DSpace https://erepo.uef.fi
Rinnakkaistallenteet Luonnontieteiden ja metsätieteiden tiedekunta
2019
Integrating intangible resources
enables creating new types of forest services - developing forest leasing value network in Finland
Laakkonen, Anu
Elsevier BV
Tieteelliset aikakauslehtiartikkelit
© Elsevier B.V.
CC BY-NC-ND https://creativecommons.org/licenses/by-nc-nd/4.0/
http://dx.doi.org/10.1016/j.forpol.2018.07.003
https://erepo.uef.fi/handle/123456789/7488
Downloaded from University of Eastern Finland's eRepository
Author accepted manuscript version (AAM)
Integrating intangible resources enables creating new types of forest services - developing forest leasing value
network in Finland
Anu Laakkonena*, Teppo Hujalaa, b, Jouni Pykäläinena
a University of Eastern Finland, School of Forest Sciences, Yliopistokatu 7, FI-80100 Joensuu, Finland
b Natural Resources Institute Finland (Luke) c/o Aalto University, P.O. Box 16200, FI-00076 AALTO, Finland
*corresponding author: anu.laakkonen@uef.fi
Highlights
• Enhanced business collaboration may enable new types of forest services.
• Value creation takes place in a collaborative value network.
• We scrutinize value network of forest leasing service in family forests.
• An integrator - a tenant or a consultant - combines actors’ resources and competence.
• Network actors cocreate value by converting intangible resources to deliverables.
Abstract
Emergence of more urban forest owners who live far from their forests challenges not only policies but also businesses for how to engage owners to active forest management. This study explores the opportunities of how exchanging and integrating intangible resources in collaborator networks may enable designing new types of forest services. To that end, the study scrutinizes the value network of a potential forest leasing service for family forests. Service-dominant logic and the concept of value network framed the analysis, which is based on semi-structured interviews with 12 Finnish
forerunners and experts in private forestry. The results highlight the mediating role of the integrator (tenant or consultant). The value network offers novel value propositions via exchanging intangible benefits, i.e. trust, expertise, easiness, and communication. Main actors and operations already exist in Finland: integrating intangible resources (=working in reciprocal business networks) in creating new kind of forest services may serve new forest owner types and their emerging needs better and more flexibly. Companies’ capability to convert information and knowledge to exchangeable deliverables within the value network will determine their competitive advantage in future. The task for forest policy is to enable open forest and landowner data for the novel service concepts. Further research is suggested to introduce novel value cocreating business logic to forest services in general.
Keywords: Collaborative business network; Value co-creation; Service dominant logic; Forest entrepreneurs; Forest service; Finland
1 Introduction
The traditional business logic for organizing company’s operations has been based on trying to minimize transaction costs, and thus deciding whether to perform business activities within the company or to buy them from the market (make-or-buy decisions) (Coase, 1937;
Williamson, 1981). However, starting from the late 1900’s, companies’ business logic has evolved toward intentionally created strategic value networks, where the business and value creation logics are based on collaboration (e.g. Jarillo, 1988; Shuman and Twombly, 2010;
Lusch and Vargo, 2014). Meanwhile the whole society is under a transition toward service and knowledge economy (Lusch and Vargo, 2014) where e.g. digitalization of services (Pajarinen et al., 2013) and service platforms (Gawer and Cusumano, 2014) have greater role in everyday life of people and the way how companies operate.
Many economic sectors, such as transportation and hospitality industry, have already recognized this transition toward strategic value networks and are adapting to it. Companies who operate as mediators offering services without owning traditional factors of production (i.e. financial capital, employees, raw materials) by themselves have become more common.
For example, digital consumer applications, such as Airbnb and Uber, have a central role in changing the traditional business logics. In forest-related services, this awakening is still lacking in larger scale, even though the role of services as a part of companies’ strategy and collaborative value creation logic with sharing information and knowledge are starting to gain increasing attention (Pelli et al., 2017).
The forest sector is characterized as a mature industry with traditional established ways of doing and organizing business, and thus it is claimed to face many challenges when its operating environment changes and it should adapt new business logic (e.g. Hansen et al., 2007; Mattila et al., 2013). Many countries, such as Finland, have a long tradition in forest policy with well-established approaches and practices for managing forests where forest industry, governmental institutions and forest professionals have a strong role (Karppinen et al., 2015). This situation is coupled with culture of offering traditional forest services following product-oriented business logics where organizations compete toward each other by price and quality factors of services.
On the other hand, there are several reasons for renewing forest services. For example, forest ownership has become more fragmented with new urbanized forest owners who have different motivations and attitudes toward owning and managing forests in Europe (Živojinović et al.,
2015). At the same time, in USA the total number and the share of female family forest owners have increased, forest owners are getting older and less active in traditional forestry, and holdings are more parcellated (Zhang et al., 2009; Butler et al., 2016). New types of forest owners may have non-traditional objectives and motives for owning forest, or they may represent traditional forest owner types, whose motives and approaches to owning and managing forest have changed (Bengston et al., 2011; Weiss et al., 2018).
In Finland the number of urbanized absentee forest owners has increased and accelerated fragmentation of forest holdings into smaller parcels, while consolidation of larger holdings has concurrently increased because of profit-seeking investor owners (Karppinen et al., 2015).
The new urbanized forest owners are claimed to be insufficiently served by current operators in the forest-based service market (Mattila and Roos, 2014), which might be because their forest service needs are recognized neither by service providers nor by themselves (Karppinen et al., 2015). Furthermore, it has been predicted (Rämö et al., 2009) that by 2030 the demographics and objectives of Finnish forest owners will be more heterogeneous, and that would increase the need for high quality all-inclusive personalized services that save time and effort from the highly-educated city-dwellers. Understanding altering forest owner types challenges policy-makers to reshape forest policies and offers public and market actors possibilities to renew forest-related services. New policies would recognize the diverse objectives e.g. by offering subsidies and guidance not only for wood production but also for providing other ecosystem services.
