Innovation in the forest industry: ready or not!

‘It’s not the strongest of the species that survive, nor the most intelligent,

but the ones most responsive to change’

(Megginson 1963, paraphrasing from The Origin of Species by Charles Darwin)

With the launch of the national Innovation and Science Agenda in late 2015 (Department of Industry, Innovation and Science 2015), the Australian Government has placed innovation firmly on the page, providing initiatives worth $1.1 billion over 4 years to support and promote innovation.

Innovation can take many forms (new products, services and organisational structures), and can range from incremental to disruptive or transformational. There is a general consensus that, in order to maintain and grow competitive positions, organisations must innovate and be proactive in doing so (Baregheh et al. 2009). Recent studies have demonstrated the potential value of innovation to industry, with innovation carried out by small and medium enterprises (SMEs) in Australia increasing the productivity of those SMEs by 21% after 4 years (Palangkaraya et al. 2014). The strongest effects came from organisational/management and scientific innovations. How well placed is the forest industry to capitalise on these opportunities, and to foster innovation?

The ABARES Forestry Outlook report (Burns et al. 2015) highlights opportunities for Australia’s forest sector to capitalise on increasing global and domestic demand for wood products and an increasing gap between supply and demand. Despite this outlook, Australia’s plantation estate is currently shrinking rather than growing (e.g. net area decreased by 12 800 ha in 2013–14) (ABARES 2015), and the long-term viability of some plantation regions is under threat from climate impacts such as drought, pests and diseases (Pinkard et al. 2014), with probable increasing pressure from these elements into the future (Mitchell et al. 2014). Future climate variability and increasing competition for suitable land, associated with megatrends such as population growth (Hajkowicz et al. 2012), mean it will likely be difficult to maintain, let alone expand, the existing plantation footprint within Australia without substantial silvicultural or genetic intervention.

Yet expansion of the forestry estate has been highlighted as a key policy position of the Australian Forest Products Association, which aims to deliver 300 000 ha of new tree plantings (AFPA 2015). An alternative and complementary approach is to grow more from less (as either greater wood volumes or higher value forest products), servicing investor expectations of yield increases of up to 2% per annum, while at the same time meeting societal expectations about how and where forests are grown (Pinkard and O’Grady 2016).

These drivers provide a strong incentive for the Australian forest industry to innovate. The industry itself is well aware of the ‘innovation imperative’ (OECD 2015). A quick Google search on the terms ‘forestry, innovation, Australia’ reveals many documents related to innovation in the forest industry, such as the Blueprint for the future South Australian Forest and Wood Products Industry (2014–2040) (PIRSA 2014), or the Forestry Innovation Plan (Forestry Tasmania 2012). While there is currently no clearly articulated vision for innovation in the Australian forest industry, the Forest Industry Advisory Council’s recent discussion paper, and the results of a CSIRO—Institute of Foresters Australia innovation workshop, have started this process (FIAC 2016; Pinkard and O’Grady 2016).

Two excellent examples of innovation come from Tasmania, and they illustrate the key drivers of innovation. FORICO manages many of the ex-Gunns Ltd and other plantation assets in Tasmania. When these assets were established, their main product focus was wood chips for pulp and paper markets. Uncertainty in commodity markets and inability to secure a processing plant in Tasmania have driven the company to diversify their product streams using a ‘one resource—multiple products’ strategy. FORICO has applied a global innovation, black pellet technology (Zilka n.d.) to value-add its business. A driver for the company to innovate was dissatisfaction with the status quo, in this case, the low value of its product.

For Norske Skog in southern Tasmania, a declining demand for newsprint has served as a disruptor that has seen the company embrace a diversification strategy that seeks to use existing assets in different ways. The company teamed with the chemical technology research and development (R&D) company, Circa Group, to develop a demonstration plant to produce cyrene, a non-toxic alternative to fossil fuel-based solvents, from what is currently waste material.

