INTRODUCTION TO INNOVATION

When a company decides to focus on innovation, it usually means the development of new technologies, products, research and strategic planning. Technical innovation is based on inventions and creativity and in that case innovation is an invention that has produced economic value in the market. However, while innovations in technology and products are easy to copy, innovative approaches in management and employee education are much harder to emulate. Implementing change is not a simple and one-time act but a complex process. In this process, managerial skills, technical skills, creativity and autonomy of the organization itself come to the fore. Strategic planning determines the overall direction and goals of innovation.

Numerous human resource management and development programs, such as continuing education and development, motivation and reward, are in the direct function of the successful implementation of the strategy. The achievement of the organization’s strategic goals should be enabled and supported, while human resource management should contribute to competitive advantage, increase productivity and increase market value of business. The main feature of human resources management is its focus on the future, ensuring and developing people in accordance with the future position of the organization and its business needs while eliminating weaknesses. Therefore, companies must invest in education, employ quality staff, establish a system for evaluating staff and performance, rewarding and improving quality staff, buy licenses for technology etc. Organizational learning is one of the most promising concepts in modern management literature, and the ability to learn faster than its competitors may be the only sustainable competitive advantage that a company possesses (De Geus, 1988).

In order for resources to be used harmoniously and efficiently, their mutual organization is needed to meet strategic goals. Research and development strategy is one of the functional strategies of the company, as well as marketing, production, factor, personnel or any other strategy of the hierarchical level. In order for research to be more efficient, regular keeping of documentation is important and must follow certain norms and standards. Imagine a situation where for every new product, or for the improvement of the old one, you should discover everything from the beginning. If we do not have good documentation, the time spent on obtaining information is drastically increased and the research itself loses on efficiency, and even the product itself may lose on quality because some information was not available during its development or had to be reconstructed from the beginning (due to loss).

Outsourcing is a contractual relationship by which part or all of a job is outsourced to an external (often virtual) partner. The client company with the outsourcer generally concludes a longer-term contract, and outsourcing is becoming a universal business model of today’s successful companies. For an organization with little or no experience in planning, an external consultant can enhance the planning process. The use of a consultant to serve as a facilitator is one method of ensuring that good ideas do not get lost in the emotion of the process or personalities of the participants. External consultant can provide an objective and different perspective in the process. As an outsider to the organization, consultant can ask questions and challenge existing traditions, assumptions, and routines more objectively than staff and board members. By applying outsourcing, separate activities are left to specialized partners who will perform them better and cheaper, while maintaining strong links with the outsourcer, while the company focuses on key activities (core business). The ability to innovate successfully is considered one of the key competitive advantages, because innovation and new technologies are important factors of economic growth (OECD, 2000). Cooperation between the business and the scientific community is therefore considered one of the most important parts of the innovation system. As the innovative capacity of the industry is significantly related to the degree of communication between scientific institutions and the economy, it is important to understand why companies cooperate with scientific institutions, and how intensively they cooperate. The aim of the cooperation is to increase the innovative capacity of the company, thus increasing the share of revenue coming from new or significantly improved products in total revenue.

Idea Generation

The process of developing a new product always begins with the pursuit of new ideas. At the strategic level entrepreneur needs to define the resources to be invested in this domain. Levels of assumed resources vary depending on whether it is the development of a new product, the innovation of an existing one, or the imitation of a competing product. An idea can come from almost any source. Without a flow of new ideas there can be no innovation regardless of how well you manage it. However, there are a number of reliable and proven sources of ideas which you can rely upon to stimulate innovation activities. Ideas about new products are acquired through communication with customers, monitoring the competition, and communication with advisory services. In modern practice today, the following sources of ideas for new products are practiced:

1. Customer needs and desires
2. Products and services of competitors
3. Business incubators
4. Entrepreneurial centres
5. Development agencies

Smaller companies may rely heavily on outside resources, such as universities and independent laboratories in order to create successful products. Idea generation should be completed by gathering information about trending ingredients and consumer wants by attending trade shows, keeping up to date on new product releases by other companies, scanning research articles and trade publications, and monitoring grocery shelves.