The purpose of this study is to introduce a rather radical change related to the mindset of forest service companies’ business and value creation logics away from operating as a separate part of a value-adding value chain toward more collaborative value creation in value networks. To this end, there is a need to more closely study value creation and exchanges as well as the role of mediation (i.e. brokers, platforms, etc.) in the context of forest services and their networks. In this study, forest leasing service, a hypothetical but rather thoroughly explored and initially experimented service business model (Kurttila et al., 2017), is seen as a case lens through which the potential change in forest service companies’ business and value creation logics are investigated.
The specific objective of this study is to scrutinize the value network of the potential forest leasing service for family forests with focus on wood production. The embedded research questions are: 1) What kind of structure might a feasible value network i.e. business collaboration network have to enable the forest leasing service in Finland? and 2) What are the key attributes and exchanges within the value network that foster introducing new types of forest services? Although the focus of this study is to empirically investigate forest leasing
service, the aim is not to indicate whether leasing is any better or worse than any other type of forest management service, but rather to point out general observations on how forest service value networks can be developed to tackle the challenges in the companies’ operating environment.
Section two of the article introduces the current practices for forest management and roundwood sale and the new forest leasing service, as well as reflections on how collaborative value networks can be translated understandable within the context of forest services, especially forest leasing service. Section three describes theory-based key concepts related to collaboration in networks and new business and value creation logics. Section four describes the methodological approach and methods used. Section five presents research results i.e. the outcome of the value network analysis responding to research questions 1 and 2. Section six discusses the findings and analyses from the viewpoint of forest service development in practice and how to connect them with existing theory. Conclusions section summarizes the study with policy recommendations as well as managerial and theoretical implications.
2 Current forest management and roundwood sale practices vs. forest leasing service through collaborative value networks
Organization of private forest management and roundwood sale practices vary between different countries in Europe. The detailed division of tasks between public and private actors differ, but in general forest professionals have a central role in influencing forest owners' decision-making. For example, in Sweden, forest owners are mainly doing the forest management decisions by themselves, but large part of forestry operations and roundwood sales are outsourced to large companies, timber merchants or contractors, and forest owner associations have an especially important role as a trusted companion in roundwood sales (Lidestav et al., 2015). In Germany, in turn, private forest ownership is very versatile, which leads to a range of different forest management practices both in smaller and larger forest holdings, but often forest owners use forest services offered by contractors, forest owner associations or state forest administration (Koch and Maier, 2015). In Slovenia, national Forest Service is responsible for forest management and roundwood sale planning, but the number of private companies offering forest services has increased recently (Krč et al., 2015), and owners of large forest holdings are served by roundwood purchasers, but many small-scale forest owners are poorly served by less reliable service providers.
Currently there are four main options for forest owners to manage their forests and do roundwood sales in Finland (Korhonen et al., 2012). First forest owners can outsource forest management and roundwood sales to Forest Management Association (FMA) i.e. lobby and
professional service organization administrated by owners themselves. Second, owners can be loyalty customers of roundwood-buying companies according to an agreement with the company for managing the forest and having an option for roundwood sale. Third, forest owners can join a jointly owned forest where a shareholders’ meeting and a nominated management group use decision power related to forest management and roundwood sales.
Finally, of course, forest owners have the possibility to do all forest management and roundwood sale related decisions and work by themselves.
All these above-mentioned options, except joining a jointly owned forest, require active decision-making from the forest owner in each roundwood sale and forest operation project.
One of the mostly increased new forest owner type in Finland is wage-earner forest owners who live far away from their forests (Karppinen et al., 2015), and they may lack time and willingness to make forest-related decisions, let alone to do the actual forestry work by themselves. Kurttila et al. (2016) point out that forest owners, regardless of the forest owner type they belong to, appreciate easiness, risk-freeness and regular income when considering forest management and usage. In line of changes in forest owner types and market orientation of forest policy, Finland has renewed its forest legislation and deregulated forest management services, and thus enhanced the development of forest-related service market (Mattila et al., 2013; Karppinen et al., 2015).
Table 1: Traditional forest holding management services versus new forest leasing service Traditional forest holding
management services
New forest leasing service
Forest owner’s role Operates by her-/himself, active decision-making
Gives power to tenant to make operational decisions related to forests
Income generation Roundwood sale Lease
Focus of activities Single activity, e.g. tending of seedling stand
All-inclusive forest holding management service Company’s business logic Make-or-buy decision, aim to
minimize transaction costs.
Information sharing: single wood sale and technical details.
Networked activities in collaborative network.
Information sharing: wood sale as a process linked to forest owner’s and buyer’s objectives.
Value creation logic Value created and added by the company in value chain.
Value cocreated in value network. Shared value propositions: actors define value.
Value Value-in-exchange Value-in-use, value-in-
context Key resources Tangible (e.g. machines,
products)
Intangible (e.g. competence, skills)
In this study, forest leasing (Table 1) is defined as transferring forest property’s tenure, forest management and felling decisions to a service provider, a tenant (Hänninen et al., 2017). The transfer is based on a contract, preferably long-term (i.e. 10, 15 or 20 years). Forest owner gets regular compensation i.e. monetary rent in return from the transfer. The ownership of the property remains on the forest owner and the tenant does not have a right to realize the property. The tenant manages and uses the forest based on the contract with together defined objectives and rules, and possibly a forest management plan.
At present, forest leasing for wood production purposes is not an existing service in Finnish family forests. However, some one hundred years ago in Finland forestry companies leased forests under concessions or long-term logging contracts, but currently forest leasing is not practiced in forest management and roundwood sales, though it is quite widely used in leasing forest land for hunting (Hänninen et al., 2017). In some parts of the world, leasing is quite commonly used. In Russia, Canada and USA concessions are used both in public and private forest land (Kurttila et al., 2017), and some examples can be found in Europe also, for example in Germany forest leasing is rare, but some contracts exist (Viitala and Leppänen, 2015).
Forest leasing has been investigated as one potential means to better serve the evolving needs of urban forest owners in collaboration between forest service companies, financial sector companies, forest owners’ associations, and scientists (Kurttila et al., 2017). According to recent sub-national survey in Finland (Kurttila et al., 2016; Hänninen et al., 2017), some 5%
of forest owners, especially urban forest owners with no recent forestry activities, could be interested in a new forest leasing service. The above share equals to more than 15,000 potential forest holdings for leasing in the whole Finland, so there could be potential business opportunities for forest-related entrepreneurs and companies.