The FORICO and Norske Skog experiences are examples of incremental innovation (Figure 1), ‘doing better what we already do’ (Norman and Verganti 2014). The feedstock material and silviculture have not changed, and existing technology is being applied. This is analogous to a car manufacturer producing a new model. More radical forms of innovation focus more on ‘doing what we did not do before’, and generally have longer timeframes for acceptance and higher risk. Both forms of innovation are required: without radical innovation, incremental innovation reaches its limits, and without incremental innovation the potential from radical innovation is not captured (Norman and Verganti 2014).

Figures 1. The four types of innovation. Market pull innovation leads to incremental change. Transformational innovation requires radical technological advances and leads to a radical market change. Technology push innovation may require radical technological advances but often has only incremental impacts on the market (e.g. Apple iPhones). Market push innovation in contrast has a radical market impact with little or no change in technology (e.g. watches as fashion accessories) (Norman Verganti 2014).

While the above examples of innovation are occurring within individual businesses, there are some key advantages to taking a sector-wide approach. These centre around increased effectiveness of technological decisions, including increased reliability of information and improved strategic decision outcomes; improved efficiency and effectiveness of R&D outcomes; and increased capacity to work across the supply chain including customers and suppliers, resulting in more informed decision-making about innovation needs and markets (Schuh et al. 2013). Sector-wide innovation can be facilitated through innovation road-mapping, which aims to foster industry renewal through anticipating and preparing for alternative futures. It provides a framework for integrating emerging opportunities (technological environment); standards, value chains and organisational hierarchies (institutional environment); regulations, economic and governance issues (policy environment); and societal behaviour, preferences and values (social environment), across a range of timeframes (Konnola 2007).

Many of the perceived opportunities for innovation in the Australian forest industry are incremental, requiring relatively small investment and low risk with the potential for good positive returns. Even with radical technology change, market impacts are likely to be incremental (Figure 1). For example, genetic improvement, using quantitative genetics and the more recent field of genomics, has the potential to enhance productivity and wood or fibre quality, as well as improve capacity to reduce vulnerability to pests and climate change (Grattapaglia et al. 2012). Recent advances in digital technology and informatics will potentially reduce costs of forest health monitoring, inventory and silvicultural management, and improve yield forecasting, product uniformity and product segregation. Examples of forest simulators are already emerging (e.g. the ‘virtual forest’, as reported by Deutsche Welle n.d.), and these can play an important role in planning forest operations and sustainability. Robotics are driving gains in safety and efficiency of forest operations in New Zealand (Bayne and Parker 2012), and predictive analytics are being used to optimise forest harvesting and minimise road construction and maintenance costs (Williams 2016).

Increasingly, the need to reduce carbon emissions and to sequester atmospheric carbon will drive substitution of concrete and steel with wood based products, resulting in increased uptake of wood products in construction. This can be facilitated through advances in materials science that increase uniformity and consistency in wood products to meet end-user needs. The recently-funded ARC Centre for Forest Value at the University of Tasmania is focussed on providing the research and training to drive this transformation (University of Tasmania 2016). There also are opportunities for innovation in understanding end-user needs, for example social network analysis (Thompson and Gliding 2010), and identifying societal expectations from forests in the landscape (Moffat et al. 2015).

Many of these technologies remain largely in the research domain, but advances are occurring rapidly. Testing on real management problems is required, necessitating investment from the forest industry, and collaboration between industry and R&D providers, in order to realise potential gains.

While the imperative to innovate is well recognised, there are a number of issues that serve as barriers to innovation in the forest sector (Bull et al. 2015; Pinkard and O’Grady 2016). These include legislative obligations that limit options and motivation for exploring innovation; poor communication between industry and the potential users of novel products resulting in their slow adoption; uncertainty around resource supply/security that affects willingness to invest in new products and processes; and poor mechanisms for supporting innovation within businesses. Many of these issues can potentially be solved through improved communication across the supply chain, with end-users and the community; economic and market analyses to help identify prospective alternative products and the timeframes/constraints to delivery; and R&D to support innovation in resource assessment and management, product development and social licence to operate.

