finance it? The industry does not want to do that, so government should finance it Hambali 2015.
5. Implementation
Finally, the result of the research is applied in real conditions. It divides into two groups, upstream and downstream. The result in the
upstream area is applied in the plantation and the result in downstream area is used in the plant. For example research in developing a new seed,
can be categorized as upstream research. The new seed is used to for re- planting old trees in plantation; so it can reduce the cost of planting. When
they can produce more seeds and already fulfil the internal market, they will start to sell their seed to other companies or farmers by creating a
subsidiary company. Furthermore, the example of research result in downstream area is the optimum condition to produce Biodiesel. The
result is applied in plant to produce biodiesel with high yield but low cost.
However, even their strategy is already successful in the upstream area, but it does not work well in the downstream area. There are many challenges in
developing innovation in the downstream area, such as financial aspect, market demand, human resource and regulation. It makes research in downstream area
need a different strategy.
Based on the finding on our case study, we can see the process of developing innovation has specific activities in every stage with different kinds of
resources. After one stage is finish, they continue the process to the next stage. When they gain negative result in one stage, they will back to previous stage to
refine their strategy. The development of innovation for one product is ended when they already gain the good result and implement it in the market. So the
model of design process from Carlopio is suitable to describe the strategy in developing innovation in the palm oil upstream Industry.
Moreover, based on theory from Loewe, Williamson et al. 2001 about style of strategy innovation, the most suitable style for develop innovation in this
situation is the Cauldron style. Because creating new models for both existing and new business can help company to reduce the production cost and also improves
the quality of product. The cauldron style has similar characteristic with the coupling model in the generation of innovation, it not only solve the customer
problems but also provide a new technologies.
Research Question 2: How successful have business enterprises been using those innovative
strategy? The research result in the upstream area can be implemented directly in the
company especially in their plantation. For example research in developing a new seed. They will use the new seed for re-planting their old trees; so it can reduce
the cost of planting. When they already fulfil the internal market, they will start to sell their seed to other companies or farmers by creating a subsidiary company. In
this case, PT SMART Tbk applies their research result on PT Dami Mas Sejahtera.
“The success of PT Dami Mas Sejahtera can be attributed to the strong R D backup by SMART
Research Institute as well as Plant Production and Biotechnology Division PT Dami Mas Sejahtera
2015
” Furthermore, PT SMART Tbk is a subsidiary company of SinarMas
group, one of the biggest corporations in Indonesia. The corporation has large area of palm oil plantation. So innovation in PT SMART can be used in other
subsidiary company under SinarMas group. It makes them feel confident to conduct research because they know who will use their innovation.
The strategy described above has been successfully implemented for developing innovation in the upstream areas, but it is not yet success to develop
innovation in the downstream industry. Based on the finding, it happens because the development of innovation in the upstream industry already has a clear market
and the company can access it easily. Moreover, innovation in the upstream industry can be used directly in their internal or subsidiary company such as
research about fertilizing technique to improve the adsorption efficiency
In other hand, even the downstream industry has large market but the company cannot access it easily. The company feels struggle to find the market
for their downstream product, because the market is not in Indonesia. If they want to enter that market, they might compete with other companies who already exist.
Furthermore, the market becomes the driving factor for the company to develop innovation. Zedtwitza and Gassmannb 2002 says that the establishment of new
RD units is influenced by two principal factors: access and support of local markets, and access to local science and technology.
The research in the downstream area still has many problems, such as financial aspect, market demand and regulation. So, it causes the company to buy
existing technology rather than develop new technology in their laboratory Liwang 2015. Dr. Tony Liwang from PT SMART Tbk argues about the
innovation in the palm oil downstream industry
10 After produces CPO and other downstream
product, we just buy the technology because the technology does not change any more. If we want to
change it, which research institution can do that? If we want to make a prototype, how much the budget
needed? It is impossible Liwang 2015” So, the strategy should be adjusted in the downstream industry. It needs to
add one more step after prototype creation, namely, to create a demonstration plant stage. The stage is suggested by Susetyo from BPPT
11
“From Laboratory scale to pilot plant, continues to demonstration plant. After that, it is tested to produce
plant Susetyo 2015 ”
However, the development of innovation for the downstream industry still has many problems such as market obscurity. Susetyo 2015 says that the market
for palm oil downstream industry is already occupied by multinational corporations which have established their position. They already have a lot of
money for investment, technology to process the commodity and also distribution chain to sell the product. So, when a new company tries to compete with them,
they need more money and also a good strategy.