3 Value creation in value networks
Among traditional business research, "value" has been considered in economic and monetary terms in a form of exchange value of goods (see Bowman and Ambrosini, 2000). From this traditional view, value is something that is created when a product or service is produced, added in different processes, and realised in the monetary exchange and consumption of that product or service. Correspondingly, value chain analysis by Michael Porter (1985) is one of the first and most used strategic analysis methods for analyzing value creation in a company.
Normann and Ramírez (1993) have been one of the first ones to mention that a company should be seen as a value-creating system, where different actors collaborate and value is created in inter-organizational relationships and in knowledge exchange between companies.
They see that a company’s purpose is to help other actors to create their own value from the products and services offered by the company, rather than to create value ready for them.
This line of thought highlights the essence of knowing the forest owner’s motivations and objectives to be able to serve those with service offerings.
According to the mindset of service dominant logic (S-D logic), which is an emerging framework for contemporary service research, value cocreation takes place and is enabled by economic and social actors who are involved in the integration of tangible (e.g. goods, raw materials) and intangible (e.g. knowledge and skills) resources and service exchange in a service ecosystem (Lusch and Vargo, 2014). S-D logic sees service as making use of integrated resources for the benefit of another actor, and exchanging this service is the reason for interaction between actors (Vargo and Lusch, 2011). S-D logic shifts the view of value from being understood as simple added value and value-in-exchange to the view of value as value- in-use and value-in-context (Lusch and Vargo, 2014). In this view, value is a “benefit, an increase in the well-being of a particular actor“ (Lusch and Vargo, 2014, 57). Furthermore, value is subjective and contextual (Allee and Schwabe, 2015), which makes it unique and experiential rather than just tied into a certain product, service or resource (Lusch and Vargo, 2014). In practical terms, service exchange means that the actors perceive mutual benefits from what they do to each other. Therefore, companies are advised to view their business as service as which is based on value cocreation together with different actors.
When cocreating value, actors may convert and exchange value via deliverables, the actual things moving from one actor to another, that are beneficial and therefore create value (Allee and Schwabe, 2015). Those deliverables may be either traditional contract-based and tangible (e.g. goods, revenues) or informal and intangible (e.g. skills, ideas) (Allee, 2008), but the perceived benefits are predominantly intangible. However, value is realized and created only when other actors in the network accept it (Allee, 2008). Therefore, companies cannot just
“create and add” value, but rather reinvent it in value networks where actors work together to cocreate value propositions (Normann and Ramírez, 1993). These collaborative and strategic value networks have been defined as “any purposeful group of people or organizations creating social and economic good through complex dynamic exchanges of tangible and intangible value [i.e. resources]” (Allee, 2009, 429). In the context of forest services, regional or local forest and environmental actor constellations may be seen as value networks that have negotiated division of tasks and found good collaboration practices (e.g. Salomaa et al., 2016).
The value network approach by Allee, as well as the S-D logic by Vargo and Lusch, see that integrating resources through tangible and intangible exchanges between network actors is
one of the most important ways of creating and realizing value. In addition, the shift toward focusing on actors, rather than customers or suppliers, is noteworthy. When the value is created together with and to actors, it widens the view to whom activities and value creation is targeted. This is especially important when dealing with forest owners, because they are both the producers of timber as well as buyers of service. In this study, tangible and intangible exchange refers to the actual activities and things moving between companies, that is service exchange in the value network.
Sharing of information requires trust, transparency and integrity, which are key attributes of value networks (Allee, 2004). In the context of forest services, each actor in the network, whether a company or a forest owner, must be able to trust the others and feel that collaboration brings value i.e. benefits to oneself and other actors. Seeing value as tied to use and context, emphasizes the point that forest owners need to feel that their wishes are taken into account in the interaction and communication with the service provider. Especially, when selling timber forest owners prefer having a long-term trustworthy and committed relationship with the service provider (Korhonen et al., 2012) and it would be beneficial for the service provider to base the relationship on shared values (Staal Wästerlund and Kronholm, 2017).
Value network thinking is based on mediation in which a company operates as a mediator or an integrator by connecting and integrating different actors’ competences and resources for creating value propositions, and thus competitive advantage (Stabell and Fjeldstad, 1998;
Vargo and Lusch, 2011). To ensure the effectiveness of the value network the integrator makes sure that network actors’ roles, responsibilities and objectives are clearly defined (Shuman and Twombly, 2010). In addition, value network can be viewed as a service platform where the integrator and other actors create value propositions together. This service platform may be a concrete platform, such as a digital portal, but also a strategic value network, such as a knowledge hub of collaborating business actors.
In the context of forest services, a service provider’s role as the integrator in the value network is to coordinate activities and link different actors with different tangible and intangible resources together. Related to timber procurement, there are currently actors such as timber brokers (e.g. service by a forest owners’ association), who mediate timber sales, and consulting foresters, who have power of attorney (Knoot and Rickenbach, 2014). The role of these actors could be highlighted and extended toward long-term collaborative relationships if they would operate as integrators in longer-lasting, more all-inclusive services instead of performing only single roundwood sale transactions. In addition, bringing new kind of actors in the forest service network, such as tourism or natural product companies, such service could respond both to the need for timber as well as to other more intangible objectives (Huber
et al., 2017). In the case of forest leasing service, the forest service network may offer forest owners easiness and regular long-term income (Kurttila et al. 2017) while the integrator may aggregate small holdings under larger management entity and enhance multi-actor forest governance.
4 Methods
4.1 Methodological and data analysis approaches
The methodological approach of the study comprises the theoretical concepts of service- dominant logic, value network and value network analysis, which are decomposed and briefly defined for the purposes of data acquisition and empirical analysis (Figure 1).
The theory-driven qualitative analysis of data is based on value network approach by Allee (2008) complemented with the model of economic entity for value network analysis by Biem and Caswell (2008). Value network analysis is a systematic and dynamic method to map, visualize and analyze a role-based value network (Allee and Schwabe, 2015). The model of economic entity offers a method to notice company’s key competence, capabilities and resources to be used in creating value propositions and to differentiate from competitors (Biem and Caswell, 2008). The purpose of value network analysis is to map network’s actors and their roles, resources and competence, exchanges between these actors, and how they convert value in the network.
