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The Business of Hatcheries


September 29, 2014
By Diogo Thomaz

Topics
To prosper and be successful

Businesses and wild animals share one characteristic: they can never relax and lie back!

Even after having achieved market leadership, holding a pocketful of patents and processes that put you far ahead of the competition, you can never lie back and enjoy – for long – the advantages you have achieved.

And the reason is simple: some other company will reach your level soon and if you stay still that other company will eat into your market in no time!

This is, of course, what makes business interesting and what keeps us all going.

This also means that any business needs to constantly be in the search for new developments and new processes that will give it extra competitiveness. Incorporating this constant search for innovation and development into the company DNA is what this article is about.

Market adaption

All markets change; the market for fish fry or shrimp PLs is no exception. Customers change preferences for different species, sizes, levels of resistance to X or Y virus, batch sizes, etc., and suppliers. The hatcheries must stay in tune with these changing needs or else risk losing their customers.

Possibilities are also changing; the research community comes up with new technologies for reproduction or water treatment that open new possibilities for the production of new species or improvements in the production of current species. Again, hatcheries that don’t keep up with these latest developments will not be able to apply them in their own production facilities.

All these changes require that hatcheries in the fish and shellfish sectors are alert to developments in the market and technology so they can adapt their production to these developments. For this adaptation to be successful, and I mean profitable, there are two subtly different processes that must be taken into account:

  1. Understanding what the market needs and
  2. Being able to deliver what the market needs.

Understanding market needs

Tim Brown, the CEO of IDEO (one of the most famous design companies in the world), has written a book entitled Design Thinking where he describes a product or service design that is fully anchored on what the market needs. The process, based on very close contact between the designers’ team and the potential users of the product, uses fast prototyping and iteration in order to rapidly evolve the new product and ensure it has good market fit. In our industry this could be the production of small batches of fry from new species and their placement with a number of customers in order to test their value; or the development of small scale rotifer delivery systems to see the impact on productivity in larval tanks.

Tim Brown also stresses in his book the importance of being able to put yourself in the shoes of your customers, of understanding very clearly what they look for from their suppliers. Only if you determine this understanding you will be able to design and deliver the product they want.

Delivering value

Eric Ries’ book The Lean Startup focuses on the processes companies should use in order to develop innovative products that the market is willing to pay for. He has a very interesting definition of a Startup: For Ries a Startup is any organization (a company or a team inside a company) that is developing a new product or service for an uncertain market, where historical information is not available and therefore not useful in predicting future performance.

Startups are faced with difficulties most companies do not have in the ‘normal’ day-to-day business. They base their work on hypotheses of how much customers will like/need/pay for the new product or service. They need to have mechanisms to quickly iterate through many variations of the product, to measure appeal to customers and to improve or pivot (change dramatically) their product or service.

The “Lean Startup” processes are very closely linked with the market, but need an almost scientific approach using hypothesis and hypothesis testing, which itself requires a set of accounting and analytic tools that differ significantly from the traditional business tools we know and use.

This process should be fast but realistic and should ensure that, at the end of the line, you can deliver the value that the market is willing to pay for.

A continuous process

These two processes share many common features: Design Thinking is more at the creative side of new product development and the Lean Startup is more at the development and delivery of that new product – if the market really needs it.

Both authors agree on one important aspect: organizations should make sure that these processes are part of their “DNA,” meaning that the use of techniques such as Design Thinking to generate new products or services and Lean Startup to develop and test them in the market should be continuously present in all organizations that aim to play a leading role in their industries.

This is because an organization can never rest. Even if it’s at the top of its sector it will need to continuously develop new products, new ways to improve productivity and ensure it stays close to its customers’ needs.

Relevant for hatcheries?

As I mention often in these articles, fish and shellfish hatcheries are high-tech biotechnology facilities that use complex biological, engineering and nutritional technologies to mass-produce one or more products for the market. Depending on the market some hatcheries specialize in one or two products and others produce a range of products that can be different species, different fry ages or sizes, different batch sizes, different levels of genetic selection, etc. This complexity is often linked to the various requirements of the hatcheries’ clients.

Aquaculture is still a fast-changing industry. The rate of change may eventually slow and we may focus, like other animal production industries, on just five or six species of fish and one or two of shrimp, but for the moment specs required by on-growing farmers are many and changing.

In the Mediterranean, for example, over the last decade there has been a trend to increase the size of the cages used in the sea and this means that farmers prefer fry suppliers that can guarantee large fry batches and thus ensure homogeneity inside each cage. With more offshore farming some producers also prefer to buy larger fry that will be easier to feed in the first weeks and also that will reduce the production cycle in the sea.

Visiting shrimp hatcheries in Brazil I also got the message that the variety of on-growers translates into a variety of requirements for PL ages, selection types and batch sizes. There is also a trend in Brazil for shrimp farmers (especially those that were ‘victims’ of the white spot virus) to stock some fish in their ponds and they ask the shrimp hatcheries for fish fry as well.

These are just a few examples of the need for hatcheries to closely follow their markets and to continuously develop new products or services the market needs and is willing to pay for.

Hatcheries should imbue their staff with a spirit of continuous curiosity for new developments and allow them to have frequent and close contacts with their customers so they can be always alert for changes in the market and new opportunities to adapt.

— Diogo Thomaz

Diogo Thomaz, PhD, MBA, is a technical and business consultant for the aquaculture industry, based in Athens, Greece. After 15 years as R&D project manager and other industry positions he now leads Aquanetix (www.aquanetix.co.uk), a data management and reporting service for the global aquaculture industry. He also heads RealSales Ltd (www.realsales.eu) a sales consultancy company that helps businesses expand their opportunities in export markets. He can be contacted by email on diogo@aquanetix.co.uk

Captions

Figure 1

Customer visits are excellent opportunities to discuss production problems and market trends. Companies could have ways to record the feedback from customers after each visit and create a recorded list of opportunities for development.

Figure 2

Universities and other research institutions continuously produce new knowledge that may be of value to the industry. Frequent contacts with these institutions will not only allow your company to stay close to new developments but may even lead to collaborative research more targeted at your specific needs.

Figure 3

Live food is one of the Achilles heels of marine hatcheries and much research is done on new production methods and new species and varieties. Adapting some of the new developments in your hatchery will benefit from using Lean Startup processes to speed implementation of the technology and ensure it satisfies customers and production.


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