Figure 10 Innovation Strategy for the Palm Oil Downstream Industry
Research in the downstream industry needs a different strategy with research in upstream industry. Because, research in the downstream industry
cannot just use a small scale capacity but needs to use a demonstration plant that has the similar capacity with the real plant. This means the research not only
needs a lot of money but also has a high risk.
The development of innovation in the palm oil downstream industry needs one more step compare with the strategy in the upstream industry, the additional
stage is called as demonstration plant stage. In that stage, the industry should optimize their collaboration with other parties, the University and Research
Institutions. The collaboration can help the company reduces the research cost and also divides the risk to other stakeholders.
Research Question 3: What kind of collaboration is needed by Industry, Research Institution, and
Government to develop innovation in the palm oil downstream industry? There are many strategies to develop innovation for the palm oil
downstream industry. The most important thing is the government should give that process their support. Erliza 2015 suggests several strategies to accelerate
the development process:
Idea Generation Idea Selection
Research and Development
Prototype Creation
Demonstration Plant
Implementation
1. The government should provide a sufficient fund for the university to
buy new equipment. So the university can help companies to develop their innovation in downstream industry
2. The government should reduce the tax for a company who has a
research in downstream industry. In other hand, Susetyo 2015 a researcher from BPPT, suggests
government should implement the regulation that Private Company should participate in the research activity; venture and insurance also should enter the
process. Moreover, the government should reduce a tax for companies who do research in developing innovation.
Moreover, Liwang 2015 Director of Research and Development of PT SMART Tbk, argues that the research depends on the availability of industry
market demand and industry will grow up when the money Incentive is available because it can increase their profit. However, this incentive depends on
government regulation.
Based on the opinions from three points of views, the development of innovation in downstream industry depends on incentive from the government.
So, the government should give more incentive for university in forms of cash or research facilities. And the government also should add incentive for the industry
that has research in developing innovation.
Moreover, Sri Hadisetyana from Ministry of Industry says about the strategy to develop innovation and also the interaction among stakholders in the
development process:
12
“For technology, we do FS in the first step, FS is a Feasibility Study. It uses to determine the study is
feasible or not. After FS is DED Detail Engineering Design. After DED is developing a laboratory scale.
The laboratory scale is a construction, industrial shape. After Industry scale, we collaborate with BBKK
Balai Besar Kimia Kemasan Center for Chemical and Packaging because it already in operational scale.
Laboratory scale Research and Development RnD is with BBKK. From BBKK, the result of the research is
in form of patent. After patent, it continues with B to B, Private to Private. How about the economic scale,
economic scale, production cost, the cost includes in Private to Private Hadisetyana 2015
Furthermore, Fadli Hasan from Indonesian Palm Oil Association talks about the importance of collaboration among stakeholders to develop innovation
in the palm oil industry
13
“There should be a common vision and a tight collaboration among stakeholders, because the
development of the downstream industry is based on
innovation, innovation is based on RD. So, Doing RD needs investment. When investment works, it
needs time. So when there are no intensive from government to companies who do innovation, they
will not interest to do that. There should be a collaboration among government, company and
university. Research in university should be scaled up, not just doing research based on Laboratory scale,
but should be implemented in wider contexts such as industry. In the farming context, it is called as on farm
Hasan 2015
.” We can see clearly from his statement that the collaboration among
stakeholders is very important in term of developing innovation. Each stakeholder has different role such as the government provides incentive, research institution
improves their research scale and industry provides place to implement the research result.
Based on the finding in from the interviews with the experts, the research suggests a collaboration strategy among stakeholder for developing innovation in
the palm oil Industry. It can help stakeholders to accelerate the process of development innovation.
Figure 11 Collaboration Strategy among Stakeholder to develop Innovation in Palm Oil Industry
The collaboration strategy suggested in figure 6 is adopted from the triple helix model with several adjustments. In Academia position, it divides into two
organizations, university, and research institution. The model shows positions of internal and external market as driving factor for an enterprise to develop
innovation. Each stakeholder has a different role in the process of developing
innovation, but they interact with each others to accelerate the development process.
1. Role of government