Idea Screening and Selection

Screening is the most critical step in a product development project. In this phase, all collected ideas about the new product are evaluated in detail. They are compared with each other, and it is assessed which ideas make sense to develop further. There are a large number of models and ways of screening new innovation ideas. Some are very detailed whilst others are quite subjective. Overall, you should use the method that best suits your business, but be realistic in your evaluations. Certain ideas are recorded and documented for some future time, and those that are judged to be irreparable by some characteristics, and therefore uncompetitive with existing products for the same purpose, are permanently rejected.

After testing and comparing, and ranking ideas, quality ideas should strive to materialize in a form that can be tested in market terms. You should distinguish:

1. A product idea – an idea for a possible product
2. A product concept – a detailed version of the idea stated in meaningful consumer terms
3. A product image – the way consumers perceive an actual or potential product

To go on in the new product development process, attractive ideas must be developed into a product concept. https://marketing-insider.eu/new-product-development-process/

The idea of a product can be translated into several product concepts. Concepts are developed based on the following insights:

Who are the users of the product?

What primary benefit does the product offer to the user?

In what situation, and in what way, will customers use the product?

Concept testing is performed on a specific group of target consumers, more precisely by analyzing the reactions of a particular market segment to the product concept. The concept of a ̧product can be represented symbolically and physically. Testing will be more reliable if the tested concept more fully represents the final product. Thorough testing of product concepts can assist a firm in deciding whether to invest time and money into a venture, or to abandon the efforts completely. Smaller companies may call on outside firms to assist in market screening.

The next step in the new product development process is the marketing strategy development. When a promising concept has been developed and tested, it is time to design an initial marketing strategy for the new product based on the product concept for introducing this new product to the market. Unlike the previous approaches, where the marketing strategy was designed only in the final phase of new product development, today the development of the marketing strategy is carried out earlier.

The marketing strategy statement consists of three parts and should be formulated carefully:

1. A description of the target market, the planned value proposition, and the sales, market share and profit goals for the first few years
2. An outline of the product’s planned price, distribution and marketing budget for the first year
3. The planned long-term sales, profit goals and the marketing mix strategy.

Once decided upon a product concept and after the completion of the preliminary marketing strategy plan, an analytical assessment of the possible market realization of the new product follows. This step involves a review of the sales, costs and profit projections for the new product to find out whether these factors satisfy the company’s objectives. If they do, the product can be moved on to the product development stage.

In order to estimate sales, the company could look at the sales history of similar products and conduct market surveys. Then, it should be able to estimate minimum and maximum sales to assess the range of risk. When the sales forecast is prepared, the firm can estimate the expected costs and profits for a product, including marketing, R&D, operations etc. All the sales and costs figures together can eventually be used to analyse the new product’s financial attractiveness.

The new food product development process goes on with the actual product development. Up to this point, for many new product concepts, there may exist only a word description, a drawing or perhaps a rough prototype. But if the product concept passes the business test, it must be developed into a physical product to ensure that the product idea can be turned into a workable market offering. At the start of a project, you must be cognizant of the state and/or federal agencies that regulate a product.

The European Union’s regulatory framework

There are 27 member states in the EU, and each member state is responsible for passing and enforcing their own laws within their borders. Thus, each member state has their own legislation that deals with food. However, those laws have to meet the terms of the various treaties, directives and regulations passed and agreed upon by the EU as a whole. The regulations and directives that apply for new food product development are very much dependent on the individual product itself and in which member state the product and application is first introduced.

The basic regulatory frameworks of the European Union in the field of food safety today consist of:

1. Regulation (EC) No 178/2002 of the European Parliament and of the Council of 28 January 2002 laying down the general principles and requirements of food law, establishing the European Food Safety Authority (EFSA) and laying down procedures in matters of food safety; http://data.europa.eu/eli/reg/2002/178/oj
2. Regulation (EC) No 852/2004 of the European Parliament and of the Council of 29 April 2004 on the hygiene of foodstuffs; https://eur-lex.europa.eu/eli/reg/2004/852/oj
3. Regulation (EC) No 853/2004 of the European Parliament and of the Council of 29 April 2004 laying down specific hygiene rules for food of animal origin; http://data.europa.eu/eli/reg/2004/853/oj
4. Regulation (EC) No 854/2004 of the European Parliament and of the Council of 29 April 2004 laying down specific rules for the organisation of official controls on products of animal origin intended for human consumption; http://data.europa.eu/eli/reg/2004/854/oj
5. Commission Regulation (EC) No 2073/2005 of 15 November 2005 on microbiological criteria for foodstuffs., http://data.europa.eu/eli/reg/2005/2073/oj

