United States

Department of

Agriculture

Forest Service

Pacific Northwest

Research Station

General Technical

Report

PNW-GTR-629

February 2005

Innovation in the Forest

Products Industry: an

Analysis of Companies 

in Alaska and Oregon

Abra Hovgaard, Eric Hansen, and Joseph Roos
The Forest Service of the U.S. Department of Agriculture is dedicated to the principle of

multiple use management of the Nation’s forest resources for sustained yields of wood,

water, forage, wildlife, and recreation. Through forestry research, cooperation with the

States and private forest owners, and management of the National Forests and National

Grasslands, it strives—as directed by Congress—to provide increasingly greater service to 

a growing Nation.

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or call (202) 720-5964 (voice or TDD). USDA is an equal opportunity provider and employer.

USDA is committed to making its information materials accessible to all USDA customers

and employees.

Authors

Abra Hovgaard is a former graduate student and Eric Hansen is associate professor of Forest Products Marketing, Wood Science and Engineering Department,

Oregon State University, Corvallis, OR 97331-5751; Joseph Roos is a research

marketing specialist, U.S. Department of Agriculture, Forest Service, Pacific

Northwest Research Station, Alaska Wood Utilization Research and Development

Center, 204 Siginaka Way, Sitka AK 99835-7316.
Innovation in the Forest Products Industry: an Analysis of Companies in Alaska and Oregon

Abstract

Hovgaard, Abra; Hansen, Eric; Roos, Joseph. 2005. Innovation in the forest products industry: an analysis of companies in Alaska and Oregon. Gen. Tech.

Rep. PNW-GTR-629. Portland, OR: U.S. Department of Agriculture, Forest

Service, Pacific Northwest Research Station. 53 p.

Because there is a lack of innovation research in the forest products industry

and innovative activities in the industry are not well documented, this study

attempted to fill that void. The objectives of this study were to understand the

process and definition of innovation in the forest products industry, identify the

constraints on innovative activities, identify resources that would improve innovation in forest products companies, compare the innovation environments in Alaska

and Oregon, and provide a benchmark study for innovation in the forest products

industry.

This study revealed that there are several aspects of innovation in the forest

products industry. In addition, the innovation process is a combination of semiformal development stages, trial and error, intuition, and luck. A variety of factors

constrained companies from being more innovative, including government regulations, shipping and labor costs, lack of cash flow, raw material characteristics,

marketing expertise, and raw material supply. There do not appear to be any

resources that would be helpful to forest products companies, at least none that 

the interviewed companies could recommend. Offering companies the chance to

exchange ideas and network is the most valuable resource available.

The innovation environments in Alaska and Oregon are somewhat similar yet

different in the marketing tactics employed and the techniques used to obtain market information. Furthermore, the type of innovation projects that each region

focuses on differs, as does the actual process used to develop innovations. 

Future research should focus on completing a quantitative component to this

study, developing short courses or 1-day seminars, identifying factors that contribute to innovation success and failure, investigating why the forest products

industry is not innovative by nature, and exploring the external acquisition of 

innovation in the forest products industry.

