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Success factors for developing new rural industries

Keith Hyde
South Africa and southern Europeas a source of animal and plant species for the new colony. The search for new species and the subsequent trials were relatively ad hoc. They were guided by trial, error and an imperative to succeed to be able to feed and clothe a growing colony. Two hundred years later, Australians continue to scour the world for new plant and animal species which they can develop into new industries. Recent introductions include Boer Goats from South Africa, Alpacas from South America (via the USA), Atlantic Salmon from Europe, Cashews from Brazil via India and grain legumes from the Indian sub-continent. There have been many successes and failures in the interim period. The successful introduction of Merino sheep from Spain and the development of new wheat varieties more suited to Australian conditions by William Farrer are well known. However, there are numerous other successes which we now take for granted, for example: apples, bananas, citrus, cotton, the Friesian dairy cows which produce most of Australias milk, melons, sugar cane, trout, Bos indicus cattle and zucchinis.

Introduction
Australian farmers have a long and successful history of developing new animal and plant products into new industries. The search for new animal and plant products started with the first European settlers in Port Jackson over 200 years ago. They brought cattle, sheep, grains and vegetable crops with them but they soon found that the breeds and varieties to which they were accustomed in Europe were not well adapted to the very different climate and the poorer soils of New South Wales. The native plants and animals were unfamiliar the European settlers. The plants and animals of interest for food or fibre were relatively sparse and were not farmed or cultivated by the Aboriginal inhabitants. The animals were wild, untamed species and were not conducive to the farming systems known to the Europeans. The new settlers therefore turned to other parts of the world with which they were familiarthe Americas, India,

South African proteas have been successfully developed for Australian conditions.

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About the author

There has also been renewed interest in Australian species such as abalone, barramundi, crocodiles, emus, kangaroos, marron, tea tree oil and wildflowers which are being developed into commercial industries. Australians are not unique in their interest in new industries. It is a global phenomenon dating back to the earliest days of civilisation as we know it. The earliest global explorers sought fertile new lands, minerals, new crops, animals and their products to add to their personal and national wealth, standard of living and knowledge. The rich mixture of animals and crops which makes up the farming systems of any country has a diverse history. It has been acquired and developed through the millennia. The processing and marketing systems which transform and transport the farm commodities into consumer products have also developed around the world over many generations.

Why then do individuals and governments on all continents, and also the many international agencies, continue to investigate and to develop crops and animals into new industries? The priority for many countries, especially in Africa and Asia, continues to be focused on increased production of food supplies, on fibre products for clothing or housing, on generating employment for a growing population, and on increasing national wealth and standard of living. However, Australia is in a far more fortunate position in these last years of the twentieth century. Australias industry development and personal imperatives include: To create employment opportunities, particularly in rural areas and for young Australians. Australias cities continue to grow and its rural towns continue to shrink. Government agencies and business continue to reorganise and to rationalise their work forces. The result has been the closure or downsizing of many country banks, hospitals, advisory services, service suppliers and associated support facilities, the loss of previous jobs for older residents and fewer jobs for younger people. At the same time, farm and regional townspeople want to create new opportunities for themselves and their families. They are investigating alternative farm enterprises and new business structures to generate economies of scale. The maintenance of family ties is regarded highly in most rural areas.

Keith Hyde has been actively involved in the development of new rural industries throughout his career initially in the Northern Territory and more recently during 12 years with the Rural Industries Research and Development Corporation and its predecessors. Contact address PO Box 106, Jamison Centre, ACT 2614 Phone: (02) 6251 7175 Fax: (02) 6251 7270 Email: khyde@netinfo.com.au

Why develop new industries?


The following chapters reflect the continued search for new plants and animals around the world to develop into new industries for Australia. The staff of State departments of agriculture, the CSIRO and Australias universities have methodically searched for and developed new crop, animal and pasture species. There are also many personal efforts by farmers and nurserymen. Commercial companies have been active in the introduction of many new horticultural and grain crops from Europe and North America. Australians no longer have an imperative to produce more food for an expanding domestic population, or to expand production for clothing or shelter, for the Australian population is very well provided for in all three areas. Similarly, Europeans and North Americans are well fed, well clothed and well housed. There are notable and distressing exceptions to this generalised conclusion on each continent, but they do not compare with the continued malnutrition and poor housing of many parts of Africa and Asia.

