Introduction

This paper is extracted from a Ph D study at the School of Aquaculture, University of Tasmania, which should result in the establishment of an agribusiness model for assessing the commercial viability of new species for aquaculture.

Funded by the Cooperative Research Centre (CRC) for Aquaculture, this generic project encompasses aspects of all Cooperative Research Centre for Aquaculture research programmes, but by virtue of its focus on fish species, will sit in Program C, Finfish Propagation and Broodstock Management. (The Cooperative Research Centre for Aquaculture Annual Report 1998-1999).

Innovation

To innovate is to bring in new methods and ideas and make changes. (Hughes et al 1992).

Innovation in business is new products or services, new processes and new organisational structures that firms use to compete with one another to meet customer demand, and
The adoption of new ideas, processes, products or services, developed internally or acquired from the external environment as a function of a firm’s technical, strategic and administrative skills (Nelson and Winter 1982, reviewed in Pouder and St John 1996).

Innovation in this study is a novel approach to new product development by analysing, modifying and adopting industrial models for screening and developing new aquaculture species. It is an innovative approach to soft systems at the beginning of the value chain.

Aquaculture as industry

Aquaculture is variously described as a sunrise industry, a new rural industry, and an emerging agribusiness. Though only one aquaculture species farmed in Australia, Atlantic salmon (Salmo salar), has achieved full industrialisation, the foundation aquaculture industry, Sydney rock oysters (Saccostrea glomerata), never achieved industrialisation. The presence of a foundation industry and an industrialised industry in Australian aquaculture negates the terms new, "sunrise" or emerging. Hence this study contends that aquaculture is neither emerging, sunrise, nor a new rural industry, but is an established agribusiness, dependent on innovation, technology transfer (from mainstream business) and adoption of technologies from overseas.

The new, "sunrise" or emerging inputs are the species adopted and the techniques used to produce them.

New Product Development (NPD)

New product screening and NPD are part of the same process, but discrete, as screening only allows the venture progression to the "go on" stage. Thereafter a series of criteria is applied to enable or disable the product development. NPD cost is high, with no guarantee of success, therefore management must examine the following very broad research and development (R&D) considerations before initiating a project.

Products entering large and growing markets are more likely to be successful than those entering smaller markets. In a competitive market place NPD is central to achieving product differentiation, where product lifecycles are shortening and product obsolescence rapid.

Successful product development is the result of careful planning of a product for a market and the execution of the plan by a suitable team operating with the blessing of senior management. Team composition should be small, integrated, well coordinated with cross functional/hybrid skills.

Analysis of new product development (and commercialisation) of aquaculture species in Australia makes four assumptions;

To facilitate understanding of why mainstream business methods are being transferred to agribusiness and in particular aquaculture, industrialisation of agriculture (Urban 1991) is defined as the application of modern industrial manufacturing, production, procurement, distribution and co-ordination concepts to the food and industrial product train (Boehlje 1996). The industrialisation of agriculture, and therefore aquaculture, dictates that mainstream business methods be applied to the operation of the agribusiness value chain. "Production agriculture in the western world is now entering the last phase of industrialisation, (that is) the integration of each step in the food production system" (Urban 1991).

Aquaculture cannot "rush" a product to market. Many aquatic florae and fauna products occur naturally and are already available, but farming delivers them cheaper at regular intervals to consumers than wild harvested food, sometimes no longer available or difficult to access.

The ideal new aquaculture product for development

The challenge in farming any fish is to replicate its lifecycle in captivity in a way which is predictable, repeatable and at a cost that allows it to be sold at a profit. (Forster, 1999). New species development is difficult and the success rate poor, requiring caution in selection of new species. The ideal species should produce quality meat, good fillet yield, and be acceptable to the domestic market at low or moderate cost, with the possibility of international acceptance. It should be easy to hatch, rear and docile in on-growing, accepting of dry feed, not too demanding (of protein and fat quality) and resistant to diseases and mechanical damage. It should grow quickly to a large (3kg plus) size.

New species development and commercialisation

Three distinct schools of thought on new species development were evident during the World Aquaculture Conference held in Sydney, Australia from 26-30 May 1999.

The first school thinks research and development resources should be invested in improving existing aquaculture species with no new species development.

The second displays anxiety about existing species’ position in the product lifecycle and is therefore keen to develop new species to accommodate a shift in consumer preferences.

The third takes the position that new species development should proceed deliberately, but cautiously, as part of continuing research and development.

This study takes the position of the third school, that is, new species development and commercialisation must continue in a deliberate, logical and professional manner.

The companies best equipped for new species development are probably those already operating profitably and sustainably in the aquaculture industry. New species research and development occurs for a variety of reasons. For example, there are limits to production capacity for existing species, in some cases with limited sites and markets. An aquaculture company may diversify to maintain a market edge, developing a product mix complementary to existing business. A product mix is also useful as a hedge against species specific diseases (Pankhurst 1998).

Brown, Helm and Moir (1996) gave three reasons for developing new species for aquaculture in the Canadian Atlantic Provinces. They are, to broaden the base of aquaculture in the region, develop new products for a growing market and provide job opportunities for a region suffering from a recent decline in capture fisheries.

Pankhurst (1998) identified two lessons from the Australian aquaculture production pattern, first, that success lies with globally established species and technologies, and second, there is very slow addition of new, endemic species to aquaculture.

World wide, new species development has taken longer, and required a larger resource base than is currently understood in Australia or New Zealand and too many species in too many places are a problem, as is a lack of coordinated approaches to Research and Development. (Pankhurst, 1998).