When conducting a value network analysis, scope and boundaries of the value network and level of analysis need to be defined (Allee and Schwabe, 2015). In this study the potential value network related to the novel forest leasing service is mapped, and it is limited to consider only the external network mainly from the forest management and support services perspective. The network is primarily analyzed from an ego-centered perspective i.e. from the viewpoint of the actor doing the leasing activity, but also the actors related to leasing activities are acknowledged. The wider network is analyzed based on what kind of activity that kind of actor would perform.
Allee’s value network analysis usually considers one network from one actor’s perspective.
This study aims to map one general network of the potential leasing service. In this study, this kind of general network is called a meta-network. Conducted analyses combines the networks to illustrate and further analyze a meta-network for the forest leasing service. In addition, because the meta-network is a potential one, only value creation and value realization analyses from Integrator’s perspective are conducted.
Figure 1: Operationalization of theory and methodology. The research theme (in the left) is approached via three interconnected theoretical concepts (in the middle) and conducted via discussing the embedded relevant aspects (in the right) with the informants in semi-structured interviews using their own words. The relevant aspects on the right constitute a vocabulary of the important concepts of the study.
4.2 Acquiring data
The data were collected by conducting semi-structured research interviews with 12 innovative forerunners and experts in forest sector. The interviewed actors represented forest service providers, a roundwood purchaser, a financing company, forest owners’ associations, Forest Centre (publicly funded forestry administration and law enforcement organization) and forest industries’ lobbying organization. These actors were seen to potentially be playing a key role in the leasing service. Forest owners were not interviewed in this study, because the focus is on the service providers’ perceptions of their value network. Nine interviews were conducted face-to-face and three via telephone. The interviews were recorded and they lasted from 50 minutes up to 2 hours and 10 minutes.
The interview guide had five themes (see appendix); 1) background questions and general view on the forest leasing service, 2) mapping of the value network and value exchanges, 3) impacts on actions in the network, 4) value creation in the network and 5) general view toward acting in the network. The network was mapped and visualized during the interviews by using sticky notes and paper.
4.3 Conducting the analysis
The data analysis had four phases. In the first phase, each value network was mapped manually by using a photograph taken during the interview. Excel was used in organizing each network’s actors, their resources and competence, and tangible and intangible exchanges.
Data were categorized to represent a role in the network and this role-based categorization identified forest leasing service’s value network. Lastly this meta-network was visualized in Visio (a diagramming and vector graphics application).
In the second phase, interviews were transcribed and coded in qualitative data analysis software NVivo 11. The interview guide’s themes were created as nodes in NVivo and each node had a sub-node representing the issues covered under that theme. In the third phase, impact and value creation analyses, and analysis of the general view toward acting in the forest leasing network were done based on the data coded in the second phase. The analyses were done from each role’s perspective by generalizing it to the meta-network. In the fourth phase, common topics and “key words” that arose during the interviews were coded under corresponding nodes in NVivo. After coding in NVivo, data were organized, categorized and generalized in Excel. With all collected data the overall view of the forest leasing service’s key attributes and value creation logic was created.
5 Value network analysis of a potential forest leasing service
5.1 Structure of forest leasing service’s value network
Based on the interviews, two potential role-based value networks, Tenant and Consultant, were identified and visualized, where each role represents an activity in the potential forest leasing service (Figure 2). In both value networks, an integrator (Tenant or Consultant) plays a key role in connecting actors and enabling them to reach benefits from operating in the network. While both tenant and consultant were presumed to be part of the network and were therefore expected findings, it was a new finding that the Consultant's role was rather strong.
Noteworthy new results also include the more detailed understanding of the different roles and relationships between those.
Altogether nine different roles were identified from more than 40 different actors mentioned by interviewees. Most of these actors are already operating in the forest-related sector in Finland either directly or indirectly. The roles were formed based on activities carried out related to the potential leasing service. The identified roles were Forest owner, Tenant, Consultant, Roundwood purchaser, Forest management actors, Forest management support actors, Forest leasing service support actors, Public expert organizations and Portal. The interviewees stated that Portal is a digital channel for marketing and interaction toward forest owner, and new and potential customers and partners. In addition, it collects and contains data for planning activities and decision-making. Key roles in both value networks are Forest owner, Integrator (Tenant or Consultant) and Roundwood purchaser.
According to the analysis, forest leasing service’s value network is practically the same regardless of whether the Integrator’s role is played by Tenant or Consultant. In Tenant’s value network, Tenant operates independently as an integrator toward Forest owner and other actors in the network. In Consultant’s value network, Consultant operates as an expert integrator between Forest owner and Tenant, either directly or indirectly via e.g. Forest management association (FMA), and other actors in the network. According to the findings, Tenant’s and Consultant’s role as the Integrator can be played by any actor: forest service firm, roundwood purchaser, financing company, consultant firm, forest owner, etc. Depending on who plays Tenant’s or Consultant’s role, the network and division of roles change accordingly.
Figure 2: Value networks of forest leasing service. Left Tenant’s and right Consultant’s.
The analysis revealed that when Tenant is the Integrator, it is in direct connection with Forest owner, and coordinates and plans leasing service’s activities by itself. On the other hand, Consultant’s role as the Integrator means that it operates as a neutral advisor between Tenant and Forest owner either directly or via e.g. FMA. In addition, Consultant coordinates and plans the service. In both value networks, the actual forestry operations are carried out with network partners. The interviewees noted that Consultant’s role as the Integrator is to make sure that Forest owner’s voice is heard, and interests are protected. If Consultant operates via FMA, the reason for this is to create and ensure trust between it and Forest Owner, as stated by a few interviewees. FMA’s role in this case is to take care of Forest owner’s interests as a lobbyist.