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To develop more sustainable farming systems. Most Australian farmers are very conscious that, while their current farming systems were developed with the best intent and based on the best available knowledge, they are not sustainable in the long term. They are very conscious of rising water tables, salinity, increasing soil acidity in some areas, declining soil structure, pest and disease problems. They are searching for: less exploitative farming systems; reduced use of synthetic fertilisers and chemicals for pest and disease control, both of which are expensive and can result in undesirable residues; alternative crops and animals to incorporate into their farm rotations; and for alternatives to diversify their income bases. Aquaculture industries are being developed to provide supplies of product in the face of declining stocks from the wild.

To improve our own and our neighbours standard of living. Satellite communications, the Internet, global news services and overseas travel have brought international commodity markets into every farm business. The debate is about the impact of exchange rate movements, changes in quarantine controls and the US Farm Bill. Australian farmers are very conscious that they operate in global market environment and that to remain competitive they have to be at the cutting edge of new technologies, knowledgable of global market trends and actively developing market opportunities. There is also acceptance within the Australian community that our neighbours in Africa, Asia and the Pacific can be helped to develop their standard of living and international business prospects to the mutual benefit of all countries.

To fulfil an innate personal yearning to do something different or better. For some people the challenge is to climb the next highest mountain, for others it is to fulfil a life dream, to help another person, for interest, for self-fulfilment, to be competitive, or to demonstrate ones worth to another person. There are many and varied reasons why people take up the challenge of a new business at various stages in their lives. Most of them relate to self-fulfilment and feeling good about oneself. For some people a hobby opens up as a business opportunity. For others it is a driving ambition to be successful, to solve a problem or to be proven as good as, or better, than another person.

Location is most important for new aquaculture industries, especially to provide ready access to assured supplies of quality water.

Rationalist economic arguments suggest that individuals, companies and countries should focus on their existing strengths, build on their existing industries or products and that investment of time and money in alternatives is economic folly. Policies and activities based on such arguments have their place, but the arguments also require careful interpretation. The narrowest interpretations would have precluded the development of the motor car, television and the Japanese electronics industry. They could lock a country or a company into a very narrow and vulnerable economic path. Investigation of alternatives and pursuit of a natural curiosity have opened up many new rural business opportunities in Australia and around the world.

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government does when choosing a new crop or animal product. The Rural Industries Research and Development Corporation and the Fisheries Research and Development Corporation have taken a keen interest in the development of new industries as part of their core business. The corporations and their predecessors have sponsored research on new industries since 1955. In that time they have seen many prospects develop into new businesses and new industries. There have also been some failuresprospective opportunities which have been pursued into blind alleys. The failures also offer lessons for the future and have been reviewed in corporation studies. Their experience has been reflected in the product and industry analyses which follow in this handbook. Some of the key success factors include the following: The champion. A key person in any new business or industry is the new business entrepreneur or industry champion. This person either directly or indirectly provides the vision, the drive, the energy, the ideas, the commitment and the plan to turn the vision into reality. Too often the new business entrepreneur is thought of as a smart-suited business person, and all too often this person is equated with the people who trade scrip on the stock exchange. However, entrepreneurs are found in many walks of life: on farms, in business, in research and in community service. Key features of the entrepreneur who develops new business are:

Australian natives tea tree and abalone are being developed collaboratively between industry and government research agencies.

Key success factors


After some two hundred years of experimentation, trial, error, some outstanding successes and also many failures in the history of the development of new industries, one might reasonably expect there to be some consensus on the key success factors. But there is not. On one hand, there is considerable evidence pointing to the importance of key individuals, genetic material and production or processing technologies which

can be transferred from other parts of the world, opportunities created by population changes, crop failures resulting from drought, floods or diseases, or the actions of governments to open up new lands, promote a new crop or animal product or to ban others. On the other hand, others argue that industry success is more serendipitous and not related to any one factor. This latter group argues against picking winners, but that is just what any individual farmer, processor, researcher or

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the ability to spot an opportunity and the motivation to act to realise opportunities; they are competitive and either profit or achievement driven; they are willing to take risks, but they are usually calculated risks for which they have risk management strategiessuccessful entrepreneurs are not reckless; they are effective planners and managers of the resources available to them. Successful entrepreneurs are very adept at marshalling all the resources necessary to make the venture successful. They are also very good at contingency management and managing problems if some resources are not available as originally planned; and successful entrepreneurs are very committed, they have plenty of stamina and are prepared to put in the hard work to ensure the venture is a success.

hand by the principal or principals involved. Information from one source is also checked with another source. The strengths and weaknesses of competitors in the market are also researched. they have close contact with their customers and they share critical information with key people in the market chain; good communication is a key feature of successful new industries.