Keywords: Innovation, forest products, marketing, lumber, forest products

marketing.
GENERAL TECHNICAL REPORT PNW-629

Contents

1 Introduction

1 Background Information

2 Innovation in the Forest Products Industry

3 Innovation Progress

4 Methods of Developing Innovative Products

6 The Secondary Industry in Alaska and Oregon

6 Marketing and Innovation

8 Methods

8 Measuring Innovativeness

8 Sample

9 Alaska

9 Oregon

10 Data Collection

11 Data Analysis

11 Results

14 Product Focus (Concept 1)

15 Competitive Advantage (Concept 2)

17 Customer Focus (Concept 3)

19 Management (Concept 4)

21 Organization (Concept 5)

22 Planning and Information Systems (Concept 6)

23 Marketing Communications (Concept 7)

28 Market Information (Concept 8)

28 Product Planning (Concept 9)

30 Resources

30 Innovation Process

35 Types of Product Development

36 Overall Innovation Process

37 Comparing Alaska and Oregon Companies

37 Definition of Innovation

37 Product Focus (Concept 1)

38 Competitive Advantage (Concept 2)

38 Customer Focus (Concept 3)
Innovation in the Forest Products Industry: an Analysis of Companies in Alaska and Oregon

38 Management (Concept 4)

38 Organization (Concept 5)

38 Planning and Information Systems (Concept 6)

39 Marketing Communications (Concept 7)

39 Market Information (Concept 8)

39 Product Planning (Concept 9)

40 Constraints on Innovation

43 Limitations

43 Conclusion

45 References

49 Appendix: Previous Research
Innovation in the Forest Products Industry: an Analysis of Companies in Alaska and Oregon

Introduction

The new millennium brings many challenges to the forest products industry in

Alaska and Oregon. In addition to inherently high transportation and labor costs,

increased globalization has made it more difficult for Alaska species to compete in

com-modity markets. To face these challenges, Alaska forest product firms must

seek new strategies to compete in a global environment. One strategy that has

helped firms compete in the era of globalization is innovation. The purpose of this

explor-atory report is to describe the process of innovation, present case study

anecdotal data as to what makes a successful innovative forest product company,

and show how concepts described in the literature are illustrated by these data. 

Background Information

Traditionally, market share has been used as the main measure of company competitiveness, but recently competitiveness has evolved to include product quality,

design, technology, and production efficiency (Porter 1990). Several sources have

shown that new product development (NPD) and other types of innovation are

integral factors for a company to maintain a competitive advantage (Brown and

Eisenhardt 1995, Martin et al. 1991, Pratten 1991, Scarborough and Zimmerer

2000). In a study of 90 smaller companies in the United Kingdom, one of the sources

of competitiveness most often cited was product development (Pratten 1991). Bean

and Radford (2000) recognize that “product development is not really about creating products; it is about competing in the marketplace.”

However, innovation can do more for a company than simply increase its 

competitiveness in the marketplace. The development of innovative products and

technologies has several other advantages including providing ways to better meet

consumer needs (Cooper 1996), capitalizing on a strategic market (Thomas 1995),

and realizing the financial rewards of creating successful innovations.

At the 1998 International Panel and Engineered-Wood Technology Exposition,

keynote speaker Warren Easley, Vice President for Technology and Quality at

Louisiana Pacific, insisted that “new, innovative products are badly needed” and

that the key to the future success of forest product manufacturers will be centered

on new products, new processes, and the use of new raw materials (Blackman

1998).

1

New product 

development and

other types of 

innovation are 

integral factors 

for a company 

to maintain a 

competitive 

advantage.
GENERAL TECHNICAL REPORT PNW-629

2

Innovation in the Forest Products Industry

Traditionally, the forest products industry has been grouped into two main segments:

primary and secondary. The secondary forest products industry includes millwork,

furniture, cabinets, containers, veneer, flooring, and fixtures manufacturing sectors.

Much of the secondary forest products industry consists of smaller firms that use

labor-intensive operations while incurring high raw material and transportation

costs (Hoff et al. 1997). A large body of research suggests that this type of smaller

company has a competitive advantage in industries with short product life cycles,

heterogeneous consumer demand, and advanced product technologies such as the

wood furniture industry. In addition, smaller firms have the ability to remain flexible in product design, marketing, and production, which aids in their ability to gain

a competitive advantage and leverage innovation (Howard 1990, Pratten 1991,

Rosenfeld 1992, Sommers and Leinbach 1989). 

Not only do forest products companies need to remain competitive at home,

there is a strong consensus that suggests the industry will need to invest in technology and product development in order to keep pace with foreign competition.

While U.S. companies continue to lag behind, foreign competitors are investing in

new technologies that are ultimately giving them a greater share in the market and

a larger competitive advantage. The National Research Council states, “The keys

to regaining competitiveness in most U.S. manufacturing industries are quality,

productivity, and responsiveness in bringing new products to the marketplace”

(Canada and Sullivan 1989).