New (1999) urged caution in diversifying into new species: "The culture of new species, as a reaction of entrepreneurial farmers to a perceived local, domestic, or export market may seem reasonable but is often based on wild caught juveniles or spat, or requires considerable research to develop the hatchery rearing technology.

Scientists seeking new challenges, publications and research funds also tend to concentrate their efforts on aquaculture diversification. Drawing parallels from terrestrial livestock production, it would seem more sensible to concentrate developmental effort and scientific research on relatively few species. Improving growth and survival rates, feed efficiency and health through research in nutrition, genetics, health management, environment studies of the major cultured species, to increase both revenue and food production, would seem a more efficient use of resources than dilution of effort amongst more and more species."

Dr Philippe Ferlin, President, European Aquaculture Society, presented a different but complementary view. "In Europe diversification was not considered until the beginning of the 1970’s. It was a success when this option was taken for increasing the production of Nordic countries, for which trout production was not the optimal one and for Mediterranean countries for which the production of salmonids was impossible.

It depends on market and environmental conditions. In France for example, it is now impossible to find less than 30-40 different aquatic products in a shop. The biggest hypermarkets are proposing about 100 different fresh products-different species, different sizes and different presentations. It is obviously a difficult option to introduce a new species, not only for biotechnical reasons (each species is so different) but also for marketing aspects (competition with fisheries' products).

It is the reason why such a decision has to be taken with great precaution, but it has to be taken sometimes." (Dr Phillipe Ferlin, 4 January 1999, personal communication).

The modelling problem is; what data should be factored into the model? The process begins with the concept of industrialisation. Few domesticated terrestrial animals prove commercially successful and fewer achieve industrial levels of production. Terrestrials’ slow evolutionary selection process allowed for trial and error.

New aquaculture species development needs huge capital investment and economies of scale, therefore infrastructure is important, and ideally, new product development should be offset by existing industry. Utilisation of new species requires systematic evaluation and the framework for selection be constructed around closed life cycles, available diet, fish behaviour, disease resistance, good grow out potential, markets and the general ability to farm the chosen species.

The development of a new species for aquaculture always seems to take longer and cost more than its proponents expect. (Forster, 1999).

Two examples of new species development in Australia and one in the United States follow.

The Tasmanian and South Australian governments were keen to develop aquaculture and made excellent, sometimes "virgin" sites available as well as hatchery stock and industry assistance. They could be grown by small scale operators, "oyster farmers," as well as corporate farmers in a bi modal production system. The Pacific was perceived as "new oyster".

Sites were available and the Tasmanian government supported the concept and assisted industry development by investing in a Tasmanian based salmon hatchery. Shelley identified salmon farming as a sunrise industry

Most important was that salmon farming had proved viable in Norway and Norwegian investors saw Tasmania as having similar growing conditions (Peter Shelley, former Managing Director of Tassal, now Chairman, Aquaculture Services Asia Pacific Pty Ltd, 16 May 00, personal communication).

This supports Pankhurst’s (1998) observation that success lies with globally established species and suggests the possibility of a species again being adopted from the northern hemisphere, should the prevailing regulations allow it.

Catfish Catfish (Ictalurus punctatus)

The United States catfish industry is a classic model of the industrialisation of agriculture/aquaculture.

"Catfish may not be the best fish, but it fits the agribusiness model."
(Roger E. Barlow, Bureau Director, Market Development, State of Mississippi Department of Agriculture and Commerce, personal communication, 29 Jun 00).

The catfish industry was developed because an established market existed and farmers in the South of the USA needed to diversify to offset low prices for traditional commodity crops. Large areas of the Mississippi Delta are flat and have an abundant supply of underground water which enables easy construction of catfish ponds. A superb industry infrastructure has developed with trade associations, feed mills, equipment manufacturers, processors, marketing associations.

Catfish have a food conversion rate of 2:1 (The Catfish Museum, Belzoni, Mississippi) and a multiplier factor 7:1 (Roger E. Barlow, personal communication, 29 Jun 00).

Millers pay $6.00 per tonne of feed (sold to catfish farmers) to the Catfish Institute in Belzoni which promotes the industry. The Catfish Farmers of America is the representative organisation and the Thad Cochran Warmwater Aquaculture Center in the State of Mississippi provides industry research and development support.

The catfish industry markets what the consumer wants, produces the highest quality product, regularly introduces new value added lines and conducts generic marketing via a self funded marketing arm.

All three species example have the recurrent themes of demand, government assistance, ease of production, disease resistance, clean and green environment and a ready market, running through their development. They are relatively long established species, and serve as good models, but further new species introductions need modelling along industrial lines.

Shortened product life cycles, changing tastes, technology, biological and environmental problems no longer allow for trial and error. The overall consideration is time compression, and a product at the idea stage must be screened for a "no go" or "go on" decision. Facilitation of development and eventual commercialisation needs modelling after the "go on" decision is made.

The model, will probably be a combination of a scoring model and an expert system.

Unfortunately there is not much information available on food product development and little on new aquaculture species development. Therefore, because a scoring model is a based on much quantitative data, the scoring input will be less than the qualitative data needed for expert systems.

The well known NewProd model, is not customised for new agricultural products. (Robert Cooper, NewProd designer, personal communication 20 Jun 00), and there may be no software available specifically for new food products. (Klaus Grunert, Aarhus School of Business, Denmark, personal communication 20 Jun 00).

This new model, constructed from mainstream industrial literature and case studies, will be externally validated against existing aquaculture industries, before application to new species.

Even a blind monkey sometimes finds a banana.

A Zulu proverb

References

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