The second location factor to consider is soil type. While animals are less dependent on soil type, soil type often determines the quality of the pasture and hence animal growth rates. Most plants have soil type preferences, but not all plants have a preference for deep rich soils. As indicated in the following chapters many Australian wildflowers prefer poorer sandy soils. The third critical location factor is topography and this factor is coupled with aspect. Topography influences cold air or soil water drainage, the suitability of the site for machinery access or for irrigation. The site aspect can influence the exposure of a crop to either beneficial or deleterious winds. It can also influence site temperatures. The fourth location factor is access to water for irrigation or aquaculture ponds. Aquaculture requires an assured supply of good quality water.

Other factors, which have been important for some industries have been the name or brand of the product, promotion of clean, green or fresh characteristics, exploitation of off-season opportunities and the development of niche markets. Guidelines for doing your own market research are presented in the next chapter. Location , location, location, location. Most new crop and animal products are produced around the world well away from their origins. Many crops and most animals have been very resilient in their ability to adapt to new conditions. They do have preferences, however, under which they will be less susceptible to pests and diseases or have higher productivity. The first location factor is climate. Most crop and animal species have temperature, humidity, wind and water preferences. Many plants have a daylength or a temperature requirement for onset of flowering or for fruit set.

You will be able to identify many plant breeders, engineers, farmers and others who do not characterise themselves as entrepreneurs, but have all the above success factors. Market focus. The second winning factor in successful new industries and businesses is that they are market focused. To achieve this market focus the people involved: undertake considerable research on their market. In many instances the market research is undertaken first-

Other important location factors include access to community infrastructure, service supplies and access to markets. Transferable technologies. The production and processing systems for any industry embody a complex array of technologies and knowledge which, for older industries, has been built up over many generations. The common breeds and varieties used in food and fibre production around the world, for example wheat and dairy cows, are the result of many centuries of selection for product quality and productivity, pest and

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disease resistance and temperament, etc. New technologies and research methods can expedite productivity enhancements, but the experience indicates that anyone with an interest in new industries should have a healthy respect for time and technology factors. Some of the key factors are: whether the product is already produced in another part of the world and whether the technologies associated with production in that location are readily transferable or adaptable to Australian conditions. The economics of production in Australia often require higher yields, quality improvement and mechanisation for profitability. However, there will have been some selection processes and there will be a body of knowledge associated with the production and processing if the product is produced, even under quite basic conditions, in another part of the world; traditional use may facilitate market access, market development and also alleviate the need for costly food safety research and registration as a new food product; if new technologies are required, are they simple or are they complex and might they be both expensive and time consuming to develop? Simple technologies can be readily copied and expose the new business to competition. Complex technologies, on the other hand, can provide a protective shield around the new business;

Cashew industry development champion Peter Shearer discusses a high yielding selection with the author.

technologies, skills and equipment which can be shared within the farm or manufacturing business assist the development of new products. For example, new grain legumes which make use of existing harvesting equipment and improve crop rotations on broadacre farms have been quickly adopted.

borrowing funds at the market interest rates. Funds borrowed at lower interest rates against the operators business as a whole have been successful in many instances. However, individual choosing this approach must alway weigh up the relative risks and opportunities. new ventures do have a significant demand for operational funds over an extended period before they become profitable and this demand must be sustained from capital resources or from cash flow provided by other enterprises. The successful new venture must be able to sustain some interruption in cash flow, ie. development must be able to be put on hold, if for some reason cash flow from other activities is lower than expected.

Financial management. The financial resources available to the new venture have been a key success factor in most if not all case studies reviewed by the Corporation. The people involved in successful new industry ventures have: adequate initial financial resources at their disposal for capital equipment, purchase of stock, development of land and for initial operating expenses. Very few ventures can afford the cost of

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the compatibility of the new venture with other farm or processing operations has been a key to success for many new products. Successful integration can result in more sustainable farming systems through improved rotations, soil improvement and breaks in pest and disease cycles, improved use of high cost equipment and improved use of time available to the business; imaginative marketing and trading arrangements have been a feature of several new industries; most new industries have been quick to adopt new technology. Their participants are technologically hungry and scour the world for best practices and innovative approaches. They are in direct contact with lead researchers and adopt technology well before the research journal papers are written; and once again the joint venture factor has been important for some industries.

