presents a model for creating ideas and formulating them into strategic alternatives for an enterprise. Value–focused thinking (Keeney 1992), including clearly defining and structuring the fundamental values of an enterprise in terms of objectives and using those objectives to guide and integrate decision making, offered the main line of approach for the model. In the rural environment, where different kinds of objectives are emphasized, this is a useful approach in the endeavor to integrate objectives in the strategy process. Miika Kajanus Savonia Polytechnic

Results 3 n The idea creation process which is conducted in four steps by : • • n n n (i) objectives, (ii) environmental aspects (applying TOWS-matrix), (iii) portfolio alternatives and finally (iv) by integrating all of them together. These steps provide insight into the whole business and the interactions contained there in, and for including alternatives that might otherwise go unnoticed. The approach means enhancing value-focused thinking by, besides using the objectives, by also using other relevant factors affecting decision making in order to create alternatives before deciding. This approach may be applied in many planning situations, where searching for innovative ideas is emphasized. Miika Kajanus Savonia Polytechnic

”Value-Focused Thinking” n n Different kind of values are emphasized in rural environment, e. g. owning land, environmental issues, culture, social aspects. . . Value-focused thinking (Keeney 1992) including clearly defining and structuring the fundamental values of an enterprise in terms of objectives, and using those objectives to guide and integrate decision making, offers the main line for the model Miika Kajanus Savonia Polytechnic

Value hierarchy Miika Kajanus Savonia Polytechnic

Strategic alternatives n Concentrating on Forestry SBU • n Intensifying Forestry SBU • n Dispensing with dairy production, concentrating on machine contracting. No change in forestry SBU to minimize risk. Special Cheese to Helsinki • n No change in dairy production and machine contracting. Manufacturing and marketing of prefabricated wooden buildings in co–operation with other enterprises and making use of one's own raw material. Machine Contracting • n No change in machine contracting. Financing investment into the additional forest area by increasing the level of felling over the short time horizon and by dispensing with dairy production. Dispensing with machine contracting and forestry. Concentrating on dairy production, producing one's own special cheese and marketing it in co–operation with a restaurant in the Helsinki area. Traditional Dairy Production • Dispensing with machine contracting and forestry. Concentrating on dairy production. Miika Kajanus Savonia Polytechnic

Strategy selection by Even-Swaps method Miika Kajanus Savonia Polytechnic

The choices of direction Mission n “From fields and forests, with sustainable and ethic production, creating welfare, respecting the quality of life and traditions” Vision n n “Strong, basing on three economic units, solid and profitable enterprise” “We are known about ethic and responsible actions, which takes into account the environment and society” Miika Kajanus Savonia Polytechnic

From objectives into strategies, an example Objective: Profitability (ROI 5 %) n Intensive silviculture, objective is to gain 350 m 3 removals per year n Timing the cuttings in order to gain financial synergy for the enterprise n Optimizing the forest taxation in long time period Miika Kajanus Savonia Polytechnic

From strategies into actions, an example n Strategy: Intensive silviculture, objective is to gain 350 m 3 removals per year n Actions: - Preparations of final cutting areas before cuttings; - Regeneration in a year after final felling; - Young stands treatments in time; - Thinnings in time - Renovation ditching with thinnings; - Ash fertilization in appropriate stands; Miika Kajanus Savonia Polytechnic

Action table Action Person in Resources Schedule Monitoring charge ________________________ A 1 xx 1 month 5/2001 work done A 2 xx 2 months Forest plan 350 m 3 ________________________ Miika Kajanus Savonia Polytechnic

Conclusions n n n In the case enterprise, the model yielded desired results The entrepreneurs identified the strategy process laborious The entrepreneurs learnt strategic insight when going through the process The process provided new point of views for managing the enterprise In private forestry, an entrepreneurial strategy planning model is needed, among other planning models Private forestry can learn from value-focused thinking as well as from strategic thinking Miika Kajanus Savonia Polytechnic

References n n n Keeney, R. 1992. Value–Focused thinking: A path to creative decision–making. Cambridge, Massachusetts: Harvard University Press. 400 p. Kurttila, M. , Pesonen, M. , Kangas, J. , Kajanus, M. , 2000. Utilizing the analytic hierarchy process (AHP) in SWOT analysis - A hybrid method and its application to a forest-certification case. Forest Policy and Economics 1, 41 -52. Pesonen, M. , Kurttila, M. , Kangas, J. , Kajanus, M. , and Heinonen, P. 2000. Using A’WOT in Assessing the Priorities Among the Alternative Natural Resource Management Strategies at the Finnish Forest and Park Service. Forest Science. 47(4): 534‑ 541. Kangas, J. , Kurttila, M. , Kajanus, M. and Kangas, A. 2003 Using the S-O-S (SMAA-O in SWOT) Approach for Evaluating the Management Strategies of a Forestland Estate. Journal of Environmental Management. Kajanus, M. , Kangas, J. and Kurttila, M. 2003. The use of value focused thinking and A’WOT hybrid method in tourism management. Tourism Management 25 (2004) 499 – 506. . Leskinen, L. , Leskinen, P. , Kurttila, M. , Kangas, J. and Kajanus, M. 2004. Adapting modern strategic decision support tools in the participatory strategy process – A case study of a forest research station. Forest Policy and Economics. In press. . Miika Kajanus Savonia Polytechnic