According to the analysis, the forest leasing service is defined as an all-inclusive forest property management service, where Integrator’s expertise is the key. The leasing contract is the basis for conducting operations in the forest holding. Many interviewees stated that most probably there would be a certain basic contract, but it would be modified case by case. This gives freedom and flexibility for both Integrator and Forest owner to modify the contract to suit each owner’s goals and objectives. Related to this, the interviewees noted that forest leasing service does not necessarily need to focus only on wood production: other forest-based ecosystem services and ways of managing and using forests could also be leased, such as tourism, hunting, non-wood forest products, carbon sequestration and landscape leasing, as well as other nature-based services that do not necessarily exist or have monetary value yet.
The analysis revealed that each role’s key competence and resources are based on expertise, knowhow and professional skills related to one's own field of business, performed activities and the role that actor is playing in the network. For example, as stated by a few interviewees, Integrator’s competence is expertise in forest property management (mainly Consultant’s) and professional skills in forest management and planning (mainly Tenant’s), Roundwood purchaser’s competence is knowledge on customers and markets, and Forest management support actor’s competence relates to offering expertise in supporting the service, such as financing or insurance. Most important characteristics for a role are mainly related to reliability, quality and cost efficiency as well as being a good long-term partner, as was stated by the interviewees.
The interviewees noted that Integrator’s main customer segment would be an absentee family forest owner, who lives far away from the forest holding, and who is not willing or able to manage the holding by her/himself and is possibly even thinking of selling it. In addition, Roundwood purchaser was noted as a customer and a partner for the Integrator. According
to the analysis, the forest leasing service offers two value propositions, one for Forest owner and other for network partners. The value proposition to Forest owner is that the service provides all-inclusive and easy forest owning with steady income. The value proposition to partners is that the service offers them a reliable and transparent collaborative network consisting of the field’s best actors.
5.2 Forest leasing service’s key attributes and value creation logic
According to the interviewees, the most important attributes of the forest leasing service (Table 2) are the collaborative network and actors in it, explicitly defined contracts, up-to-date forest resource information as a basis for planning activities, and a digital system for coordinating these activities. In addition, a portal as a channel for interaction toward forest owner, and new potential actors is an important attribute. The key attributes are based on each actor’s key competence and resources, and they can also be considered as the forest leasing service’s competitive advantages.
The analysis revealed that forest leasing service’s benefits can also be challenges, if they are not considered and executed properly when operationalizing the service (Table 2). Fulfilling value proposition to forest owners requires transparency of activities, an explicit contract and forest-owner-oriented activities. From partners’ point of view, fulfilling value proposition requires reliability toward all actors in the network and that actors’ have needed expertise.
These are important, because this is the only way to ensure openness and trust on each other so that things that are agreed upon will be done, as it was mentioned by one interviewee.
When discussing the general view toward operating in a network related to forest leasing service, the interviewees stated that the forest leasing service enhances value creation from forests altogether compared to current situation, because it is expected to bring more forest holdings under more efficient management and usage by activating absentee forest owners.
In addition, supply of forest-related services and other business opportunities increases, when Integrator offers novel professional, efficient, high-quality all-inclusive forest property management service. Value network functions when Integrator coordinates and links actors and activities and integrates information from different sources, as stated by one interviewee.
Table 2: Forest leasing service's key attributes and their potential benefits and challenges in operationalizing the service according to conducted expert interviews
Service’s key attribute Benefits Challenges
Reliable collaborative network Guarantees professional wood production in a large scale and cost efficiently
Trust
Transparency: neutrality and objectivity of activities, openness Long-term partnership
Actor’s lack of expertise No scale advantage
Unclear or missing common objectives
Mistrust Non-objectivity Explicit long-term contract Considers objectives of both
signing parties Explicitly defined
Common rules and objectives Long-term: encourages to take care and manage forests well, enables development and long- term planning and coordination
Too detailed contract Obscurity in content and objectives
Forest resource information as basis of activities
Up-to-date
Defines leasing’s payments and activities that are carried out in the forest
Inaccuracy Out-of-date
Digital system and portal as channels for interaction
Collects needed data for planning, decision-making and activities
Integrator’s channel for interaction
Marketing channel for forest owners and other actors
Failing to update and maintain information
5.3 Exchanges in the forest leasing service’s value network
Figure 3: Exchanges between Forest owner and Tenant in Tenant’s value network. Exchanges are illustrated with directional arrows representing the movement of a deliverable from one role to another.
Tangible deliverables are illustrated with solid arrows and intangible deliverables with dashed arrows.
According to the findings, the basis of tangible exchange in Tenant’s value network is the leasing contract where the forest property’s management is handed over to the Tenant (Figure 3). The leasing contract defines e.g. rent, forest management plans, reporting on executed operations and updating (forest resource) information. Intangible exchange is based on Tenant’s expertise and professional skills, and Forest owner’s objectives and every-day knowledge related to the forest property. In addition, intangible exchange is based on mutual reciprocal interaction (e.g. continuous discussion and collaboration, planning and developing activities).
Figure 4: Exchanges between Forest owner, Tenant and Consultant in Consultant’s value network.
Above: exchanges when Consultant operates directly with Forest owner. Below: exchanges when Consultant operates indirectly with forest owner via e.g. FMA.
According to the findings, in Consultant’s value network exchange between Forest owner and Consultant is either direct or indirect via e.g. FMA (Figure 4). Exchanges between Consultant and Tenant, and Forest owner and Tenant are the same whether Consultant operates directly with Forest owner or via FMA. The basis of tangible exchange between Consultant and Tenant is a service contract, which defines e.g. financial compensation for activities, and monitoring of and reporting on forest operations. Intangible exchange includes expertise, and reciprocal interaction and flow of information (e.g. information needed to operate and giving feedback on performed activities and their quality). Exchanges between Forest owner and Tenant are meant to be as small as possible, because Consultant is the mediator in between. Exchange is therefore only tangible and based on the leasing contract that defines e.g. rent and handover of the forest property to Tenant.
Figure 5: Exchanges between Integrator and other roles in Tenant’s and Consultant’s value network.
Exchanges between other roles in the value network are similar regardless of whether Tenant or Consultant is the integrator. Therefore, Tenant or Consultant is called Integrator.