The importance of R&D in supporting innovation is acknowledged in the National Innovation and Science Agenda, with Innovation and Science Minister Christopher Pyne stating recently that innovation and science were ‘two sides of the same coin’ (Wilkins 2016). Yet, despite having some of the highest quality scientific research organisations in the world, Australia has the lowest level of industry–R&D collaboration in the OECD (Lalor et al. 2015).

Forestry in Australia historically has had good structures to promote collaboration between forest research providers and industry, for example Forest Research Working Groups, which functioned under the COAG umbrella, and 21 years of forestry CRCs. Both of these examples, initiated and supported by governments, resulted in shared problem definition and solving, with a national outlook.

The forest industry has changed considerably over the past decade and these structures no longer exist. There has been large scale transfer of forestry assets from government to private ownership, with private investors now holding the majority of forestry assets, and governments accounting for just 19% of investment in new plantations in 2013–14 (ABARES 2015). Over the same timeframe, R&D capability has shrunk dramatically and become fragmented as R&D funding has declined (e.g. CSIRO’s forest science capability has reduced from 200 to 20 over a period of 8 years), and in-business R&D capacity has reduced substantially (Kile et al. 2014; AFPA 2015).

In this environment innovators are more likely to thrive than non-innovators. The ongoing survival of forestry R&D capability in organisations such as CSIRO is dependent on industry investment in R&D. Without that investment, forest science capability is likely to fall below critical mass in the short term, leaving the industry reliant on global R&D that may not meet local needs. Forest and Wood Products Australia is now the largest investor in forestry R&D as government funding priorities have changed, and its budget is small compared to the total asset value of the forest industry in Australia (ABARES 2015). It is clear that the business case for forestry R&D investment needs revisiting, including examination of effective industry-R&D models.

The ‘science push’ or ‘market pull’ R&D models that typify current forest industry–R&D collaboration in Australia have been replaced in other sectors, such as agriculture (e.g. FARMSCAPE (Carberry et al. 2002)) and coal seam gas (e.g. GISERA, the Gas Industry Social & Environmental Research Alliance), by the more relationship-based concept of mutual engagement and co-production of knowledge. This better reflects the complexity of industry, R&D and societal needs, and promotes broad perspectives and wide-ranging relationships to solve industry problems (Bell et al. 2014).

There are a few examples of similar approaches within segments of the forest sector (e.g. ARC Centre for Forest Value, Australian Forest Operations Research Alliance). These types of models can support a range of industry R&D needs across the supply chain, from short-term ideas generation through to longer term ‘deep dives’ tackling industry-wide problems, and from open through to protected intellectual property arrangements (Perkmann and Salter 2012). It can result in improved adoption of R&D outcomes (Carberry et al. 2002) leading to more rapid innovation.

The international forest industry has the potential to be a key growth sector in the emerging global bioeconomy, estimated to be worth approximately $200 billion (Manfred 2014), and the local industry has the potential to capitalise on the federal government’s push for an ‘innovation nation’. The recent focus on innovation at a joint CSIRO/IFA meeting in Tasmania highlighted improved sector confidence and acknowledged that innovation will be critical to future success (Pinkard and O’Grady 2016). The progressive reinvigoration of the Australian industry, strong global outlooks and emerging product opportunities across the supply chain have resulted in strong interest in innovation, and there are good examples of innovation in practice.

Many of the barriers identified above can be overcome with a combination of assistance from government innovation programs, a collaborative R&D strategy and targeted industry investment. Innovation in the sector currently occurs in response to in-business drivers, and the industry is yet to build a whole-of-sector vision of the opportunities and potential benefits of innovation, or a roadmap for achieving the vision. Such a vision will help the industry to capitalise on the current focus on, and support for, innovation in Australia, and to support its long-term prosperity.

Acknowledgements

We thank Dr Steve Read for his valuable comments on an earlier draft.

Disclosure statement

No potential conflict of interest was reported by the author.