The legal framework governing food labeling consists of:

1. Regulation (EU) No 1169/2011 of the European Parliament and of the Council of 25 October 2011 on the provision of food information to consumers, amending Regulations (EC) No 1924/2006 and (EC) No 1925/2006 of the European Parliament and of the Council, and repealing Commission Directive 87/250/EEC, Council Directive 90/496/EEC, Commission Directive 1999/10/EC, Directive 2000/13/EC of the European Parliament and of the Council, Commission Directives 2002/67/EC and 2008/5/EC and Commission Regulation (EC) No 608/2004; http://data.europa.eu/eli/reg/2011/1169/oj
2. Commission Implementing Regulation (EU) No 1337/2013 of 13 December 2013 laying down rules for the application of Regulation (EU) No 1169/2011 of the European Parliament and of the Council as regards the indication of the country of origin or place of provenance for fresh, chilled and frozen meat of swine, sheep, goats and poultry; http://data.europa.eu/eli/reg_impl/2013/1337/oj
3. Regulation (EC) No 1935/2004 of the European Parliament and of the Council of 27 October 2004 on materials and articles intended to come into contact with food and repealing Directives 80/590/EEC and 89/109/EEC. http://data.europa.eu/eli/reg/2004/1935/oj

Novel foods, i.e. foods that were not consumed significantly in the EU before May 1997, must pass a safety check before being placed on the EU market. From 2018, a new regulation applies that allows easier access to innovative food while maintaining a high level of food safety. It introduces a simplified centralized authorization procedure for novel foods and traditional foods from third countries (which are considered novel foods in the EU) which is implemented over the internet and is valid for the whole EU. Before a food is approved, EFSA conducts a centralized scientific safety evaluation, which determines the conditions of its use, its nutritional purpose and labeling requirements. Today the legal framework governing novel foods consist of:

1. Regulation (EU) 2015/2283 of the European Parliament and of the Council of 25 November 2015 on novel foods, amending Regulation (EU) No 1169/2011 of the European Parliament and of the Council and repealing Regulation (EC) No 258/97 of the European Parliament and of the Council and Commission Regulation (EC) No 1852/2001, http://data.europa.eu/eli/reg/2015/2283/oj
2. Regulation (EC) No 258/97 of the European Parliament and of the Council of 27 January 1997 concerning novel foods and novel food ingredients. This regulation sought to protect public health by ensuring that new or novel foods or food ingredients in Europe would be subjected to a safety assessment before being placed in the market, http://data.europa.eu/eli/reg/1997/258/oj
3. Directive 2002/46/EC of the European Parliament and of the Council of 10 June 2002 on the approximation of the laws of the Member States relating to food supplements. The directive states that the food supplements are foodstuffs and that they must meet all provisions that are described in the food regulation. Thus, safety and quality need to be demonstrated through scientific evidence, http://data.europa.eu/eli/dir/2002/46/oj
4. Regulation (EC) No 1925/2006 of the European Parliament and of the Council of 20 December 2006 on the addition of vitamins and minerals and of certain other substances to foods. Under this regulation, scientific testing is required to assure the quality and safety of the products. Much like the food additives directive, this regulation uses positive lists to establish which vitamins and minerals can be added to food, http://data.europa.eu/eli/reg/2006/1925/oj
5. Regulation (EC) No 1924/2006 of the European Parliament and of the Council of 20 December 2006 on nutrition and health claims made on foods. The Health and Nutrition Claims Regulation strives to harmonise the rules and procedures and allow for consistent application of them throughout all the member states. The goals of free movement of goods across all member states and the assurance of safety and reliance of scientific evidence are very prominent themes in this piece of legislation, http://data.europa.eu/eli/reg/2006/1924/oj

Food Safety and Quality Control

Food safety is an international challenge that requires cooperation among countries in harmonizing standards and setting up transnational surveillance systems. Ensures that food will not adversely affect the consumer when prepared and / or consumed in accordance with its intended use. The term “safe food” is becoming more common in everyday life, and implies the suitability of food for human consumption in accordance with its purpose. Therefore, with the provision of adequate hygienic measures in the production plant, it is possible to produce safe food under the supervision of the production process and timely response to difficulties. Therefore, in the last few years, a number of legal regulations have been drafted and adopted in order to harmonize with those in force in the countries of the European Union, the implementation of which should ensure the production of healthy and safe food. The obligation to establish and implement a system based on HACCP (Hazard Analysis Critical Control Point) principles is very often encountered. The International Commission on Microbiological Specifications for Foods (ICMSF), WHO, the Codex Alimentarius, and food regulatory agencies in various countries are recommending the implementation of HACCP system.