Because there are many activities that may be termed innovative, defining

innovation is a key component to this study. Identifying innovative companies is

essential to obtaining an appropriate sample and assessing the state of innovation

in the industry. This study defines an innovative company as one that excels at one

or more of the three dimensions (product, process, and other), when compared to

others in the industry. Examples of such innovative activities include: 

• New finishing techniques

• More efficient processing operations

• Product improvements through line extensions

• New uses of materials

• Changes in management structure and decisionmaking

• Innovative methods to gather market information or sell products

• Innovative means of addressing environmental issues
Innovation in the Forest Products Industry: an Analysis of Companies in Alaska and Oregon

3

An excellent example of innovation in the primary sector of the forest products

industry is the relatively recent switch from the use of old-growth logs to smaller

diameter, second-growth material. This has forced the industry to make process

improvements and offer new products (i.e., composites) based on the changing

resource. Although some of these changes relied on completely new technologies,

most of these adaptations made minor adjustments in existing technologies to

achieve processing improvements and design improvements.

An example of design improvements from the secondary forest products industry

involves the improvements in furniture used in retirement homes and hospitals.

Companies have started developing furniture, especially chairs, that are sturdier,

more resistant to tipping over, and with raised seats to facilitate movement of the

elderly or less mobile patients. These incremental improvements in the product

have provided added benefits to the consumer and given companies an innovative

edge.

Innovation Progress

The forest products industry began by using whole logs and solid sawn lumber. 

Over 100 years ago, plywood technology was developed and became accepted in

the marketplace, dramatically changing the forest products industry. Within the last

two decades, newer products and processes have begun taking hold in the market.

A recent (2001) presentation by Scott Leavengood of Oregon State University at

the Forest Sustainability, Assessment, and Certification Conference summarized

these now relatively commonplace products and processes that were once quite

new and innovative:

• Oriented strand board (OSB) and particleboard

• Wood I-joists using laminated veneer lumber flanges and OSB webs

• Parallel-strand lumber 

• Laminated-strand lumber 

• Medium-density fiberboard 

• Glulam beams

• Wood fiber and inorganic (plastic/cement) composites

• Small-log processing and curve sawing

• Computer-aided manufacturing

In addition to introducing innovative products, the forest products industry 

will remain competitive in the industry by implementing innovative experience and

unique management and marketing arrangements.

In addition to 

introducing innovative products, the 

forest products

industry will remain

competitive in the 

industry by implementing unique 

management and 

marketing arrangements.
GENERAL TECHNICAL REPORT PNW-629

4

Methods of Developing Innovative Products 

Cooper (1996) provides an excellent historical perspective on the evolution of 

innovation processes. Cooper characterizes these processes as first-, second-, and

third-generation innovation development processes.

The first-generation innovation process or “phase review process” was developed by the National Aeronautics and Space Administration in the 1960s and was

also used by the U.S. military for weapons development. The process attempted to

break development into discrete phases, each with its own review process. Movement

to and funding for the next phase were contingent on successful completion of the

previous phase. The process was driven mainly by engineers, and marketing people

were not involved in the development process. Drawbacks of this process include:

• It was too narrow (it only dealt with the development phase).

• It was too functional (focused on technical/engineering aspects).

• It was cumbersome and slow.

The second-generation innovation process was termed the “stage-gate model.”

It also had discrete phases with a review phase at the completion of each step.

However, the entire system and the decision points at each phase’s completion

were cross-functional, involving many different departments within the organization. Eventually, marketing and manufacturing personnel were included in the

development process. The process became much more holistic, covering the innovation from idea to market launch rather than focusing solely on development.

This type of development process has been successfully implemented by several

companies including IBM, 3M, and Northern Telecom. This process also has 

problems, however, some of which include:

• Projects must wait at each gate until all tasks have been completed.

• Overlapping of stages is not possible (activities are not undertaken 

concurrently).

• Projects must go through all gates and stages.

• The process tends to be too bureaucratic.

• The process does not lead to project prioritization and focus.

Finally, Cooper suggests that we are entering the third generation of innovation processes. This newer process emphasizes efficiency in both time and allocation of development resources. Cooper characterizes this process with four

fundamental F’s:

1. Fluidity—the process is adaptable with overlapping stages that increase 

development speed.
Innovation in the Forest Products Industry: an Analysis of Companies in Alaska and Oregon

5

2. Fuzzy gates—the process has conditional “go” decisions that are situation

dependent (e.g., projects may pass though gates without having completed 

all tasks).