The findings reveal that when Consultant operates directly with Forest owner, the basis of tangible exchange is an assignment, which covers monitoring of Tenants activities in forest and handover of the forest resource information to Consultant. Intangible exchange consists of expertise, information and objectives, as well as reciprocal interaction. When Consultant
operates indirectly with Forest owner via FMA, tangible exchange is only forest resource information. Intangible exchange is somewhat similar as with operating directly with Forest owner: expertise, flow of information and reciprocal interaction.
Considering exchanges between the rest of the roles in the value network, according to the analysis they are the same whether Tenant or Consultant operates as the integrator (Figure 5). Thus, from now on the key role of Tenant or Consultant is called Integrator.
According to the findings, tangible exchange between Integrator and Roundwood purchaser, Forest management actors, Forest management support actors, and Forest leasing service support actors are contract-based activities related to forest management and usage, and other forest related business activities, e.g. loans and insurances. It is noteworthy that similar kind of exchanges are already existing between this type of forest-related actors. Another finding is that a new kind of tangible exchange related to forest leasing service emerged from the interviews: forest resource information, which is not currently exchanged between different service providers.
According to the findings, intangible exchange between Integrator and Roundwood purchaser, Forest management actors, Forest management support actors, and Forest leasing service support actors are based on reciprocal interaction and flow of information. In addition, Integrator provides informal training for the roles to ensure quality of activities, the actors give their expertise to Integrator’s use, and Roundwood purchaser provides knowledge on customer needs. Intangible exchanges are, in a similar way as the tangible exchanges, pretty much the same as currently, however the exchanged intangible resources have a more important and wider role in value creation.
Similarly, analysis points out that tangible and intangible exchanges between Integrator and Public expert organizations are mainly already existing pieces of exchange, such as reporting and law enforcement. In the leasing service, those would only need to be reorganized.
5.3.1 Benefits of exchanges in forest leasing service’s value network: example of integrator’s value conversion
According to the findings, Integrator needs tangible and intangible deliverables from Forest owner (and Tenant) and Roundwood purchaser to generate cash flow, and thus for being able to offer the leasing service. Receiving deliverables generates activities for the Integrator, and the most important and time-consuming activities relate to contract management, because in both value networks activities are based on a contract (leasing, service or roundwood trade).
According to the conducted impact analysis, Integrator realizes value in the network by coordinating and planning forest leasing activities. The interviewees emphasized that intangible exchanges of expertise, information and interaction are those things that have greatest impact on value realization in the forest leasing service.
According to the findings, in forest leasing service Integrator’s basic activities in forest and related to roundwood trade are quite similar to activities Integrator is already performing. In addition, Integrator’s current partners are mainly the same as those needed in the forest leasing service. Hence, Integrator is able to utilize its current tangible and intangible resources when offering the forest leasing service. According to the conducted value creation analysis, Integrator creates value propositions in the value network by combining its own competence and resources to the received intangible exchanges of information and knowledge. In order to enhance value creation in forest leasing service, the interviewees noted that Integrator needs a new or improved digital system for gathering information, and coordinating and planning forest leasing service’s activities.
To make the value conversion more concrete, an example of the benefits of exchanges in the forest leasing service to Integrator, Forest owner and Roundwood purchaser is presented below. In addition, it is demonstrated how Integrator converts value from the deliverables it receives and sends. The example is based on the conducted interviews and impact and value creation analyses. The discussed exchanges are illustrated in Figure 5.
From Forest owner Integrator receives tangible forest resource information and intangible information on forest owner’s forest management objectives. Based on these received deliverables, Integrator’s expertise and reciprocal interaction, Integrator plans the activities to be conducted in the forest property, and an assignment i.e. forest leasing contract can be signed. In a similar way, Integrator receives intangible information on Roundwood purchaser’s needs, and with the help of reciprocal interaction, the Integrator is able to offer Roundwood purchaser a roundwood trade contract, which fulfills its needs.
In the value network, Integrator is able to convert value by drawing up the roundwood trade contract based on deliverables received from Forest owner (forest resource information) and Roundwood purchaser (needs for wood) by integrating them with its own competence (expertise in planning of forestry and logging activities) and delivering roundwood. Hence, Integrator realizes value by converting received and sent deliverables to forest leasing contract and actual roundwood sale contract, and thus creates value by fulfilling the value propositions offered to Forest owner (easy forest owning) and Roundwood purchaser (collaborative network).
6 Discussion
The objective of this study was to scrutinize the value network of potential forest leasing service in Finland with the motivation to learn about the relevant and mutually beneficial exchanges between actors' roles when aiming to develop new kind of forest services, which would safeguard forest service companies' future competitiveness in the changing operating environment. The results demonstrated that the forest leasing service, for example, may be introduced as a new type of forest service within the existing actor network, thus without major changes in the existing forestry operations but with an altered thinking of value creation and with a new business model. This observation verifies that the thinking behind S-D logic and strategic value networks is indeed an operable idea also in forest sector and allows the renewal of forest-based companies' business logic, which naturally needs further work with and among companies.
On the other hand, the theoretical concepts behind S-D logic and value network analysis appeared to be intellectually demanding and sometimes uneasy to interpret in practical forestry terms. Moreover, the “value-in-use” and “value-in-context” notions embedded in the S-D logic appeared to neglect the temporal dimension of forest services, which typically deal with longer time horizons than merely living in present moments. Although trust develops along positive experiences over time, and value propositions are promises toward future, the present forest service case evoked a need to re-conceptualize “benefits” in value cocreation to contain not only present immediate servings but also perceived value that has carriage over time and specific value-creating temporal distribution. Future sequence of monetary and communication actions, agreed upon in a forest leasing contract, are practical examples of such temporally relevant benefits that new types of all-inclusive forest services could offer to forest owners and other forestry actors.
Similarly, value network analysis by Allee as an analysis method appeared to be challenging due to its punctiliousness. Because it is usually conducted from one actor’s perspective, mapping a meta-network might oversimplify heterogeneous data. On the other hand, the strength of Allee’s value network analysis is that it offers a managerial real-world perspective on analyzing networks, while also incorporating theoretical point of view to the analysis. Not to mention the clear visualization of the network’s actors, resources and exchanges.