The HACCP system plays a major role in preventing hazards or reducing hazard levels to an acceptable level and controlling critical points. HACCP is a system that identifies, assesses and controls hazards that may arise during food production, storage and distribution (ICMSF, 1991). This system also enables employee education, partnerships with suppliers, control of possible mistakes that may occur during the preparation and serving of food. It not only enhances food safety but also better use of resources and timely response to problems. HACCP is internationally recognized as one of the effective ways to control foodborne diseases (poisoning). The HACCP system needs to be developed for each production line and adapted to each individual product and process. The HACCP plan also needs to be reviewed if there are changes to the production process. This will have an impact on increasing or decreasing production processes in the flow chart, causing higher or lower scores on the probability (probability level); and lead to changes in the Critical Control Point. Every food production and processing organization must have a food quality control system. According to the legislation, all entities in the production of processing and distribution of milk in the EU must have introduced the HACCP system, which in the meantime has been upgraded to some other standards of ISO standards such as e. g. ISO 22000:2005 or ISO 9001:2008. European regulations on foodstuffs indicate that safety must be ensured by a preventive approach, such as implementation of prerequisites and application of procedures based on HACCP principles (Suherman et al., 2021). However, performance and effectiveness in preventing contamination depend on proper implementation and application (Samper et al., 2012). Medium and small-sized dairy companies are no exception; they also exhibit these important deficiencies together with those of training workers and technical staff, insufficient physical conditions, and the cost of the HACCP implementation (Karaman et al., 2012). The lack of knowledge, motivation, and trust in food safety legislation together with the lack of financial resources and human resource limitations are the main barriers to the fulfillment of the requirements demanded by official control (Jianu and Chis, 2012; Yapp and Fairman, 2006).

Market testing

The last stage before commercialisation in the new product development process is test marketing. In this stage of the new product development process, the product and its proposed marketing programme are tested in realistic market settings. Therefore, test marketing gives the marketer experience with marketing the product before going to the great expense of full introduction. In fact, it allows the company to test the product and its entire marketing programme, including targeting and positioning strategy, advertising, distributions, packaging etc. before the full investment is made.

The amount of test marketing necessary varies with each new product. Especially when introducing a new product requiring a large investment, when the risks are high, or when the firm is not sure of the product or its marketing programme, a lot of test marketing may be carried out.

Commercialisation

The final stage in the new product development process is commercialisation. Commercialisation means nothing else than introducing a new product into the market.

Product life cycle

The product life cycle serves us to show the aging process of a product. For each product, we must have a clear picture of the reasons why there is a need for them in the market and what are the motives for consumption.

Five distinct phases of the life cycle can be discerned:

1. The introductory period is heavily supported by promotions, in-store demonstrations, advertising, and slotting fees to gain introduction. Sales volume is initially low as customers and consumers are educated about the product.
2. A strong growth period ensues when first-time customers begin repeat buying and more new consumers are attracted. There is positive acceleration of sales growth. Growth continues as new markets open, but continued promotion and expansion at the introductory pace are costly.
3. A decline in sales begins. Growth accelerates negatively.
4. Next comes a no-growth period. Sales are constant, a sign of a stagnating market.
5. The decline accelerates. Newly introduced competitive products adversely affect sales; customers and consumers become indifferent to the old product. Promotions cannot profitably maintain sales.

The length of this life cycle will depend on many variables, but what is important in making strategic decisions about product management during certain phases of the life cycle is that the activities adapt to the actual phase of the cycle.