Transferable technologies, more sustainable systems and integration with existing farm activities have been keys to the adoption of grain legumes and oilseeds on Australian farms.

Government incentives and tax concessions, and particularly the latter, are important to the new industry development, but new industries are not built on incentives or concessions alone. They must have some inherent competitive advantages and prospects of independent profitable operation. joint venture arrangements can provide capital, expertise materials and/or market linkages for the new venture and all need to be considered. However, there are downsides of joint ventures which also need to be considered, ie. what happens if one partner cannot meet their commitments, are the partners naturally compatible and do partners benefit in relative proportion to their input? not so strongly identified as other success factor. A range of innovative styles were used in successful companies. These include: a strong profit and quality focus. This was a feature in most successful firms and new industries; a strategic long-term approach has been necessary for the development of most new industries. The Wood, Chudleigh and Bond research study, which is referenced below, indicates that new industry development is not for the faint-hearted. It can take 15 to 20 years to get a new industry prospect to the stage where it can be considered established; value adding and vertical integration have been important in some but not all instances. Secondary processing and direct marketing can yield high profit potential but there are also higher costs and market entry issues to be considered;

Style of operation. The style of operation or the modus operandi of the firm has also been identified as a success factor in new industry development, though the common characteristics were

Role of government. The final success factor is the role of government. Governments at local, State and Federal level have a significant influence over how business is conducted in Australia, in representing Australian interests in international forums and in provision of services such as roads, electricity, water supply, education, research and medical facilities. A key role for government has been to set the right economic environment for industry development. This

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was particularly important for new industry during the 1950s and 1960s and governments, both State and Federal, continue to search for the optimum economic environment to foster industry development, economic growth and new employment opportunities during the 1990s. Government agencies, and especially State departments of agriculture, the CSIRO and water supply authorities, have been a key source of information for new industry developers. Government agencies have traditionally kept better records than industry, they have also had some longstanding employees with whom you can discuss what did and what didnt work, and why. Governments have been key providers of R&D support in Australia. Finally, I reiterate the role of government as a provider of services and representation. Governments, both State and Federal, play a key role in market access negotiations.

Dont dream it, do it and the many rural Australian who are making the development of new industries a new way of life for themselves.

B.E. (1975). The Oxford Book of Food Plants. Oxford University Press. RIRDC/ABARE Symposium on New Rural Industries (1994) Proceedings of the 1994 Outlook ConferenceVolume 3. Australian Bureau of Agricultural and Resource Economics, Canberra. Wood, I.M., Chudleigh, P.D. and Bond, K.A. (1994). Developing New Agricultural Industries. Lessons from the Past. Rural Industries Research and Development Corporation, Research Paper Series, No 94/1, Volumes 1 and 2.
Table 1a Opportunities for Northern Coastal Areas

Key references
Brown. D., Van Landeghem, K. and Schuele, M. (1997). Australian Aquaculture Industry Profiles for Selected Species. Australian Bureau of Agricultural and Resource Economics Research Report 97.3. Cahill, G. (1993). Dont Dream It, Do Itmaking money from new farm enterprises. Agmedia, Melbourne. Cahill, G. (1995) 160 Alternative Farming Enterprises Ideas Suitable for Large and Small Farms. Agmedia, Melbourne. Food and Agricultural Organization. Commodity Production and Trade Statistics. World Wide Web Internet Site < http://apps.fao.org/cgi-bin/nphdb.pl > Karingal Consultants (1994). The Australian Wildflower Industry a Review. Rural Industries Research and Development Corporation, Research Paper Series, No 94/9. Imre, B.C., Bray, R.A., Wood, I.M. and Fletcher, R.J. (1997). New Crops, New Products New Opportunities for Australian Agriculture. Proceedings of the First Australian New Crops Conference, the University of Queensland Gatton College, 811 July 1996. Rural Industries Research and Development Corporation, Research Paper No 97/21. Masefield, G.B., Wallis, M., Harrison, S.G. and Nicholson,

In this paper, I have drawn together the key factors that have been observed to be important in the development of new industries in Australia over the past 40 years. I have drawn on several background studies and two review conferences supported by RIRDC and experience with many Australians who have been successful in their development of new ventures and new industries. The critical success factors, however, lie in the title of Geoff Cahills 1993 reference

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Table 1b Opportunities for Northern Inland Areas

Table 1c Opportunities for Southern Inland Areas

Table 1d Opportunities for Southern Coastal Areas

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