3. Focused—the process takes all projects into consideration and prioritizes in

order to focus resources on “best bets.”

4. Flexible—the process is not a rigid stage-gate system but allows each project 

to take its own course through the process.

Certainly, the third-generation process is not the end. The product development

process will continue to change and adapt with changes in the business environment and consumer needs. According to Tomkovick and Miller (2000), “New

product developers now find themselves in an age of change, the likes of which

the world has never known.” The authors offer seven themes focused on the new

product development that will affect the innovation process. 

1. New product development is of growing importance to companies and is 

often the activity that offers the greatest leveraging of investment.

2. New product development champions must continually encourage the 

known foundations of new product success.

3. Companies may benefit by translating innovation and sales growth rates 

into more new product development cycles per decade. 

4. Continuous product quality improvement protects and builds brand equity 

and should be a vital part of new product development contribution to 

the firm.

5. Product elimination is an integral part of the innovation process; retention 

of poorly selling products can drain scarce resources needed for more successful projects.

6. Fun and optimism are essential and often overlooked ingredients for new 

product development success.

7. New product development credibility is built by delivering on promises 

made.

Based on these seven themes, the authors conclude that: 

• Innovation and product development are becoming increasingly important 

in the business world.

• Successful innovations require both process and product champions.

• Product modifications and quality improvements are important components 

of product development.

• Product elimination is an often overlooked but essential product development activity.
GENERAL TECHNICAL REPORT PNW-629

6

Tomkovick and Miller (2000) predict that the processes of developing products

will continue to undergo changes while the importance of product development to

a company’s success will continue to increase. Although Tomkovich and Miller

focus on product development, the broader innovation environment is also impacted

by these themes. Certainly there must be processes and management/marketing

structures that allow companies to be successful product developers.

The Secondary Industry in Alaska and Oregon

A recent report by the USDA Forest Service highlights significant changes in the

structure of the Alaska forest products industry and a movement away from the

dominance of primary producers. Part of this is due to the recent closures of the

two major pulp mills in southeast Alaska (Sitka in 1993 and Ketchikan in 1997),

which contributed to a 41-percent decrease in employment in the forest products

sector in this region (Allen et al. 1998). Consequently, Alaskans are turning to

lower paying retail and service sector jobs, which is predicted to slowly erode

wages (Allen et al. 1998). 

The closure of these large pulping companies has also resulted in the underuse

of sawmill by-products (chips, lower grade saw logs, and utility-grade logs) that

were typically used in the pulp mill operations. Some researchers predict that this

underutilized resource is the raw material needed for the emergence of a stronger

secondary forest products industry. This resource could provide an opportunity for

small to medium-sized companies to find markets and develop new, value-added

products or processes that would use this resource (Allen et al. 1998, Brooks and

Haynes 1997). 

This study is timely for both Alaska and Oregon. Both regions are experiencing recent growth in the secondary forest products industry. Furthermore, the

secondary industry in both regions consists of smaller companies that could prosper

from innovative activities that could help them compete in both the domestic and

international markets. 

Marketing and Innovation

Since the late 1960s, researchers have been studying the factors that influence the

failure or success of innovative products. In nearly all of these studies, the importance of marketing planning is apparent. Studies conducted over a period of more

than 30 years show the important role that marketing plays in product development.

Studies show 

the important 

role that marketing

plays in product

development.
Innovation in the Forest Products Industry: an Analysis of Companies in Alaska and Oregon

7

The importance of marketing in product development processes

Study Findings

Myers and Marquis 1969 Most successes were market-derived (market pull)

ventures rather than technology push (present in only

21 percent of the cases). Understanding user needs and

both internal and external communication are important

factors in product success.

Cooper 1975 Ineffective product marketing and poor market

research are the main causes of product failures.

Hopkins 1980 Inadequate market analysis, product defects, lack of

marketing, high costs, bad timing, and competitive

weakness were the main causes for product failures.