According to Global Data in 2016, 72% of UK consumers often/sometimes try new varieties of cheese (GlobalData, 2016). While traditional dairy varieties such as cheddar drive the most volume, novel varieties offer something different for consumers and can create new interest. Therefore bringing out dairy products with novel flavours (e.g. cheeses, functional beverages, butter, etc.) is crucial for consumer recognition and market competitiveness. Unique flavours can inspire interest and help small manufacturers align with more natural and healthy profiles, for example the use of attractive botanicals and spices or innovation in technology by using adjunct cultures for flavour enhancement.

Yogurt makers are stirring indulgent flavour profiles featuring salted caramel, dark chocolate and cold-brew coffee. General Mills, Inc., Minneapolis, introduced four Yoplait yogurt varieties in a partnership with Dunkin’ Brands Group, Inc., Canton, Mass., which include Boston Kreme donut, apple fritter, cinnamon coffee roll and french vanilla latte. Yoplait has launched several limited-edition flavours, including root beer float, watermelon, cherry snow cone and rainbow sherbet, plus a Girl Scout Cookie collection featuring Thin Mints, caramel coconut and peanut butter chocolate flavours. At the other end of the spectrum, savoury yogurt may gain appeal as consumers seek lower-sugar options. Vegetable-based varieties such as carrot, beet and sweet potato have taken root in the United Kingdom and Australian markets.

The millennials are embracing cottage cheese as a healthy protein-filled alternative to yogurt without the sugar found in so many yogurt or cultured products. New offerings of cottage cheese may stand out with fruity, savoury and spicy flavours. The flavour offerings in the cottage cheese category can be exotic, such as pineapple starfruit or Meyer lemon tart. Savoury offerings are also emerging, with trending flavours such as cucumber dill, toasted onion and chive. RifRaf Ricotta Cups, Brooklyn, N.Y. offered a product similar to cottage cheese which combines spoonable whole-milk ricotta with flavours including serrano pepper honey, sun-dried tomato, Meyer lemon and strawberry balsamic (Figure 1.). The product line was inspired in part by a restaurant-industry trend of serving premium ricotta as an appetizer or dessert with various garnishes, according to the company.

Figure 1. RifRaf Ricotta Cups (Rifraf, Brooklyn), https://rifraf.com/

Nutrition is also always a factor with dairy. Consumer awareness around gut health continues to rise in 2020 with people becoming increasingly educated on the importance of a healthy, functioning gut and how it can determine consumers overall well-being. Consumers recognise that looking after gut health is important for maintaining overall health, with one in five consumers saying they actively include foods in their diet that support gut health (Granato et al., 2010). To reach optimal gut health, researchers suggest eating more dairy that is rich in probiotics, fibre and prebiotics which can be found in fermented dairy products such as kefir, milk, cheese, yogurt and gut shots. Sour milk products and kefir have gained popularity due to their high content of natural probiotics and their association with digestive health.

Brands are now producing a wide range of probiotic dairy products such as functional dairy beverages enriched with probiotics which contains 0% fat and 0% cholesterol. A range of flavoured gluten-free cultured dips, including caramelised onion and goat cheese, baby beets, mint and goat cheese and feta and cashews are also developed. A wide range of high protein dairy products are also available, including ice cream, milk and cheese to support this healthy lifestyle.

Many consumers avoid lactose due to allergy/ intolerance, or for other reasons. Because of this, many lactose free products are emerging into the marketplace, including kefir, cream cheese and cottage cheese, along with milk, butter and yogurt.

Whey can be defined as the yellow-green watery part of milk (serum) that remains the curds are separated during cheese-making. It accounts for about 85–90 % of the volume of milk and contains about 55 % of the nutrients in milk. Cheese whey is a strong organic effluent that can pose a risk to the environment if not properly managed so according to the current legislation must be adequately disposed. Small family farms engaged in cheese production, face the problem of whey disposal on a daily basis. Uncontrolled whey disposal can cause great damage through water, air and soil pollution. One of the most common ways, which is not always a feasible and reliable solution for cheese producers, is to use whey in pig feed. This way of whey disposing, through contracts with pig breeders, does not contribute to the financial balance of cheese production. In addition, the high cost of cheese production due to significant energy needs (heat and electricity) makes cheese producers less competitive in the market because they “gift” a high-value product without monetary compensation. On the other hand, today there is a growing trend of utilization of various agricultural wastes, including whey, as valuable substrates for the production of value-added products. Utilization of whey could increase competitiveness of family farms in the market give them the “zero waste” epithet. The full potential of whey on small farms can be exploited through the utilization of whey in production of value-added products (whey based beverages, whey cheese) or in biogas production for on-farm energy recovery.