Although some problematic features appeared in the applied theories and analysis method, the analytical lenses enabled focusing especially on the intangible benefits (e.g. feel of ease, trust, security, match with one’s objectives) that the new type of service may facilitate. The
present analysis of the forest leasing case showed that considering intangible exchanges (e.g.
serving each other with skills and knowledge) among the business actors may enable developing new kinds of forest services, which make use of an integrator's competences and mediation activity. Such adaptive networked services may be more competent and more agile to respond to forest owners' emerging needs. Even though forest service companies are currently already operating in networks, and collaboration between companies exist, the companies do not necessarily have the means, resources and even a will to offer all parts of a new type of service by themselves, as was observed in the forest leasing service case.
Hence, opportunities offered by digitalization and mediated platform economy can bring up new insights in seeing the network as a service provider and a platform, as well as, in rethinking the collaboration. This would mean that companies and entrepreneurs increasingly offer services to each other to realize a smooth integrated service to the forest owner.
The first research question was “What kind of structure might a feasible value networki.e.
business collaboration network have to enable the forest leasing service in Finland?”. From the results, where either a Tenant or a Consultant coordinates and plans forestry operations, one can infer that the integration activity appears crucial. There needs to be an actor that clarifies the other actors' roles and enables the trust building and value cocreation via intangible exchanges, which can in practice take place, for example, in the form of providing an online platform for actors.
The observed strong role of an integrator highlights the principles of mediation economy when aiming at new types of forest services that are based on value network thinking. From a wider perspective, this shift from value-in-exchange thinking to value-in-use and value-in-context thinking means that the whole forest ecosystem may be seen as the resource base from where value is created, and similarly all (relevant) actors in the society are the beneficiaries.
Therefore, different uses of forests are to be considered when developing forest-related services for forest owners, a viewpoint to be considered by both economic and political actors when renewing forest management practices. In practice, this means for example that different uses of forests could be integrated in the same forest management plan, e.g. wood production, recreation and nature conservation. Each actor experiences the created value differently and from a different perspective: forest owner benefits from wood production and recreation, wood purchaser benefits from wood production, public benefits from recreation, and the whole society benefits from the nature conservation. This kind of thinking got support from the present interviewees, who discussed the opportunity of leasing one forest for different purposes, such as hunting, non-wood products, recreation, etc.
Of the two suggested value networks, the Tenant's one was anticipated, but the prevalent role of the Consultant's one was more surprising. The main difference between them is whether there is a need and place for a neutral mediator between the forest owner (Lessor) and the service provider (Tenant), or whether the latter has the competences, resources and trustworthiness to act as the integrator between the forest owner and other forestry actors. In Finnish context, both value networks may be operable. In other countries and contexts, it will depend on the distribution of competences as well as the strength of social capital within the existing actor network whether it is more logical for some operational actor to take the integrator's role or whether a separate integrator will be needed.
A highly interesting finding of the current study is the emergence of a new role, Portal. New additions to current service provision are an external portal and an information system, which are seen as important channels for interaction between roles.The agile value network, as a knowledge hub platform for collaborating actors, would enable differentiating forest-related services for different customer needs and decision-making behavior of different forest owner types, which has been earlier suggested by Hujala et al. (2013).
The second research question was “What are the key attributes and exchanges within the value network that foster introducing new types of forest services?”. The results showed that forest leasing service’s actors and operations are quite similar to already existing forest-related services. There is thus a rather solid base for renewing the service to a new mindset and business model with relatively minor practical changes to the activities. But when it comes to introducing new types of forest services, this study observed that the intangible exchanges in the value network are that extra creating the novel added value in the service (Kothandaraman and Wilson, 2001; Allee, 2008). These intangible exchanges are enabled and enhanced with the collaborative and long-term nature of activities that create trust and transparency between roles (Allee, 2004). This theory-based notion is compatible with the observations from the present case that creating a forest leasing value network require time, trust, and collaborative activities.
An interesting finding in this study is that almost all key competences and resources are intangible by nature and this was stated by all interviewees. Even though those intangibles were highlighted in the interviews as important features in value creation, they were still somewhat vaguely defined. This might be due to the not-yet-existing nature of the service as well as the fact that competence is often company’s competitive advantage and thus, a business secret. Therefore, when approaching a more operable version of new service business design, the companies participating in the value network will need to open up and explicate their giving and receiving intangibles to make the exchanges more understandable.
It is worth noting the observed relevant role of the Portal as a channel for interaction between network actors, because it enables value conversion. When larger group of actors has access to the same information (regarding e.g. the forest holding's history, forest owner's wishes), incomplete information can be updated, and undone operations can be suggested.
Digitalization of forest services have recently been rapidly developing in Finland, examples of which are public forest information delivery and e-services platform (metsään.fi), and electronic wood marketing and bids management platform (kuutio.fi). These examples are promising, but they do not yet evidence value networks with integrated exchanges of intangible benefits. Thus, there is still a need for all-embracing digital portal that can connect all forest- related actors as well as actors outside of forest industry.
7 Conclusions
Today's forest-based companies are challenged to find ways to meet the diverse requirements of their forest owner customers and to be successful in the changing operating environment.
The traditional approach to maximize the amount of bought timber and seeing forest owner merely as a timber producer might not be enough. This study has argued that one way to safeguard the future competitiveness is that forest service companies modify their business logic toward value cocreation in collaborative value networks. When offering services through a value network to the new forest owner types, especially to the urbanized absentee owners, combining timber production and other objectives, such as environmental or recreational values, to the service offering is important.
The present research used forest leasing service as an example to illustrate the novel business logic through analyzing the actors' roles and exchanges within the value network.
Forest leasing was viewed as an all-inclusive forest property management service, the novelty of which from the value cocreation view is that a company operates as an integrator coordinating and enabling the leasing service in a value network. Service innovation is in the change of forest entrepreneurs’ and companies’ business logic toward value cocreation in a collaborative value network, and the study at hand showed that companies are willing to undergo that change.
Even though companies have revealed some signs of willingness to adopt the new business logic, it remains questionable after this study, whether they are ready for the change toward open value cocreation. It might be difficult for companies to share their intangible resources i.e. knowledge and expertise to partners. These have traditionally been companies’ key competences, and companies are used to looking for ways how to ensure that competitors,
even though considered as partners, do not steal the competitive advantage. The new thinking would require these one's own assets to be shared with others, which may feel difficult.
