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4.2 ICT and innovation in 'old economy' industries
Recent assessments have pointed to the importance of ICT in innovation outside the so-called new economy industries concerned with knowledge, computing and communications (National Office for the Information Economy 2002, 2004). The concept of the new economy also involves ‘old’ economy corporations embracing new technologies and enhancing their performance. According to business historian Alfred Chandler, the new economy created, and will continue to sustain for some time, the opportunities and necessities for reconfiguring almost every aspect of the operation of industrial age enterprises (Chandler 2001).
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Bonds Clothing Bonds (part of the Pacific Brands Limited Group) is a highly innovative business unit in what is considered to be an ‘old economy’ industry. Innovation is enabled by ICT which is used to link and integrate production, marketing and sales. ICT has enabled the company to move from a manufacturing/production orientation to a marketing/customer orientation. Bonds is led by a Group General Manager with a strong marketing background. ICT underlies the current order fulfilment process. Customer orders are made and processed electronically. The order management system allows stock to be tracked from inventory to invoice using scanning technologies. Bar coding is fully integrated with the inventory management systems of the major retailers. Information is collected weekly from retail point of sale (POS) systems that provide information about stock on hand at stores and which can provide information about stock movements to retailers. The main ICT driver was the cost of manually handling 18,000 stock keeping units (SKU) – covering seasonal ranges, sizes, colours and retailer marks. ICT allows the order fulfilment process to be expedited, as well as more efficient manufacture and inventory management. This in turn, allows for greater responsiveness and targeting to customer requirements. The company is looking to implement track and trace technologies for retailers to identify where orders are and monitor progress. It is also looking to automate stock replenishment. |
The way in which ICT has the potential to complement, integrate and blend a wide variety of technologies and knowledge areas in a traditional manufacturing environment can be illustrated by reference to food processing – one of the largest manufacturing sectors in Australia and generally regarded as an old economy industry. Each of the activities in the value chain identified in Figure 2 has a strong ICT element that combines with other knowledge domains.
Figure 2: Activities and knowledge/technology areas in food processing
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Activity |
Technology/Knowledge Area |
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Selection and preparation of raw materials |
Filtering, centrifugal, washing technologies; steaming (thematic treatment) sensorics; molecular biology and micro biology; chemistry and biochemistry |
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Processing |
Process lines (engineering); ICT and informatics; logistics; heating and refrigeration technologies; molecular biology and micro biology; bacteriology; chemistry; biochemistry; gastronomical skills |
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Preservation and storing |
Cooling/freezing technology; vacuum; hermetics and modified atmosphere packing; sterilisation; pasteurisation and homogenisation; biological preservation; biotechnology; biochemistry; bacteriology and microbiology; analytical chemistry |
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Packing, wrapping and coating |
Disposal technology and environmental issues; materials technology; process lines (engineering informatics); design; consumer preferences and marketing; microbiology and bacteriology; biochemistry and analytic chemistry; cooling/freezing technology; vacuum; hermetics and modified atmosphere packing |
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Hygiene and safety |
Microbiology; bacteriology; biochemistry and analytic chemistry |
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Quality and nutrition |
Chemistry; microbiology; additives; texture; sensoric analysis and evaluation |
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Quality control and documentation |
Testing/measurement technology; spectoscopology; sensorics; microbiology and bacteriology; biochemistry and analytic chemistry |
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Transport and distribution |
Logistics; ICTand informatics; general transport technology; cooling/freezing technology; microbiology and bacteriology; biochemistry and analytic chemistry |
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Trading, marketing, sales |
sociology (consumer preferences and trends); economics (price elasticities, etc) |
Source: Smith, Keith. 2000.
The business interviews used in this study provide insights into how businesses in the old economy industries have identified, adopted and implemented ICT in business and production processes and in product design. Innovation has also been driven by a need to remain competitive, as well as supporting a strategy of business growth.
The companies consulted for the study indicated that ICT enables innovation in all of the areas most often identified as involving distinctive approaches to innovation:
- Product and service innovation.
- Process innovation.
- Supply chain innovation.
- Business model innovation.
These are addressed briefly in turn.
Back to 4.1 Innovation, business strategy and ICT | Table of Contents | Forward to 4.3 Product and service innovation