Value-added products: whey (albumin) cheese and whey based beverages

Due to the increasing awareness of people about health care, there is a growing demand in the market for value-added products in nutritional terms. Whey and its components are increasingly used as functional ingredients in dietary and health products, while bioactive proteins are more often used in both the pharmaceutical and nutritional industries (Blažić et al., 2018). The largest dairy companies in the world have already introduced a new generation of whey-based products (Papademas and Kotsaki, 2019). Whey-based products can certainly meet consumer’s requirements due to its high nutritional value. In addition, in financial terms, these are value-added products because they are products with a higher market price per unit of product, taking into account that the raw material is “free” because it is an indispensable by-product of cheese production.

Whey cheese, which belongs to the group of albumin cheeses, is a sweet cheese with a delicate consistency. It is white to slightly beige in colour with a hint of cooked whey proteins due to the high temperature at which the whey is processed. The greatest nutritional value of albumin cheese is given by whey proteins, which have a high degree of utilization in the body and are easily digestible and therefore can occupy an important place in the diet of children and the elderly (Rako et al., 2016). Due to its protein content, albumin cheese is considered a high-protein food. The production of albumin cheese is relatively simple, does not require additional investments since it is produced from by-products of cheese production and has a high market price. For these reasons, albumin cheese is an excellent choice for increasing the assortment on the family farm, while at the same time solving the problem of whey disposal (Tudor Kalit et al., 2019).

Figure 2. Whey-based beverages (Zelene doline, Mlekarna Celeia), http://www.zelenedoline.eu/products/lca-drinks

Production of whey-based value-added beverages is also a great alternative for whey utilization. Such beverages can be produced from sour or sweet whey. Research dealing with the development of new products and consumer acceptance has shown that whey drinks with various additives have a positive reaction from consumers. The unwanted smell of boiled milk and the sour-salty taste of whey are usually masked by the addition of fruity aromas of citrus and tropical fruits, and berries and berries, and the addition of chocolate, cocoa powder, vanilla, cereals and honey can also be used (Tudor Kalit et al., 2019). Following consumers’ expectations, Slovenian dairy Mlekarna Celeia introduced LCA ZELENE DOLINE whey-based drinks which contains high-quality protein, vitamins and minerals, and are free from fat, saturated fat, sweeteners and colourings (Figure 2.). The nutritional value of such beverages and the positive effect on the human body can be further improved by the fermentation of whey-based beverages by the action of probiotic cultures (Jeličić, 2008).

Whey as a co-substrate in biogas production

Many EU strategies and policies focus on sustainable development by increasing renewable energy sources. Renewable energy sources from leftover agricultural production have attracted the attention of many around the world primarily because of their sustainability and the fact that they improve the quality of the environment by reducing waste disposal in landfills. Considering the new environmental rules, the use of digestion processes has become a quite common alternative in the treatment of agro-industrial residues. In addition, waste digestion produces biogas that can be used in power generation, resulting in both environmental and economic benefits. Because of its high organic and low buffer capacity, anaerobic digestion of whey leads to prompt acid evolution and low biogas production, so to increase the productivity whey should be mixed with other types of wastes and/or manure (Zandona et al., 2021).

Figure 3. Energetic and nutritional potential of cheese whey anaerobic digestion (Escalante et al., 2018).

Reduction of whey organic matter by chemical treatment is not economically viable for small family farms due to the cost of chemicals needed for this purpose, while the method of anaerobic fermentation produces biogas that can be directly used to produce electricity and heat on farm is more suitable and sustainable (Figure 3). There is a growing tendency to build the so-called small biogas plants in the world. Such plants are modular, reducing transport costs and making it easier to use heat and electricity in small farm systems. Such a model would provide greater financial benefit for cheese producers by closing the energy cycle in production facilities of smaller capacities (Tudor Kalit et al., 2019). This would make whey an economically viable raw material for energy production. There are several ways to use thermal energy on family farms, and one of them is the use of thermal energy in the production of existing dairy products, as well as in the disposal of whey itself through the production of innovative whey drinks and desserts. This environmental and sustainable approach of whey utilization can bring savings and economic benefits to farmers.