Nevertheless, the present interviewees showed readiness for such new thinking by using words such as trust, openness, transparency in their talk about business collaboration. The role of forest policy is to support forest service companies’ business collaboration by means of offering them open forest data and sufficient level of deregulation. Furthermore, trust building toward platform and mediator economy solutions may be conducted in forest policy processes incorporating both business and support actors.
For forest owners the service offers all-inclusive effortless forest owning with regular income.
Forest owners have to see the forest leasing service as an easy, reliable, long-term and risk- free all-inclusive alternative for their forest management. Trust, neutrality and transparency of leasing activities have to be ensured in order to have balance in the power relations between forest owner and integrator. Therefore, all relevant actors also from public organizations and other related institutions and lobbyists have to be included in the leasing service’s value network.
Further research could be done related to investigating and introducing the value cocreating business logic to other kind of forest services in Finland and other countries. In addition, further research could be done after the leasing service is introduced to the market in order to examine whether the business logic works in real life, and thus verify the business model and value network’s roles, exchanges and value creation. Because the potential value network was mostly mapped and analyzed from the key roles point of view, it would be interesting to research forest owners’ and support actors’ roles and exchanges more deeply and how they participate in value creation. In addition, extending the leasing service to other ecosystem services would be worthwhile to study.
Acknowledgements
This work was supported by Tekes – the Finnish Funding Agency for Innovation [grant numbers 3747/31/2014 and 4587/31/2014]; the authors like to thank interviewees for their valuable time and insights. In addition, authors like to thank the editor and the two anonymous reviewers for their valuable comments.
References
Allee, V., 2004. Value Networks and Evolving Business Models for the Knowledge Economy. In Holsapple, C. W. (Eds.), Handbook on Knowledge Management 2 Knowledge Directions. Springer cop., Berlin, pp. 605–621.
Allee, V., 2008. Value network analysis and value conversion of tangible and intangible assets. Journal of Intellectual Capital. 9, 5–24.
Allee, V., 2009. Value-creating networks: organizational issues and challenges. The Learning Organization. 16, 427–442.
Allee, V., Schwabe, O., 2015. Value Networks and the True Nature of Collaboration. Meghan-Kiffer Press, Tampa.
Bengston, D.N., Asah, S.T., Butler, B.J., 2011. The Diverse Values and Motivations of Family Forest Owners in the United States: An Analysis of an Open-ended Question in the National Woodland Owner Survey. Small-scale Forestry. 10(3), 339–355.
Biem, A., Caswell, N., 2008. A value network model for strategic analysis. In Proceedings of the 41st Annual Hawaii International Conference on System Sciences, Waikoloa, Hawaii, USA, January 2008.
Bowman, C., Ambrosini, V., 2000. Value Creation Versus Value Capture: Towards a Coherent Definition of Value in Strategy. British Journal of Management. 11(1): 1–15.
Butler, B. J., Hewes, J. H., Dickinson, B. J., Andrejczyk, K., Butler, S. M., Markowski-Lindsay, M., 2016.
Family Forest Ownerships of the United States, 2013: Findings from the USDA Forest Service's National Woodland Owner Survey. Journal of Forestry. 114(6), 638–647.
Coase, R.H., 1937. The Nature of the Firm. Economica, 4(16): 386–405.
Gawer, A., Cusumano, M.A. 2014. Industry Platforms and Ecosystem Innovation. Journal of Product Innovation Management. 31(3), 417–433.
Hansen, E., Juslin, H., Knowles, C., 2007. Innovativeness in the global forest products industry:
exploring new insights. Canadian Journal of Forest Research. 37(8), 1324–1335.
Huber, P., Hujala, T., Kurttila, M., Wolfslehner, B., Vacik, H., 2017. Application of Multi Criteria Analysis Methods for a participatory assessment of non-wood forest products in two European case studies.
To appear in Forest Policy and Economics. https://doi.org/10.1016/j.forpol.2017.07.003
Hujala, T., Kurttila, M., Karppinen, H., 2013. Customer Segments Among Family Forest Owners:
Combining Ownership Objectives and Decision-Making Styles. Small-scale Forestry. 12(3), 335–
351.
Hänninen H., Kumela H., Hujala T., Kurttila M., 2017. Metsänomistajien näkemys metsänvuokrauksesta metsäomaisuuden hoidon kokonaispalveluna. [Forest owners perspective on forest leasing as an all-inclusive forest property management service] Metsätieteen aikakauskirja 2017-6997.
Tutkimusartikkeli. 24 p. https://doi.org/10.14214/ma.6997 (in Finnish)
Jarillo, J. C., 1988. On Strategic Networks. Strategic Management Journal. 9(1), 31–41.
Karppinen, H., Horne, P., Hujala, T., Leppänen, J., Matilainen, A., Talkkari, A., 2015. Forest Land Ownership Change in Finland. COST Action FP1201 FACESMAP Country Report, European Forest Institute Central-East and South-East European Regional Office, Vienna. 48 p. [Online publication]
URL facesmap.boku.ac.at/index.php/library2/doc_download/432-fp1201-country-report-finland (accessed 26.09.2016)
Knoot, T.G, Rickenbach, M., 2014. Forester networks: The intersection of private lands policy and collaborative capacity. Land Use Policy 38, 388-396.
Koch, M., Maier, C. 2015. Country report Germany. In Živojinović, I., Weiss, G., Lidestav, G., Feliciano, D., Hujala, T., Dobšinská, Z., Lawrence, A., Nybakk, E., Quiroga, S., Schraml, U. (Eds.), Forest Land Ownership Change in Europe. COST Action FP1201 FACESMAP Country Reports, Joint Volume.
EFICEEC-EFISEE Research Report. University of Natural Resources and Life Sciences, Vienna
(BOKU), Vienna, Austria. 693 p. [Online publication] URL
http://facesmap.boku.ac.at/index.php/library2/doc_download/465-fp1201-country-reports-joint- volume (accessed 26.09.2016)
