Session ID: 1508 AEA 2020
Product Value Chains Provide A Systems View of Innovation Impact Pathways
Gretchen B. Jordan
360 Innovation LLC
Gretchen.jordan@comcast.net gretchenjordan360.com
Abstract:
The complexity of assessing, either prospectively or after-the-fact, the complex changes that happen leading up to the introduction and adoption of an innovation is considerable. Most agree that the ecosystem surrounding an innovation, be that a new product, process, policy, or practice, does facilitate or constrain innovation. That ecosystem can be represented in a value chain -- the full range of activities which are required to bring a product from conception through to delivery to final consumers and disposal after use. Value added along the chain can be economic, social and environmental. The paper will discuss the questions to be investigated in a value chain assessment, data collection, analysis, and assumptions. The overarching question is: For a specific product/technology and market, what is the evidence from value chain analysis that the innovation(s) added value along the product value chain and where has there been progress and impact?
This paper argues and shows by example that a good understanding of a product’s value chain illuminates the points in a system where interventions were/are needed to foster an innovation, and pathways to look for when measuring progress and impact. The value chain construct provides a theory-based architecture or template for thinking through the innovation and adoption of a product, process, policy or practice. The need for more well-thought out program interventions and program evaluations was a key point argued in the RT&D Topical Interest Group White Paper on assessing research outcomes (2015). The paper also responds to the RT&D TIG call for papers on “Emerging methods and priority challenges in RTD evaluation to measure ‘societal’ impact”, and offers evaluation findings that lend themselves to visuals that help communicate a program’s role in the larger innovation ecosystem.
A value chain, first defined by Michael Porter in the 1980s, is a set of interlinked value-adding activities that convert inputs into outputs which, in turn, add to the bottom line and help create competitive advantage. The key difference between a value chain and a supply chain is what they emphasize. Supply chains flow from the producer to the consumer and emphasize efficiency of firms’ processes that deliver the product to the consumer. The value chain begins with what value the customer receives to be willing to pay for the product, and that payment works its way back to the producer. Emphasis is on the value added at each step. Value is captured in the interface at each step (business-to-business as well as business to consumer), not linearly but rather within a system. Value is produced through the functioning of the whole chain as an interactive unit. A value chain is product specific.
A product value chain includes the following actors:
- Market actors for a product: Raw material suppliers, Component, Sub-system suppliers, Manufacturers/Assemblers, Distributors/Sellers/Service Suppliers, Consumers; and
- Supporting actors: Business infrastructure & functions, R&D Institutions, Sources of capital/finance, Government entities (taxes & subsidies/regulation, procurement).
The overarching question is: For a specific technology and market, what is the evidence from value chain analysis of the product (process) innovation adding value along the product value chain and where has there been progress and impact? This may be asked prospectively before an investment, or retrospectively.
Examples of assumptions include:
- The larger the extent of the chain in place, the closer the technology is to commercialization and sales and the more likely commercialization and market adoption will occur. Identified gaps are opportunities for future efforts.
- The larger the extent of planned and relized value-adding changes in relationships among actors in the chain, along with their importance to commercialization and adoption the better. Identified gaps are opportunities for future efforts.
- The larger are projections of the future extent and strength and value added of the product value chain, including more formal partnerships with longer duration, and the credibility and likelihood of these estimates, the better. Identified gaps are opportunities for future efforts.
The data most likely will come from project reports and surveys of grantees, as well as industry/market analysis if this has been done. Helpful data to be collected routinely from grantees includes technology or process name, intended application(s), existing or desired partnerships (formal and informal) with firms/entities in the actual or hypothesized supply chain, value propositions of each project effort, Technology Readiness Levels, actual or projected date of commercial launch. Standardization of definitions, assumptions, and data collection and analysis protocols is necessary when applying this method to multiple technologies and markets. This allows for aggregation, and maintains the credibility of analysis results.
A framework to help with the data analysis, using a historical tracing approach, is shown in the poster. Recently the author worked on a framework to assess the progress and impact of an agricultural research organization where the objective was access to nutritious, safe foods and sustainable agriculture and natural resource use in developing countries. This type of research for development (R4D) has used value chain analysis in planning for more than 20 years (for example, Gelli et.al, 2015).
References:
Gelli, A., Hawkes, C., Donovan, J., Harris, J., Allen, S.L., De Brauw, A., Henson, S., Johnson, N., Garrett, J. & Ryckembusch, D. 2015. Value Chains and Nutrition: A Framework to Support the Identification, Design, and Evaluation of Interventions. IFPRI Discussion Paper 01413. Washington DC: IFPRI. http://ebrary.ifpri.org/utils/getfile/collection/p15738coll2/id/128951/filename/129162.pdf
Jordan, Gretchen, Jonathan Mote, Rosalie Ruegg, Thomas Choi, and Angela Becker-Dippmann. 2014. A Framework for Evaluating R&D Impacts and Supply Chain Dynamics Early in a Product Life Cycle: Looking inside the black box of innovation, prepared for the U.S. Department of Energy. http://www1.eere.energy.gov/analysis/pdfs/evaluating_rd_impacts_supply_chain_dynamics.pdf
Kaplinsky, R. and Morris, M. 2002. A handbook for value chain research. Report prepared for IDRC. IDS https://www.researchgate.net/publication/42791981_A_Handbook_for_Value_Chain_Research
Porter, Michael. "Value chain." The Value Chain and Competitive advantage: creating and sustaining superior performance (1985).