Rothwell 1972, The most important factors for the success of innovaRothwell et al. 1974 tive products are understanding user needs, attention 

to marketing and publicity, efficiency of development,

effective use of outside technology and external communication, and the influence of responsible managers.

Cooper 1979 The factors that separated 102 product successes from

93 failures in 102 Canadian firms were a unique and

superior product in the consumers’ eyes, strong market

knowledge (well-researched markets), and technical/

production synergy. 

Cooper and A good fit between the marketing strategy, sales force,

Kleinschmidt 1986 distribution needs of the product, and a firm’s marketing resources and skills is fundamental to product

success.

Hise et al. 1990 A high level of marketing involvement in product

development is more likely to result in greater commercial success for new consumer products than for

new industrial products.

Griffin and Hauser 1996 Marketing plays an important role in product development by providing information on customer needs

and aiding in product positioning decisions.
GENERAL TECHNICAL REPORT PNW-629

8

Atuahene-Gima and If innovative products are to be successful, marketing

Evangelista 2000 and research and development need to play influential

roles in innovative activities.

Bagchi-Sen 2001 Market research is more important for business

development and problem solving in innovative 

companies than in non-innovative companies.

Success of new products depends on several marketing components including:

• A market-derived venture 

• Effective product marketing

• High level of marketing involvement

• Adequate market research and market analysis

• Sufficient publicity

• Strong market knowledge

• Ample marketing resources and skills

Without a strong and effective marketing framework, the extensive resources,

energy, and time spent on the development of an innovative product will likely be

lost to high failure rates.

Methods

Measuring Innovativeness

The concepts of innovation were explored through a series of case studies of 18 

innovative companies in Alaska and Oregon. Personal interviews took place in

Alaska and Oregon during 2001. These interviews produced key phrases, characteristics, and stories that can be used to describe an innovative forest products

company and the innovation process. Furthermore, these interviews could be used

to turn the concepts into variables that can be measured in a future quantitative

survey (not part of this research project). 

Sample

Nine innovative forest products companies were chosen from each state because 

they excelled in at least one area of innovation: product or process improvement,

new product or process development, or innovation in management or marketing

that represents added value (i.e., added benefits) to the consumer. A company participating in one or more of these activities was termed an “innovative” company

for the purposes of this study.
Innovation in the Forest Products Industry: an Analysis of Companies in Alaska and Oregon

9

Alaska

The identification of innovative Alaska companies took place in three phases 

with the help of several professionals and organizations. First, the Alaska Wood

Utilization Research and Development Center (WUC) in Sitka, Alaska, a branch 

of the USDA Forest Service Pacific Northwest Research Station, helped to develop

a preliminary list of innovative companies. Collectively, individuals at this center

have been working with Alaska forest products producers for over 30 years and 

are consequently very familiar with the industry. 

Once a preliminary list was formulated, other Alaska experts evaluated the 

list and provided recommendations. This helped to establish commonalities and

obtain the best possible sample. Experts included Alaska Science and Technology

Foundation, Alaska Department of Commerce and Economic Development, Wood

Products Development Service, consultants, and academics. 

As a third and final measure, several of the first companies interviewed were

asked to suggest other Alaska companies that they considered to be innovative or

that fit with the study requirements. This process yielded nine innovative companies

(table 1). The company names are purposefully withheld to provide anonymity. 

Oregon

Innovative forest product companies were also selected in Oregon by using the 

same criteria. Again, a three-stage approach was implemented starting with the

Northwest Wood Products Association (NWPA). Next, feedback was sought from

other experts including Oregon Economic and Community Development Department, Oregon Forest Industries Council (OFIC), the Pacific Northwest Research

Station, extension agents, academics.

Table 1—Profile of innovative forest products companies studied in Alaska

Sector Interviewee(s)

Primary V.P. corporate development and V.P. manufacturing

Primary Owner/operator

Secondary Owners/operators

Secondary Owner/operator

Secondary Owner/operator

Secondary Operator

Both Owner/operator

Both Owner/operator

Both primary Operator

and secondary
GENERAL TECHNICAL REPORT PNW-629

10

As a third and final measure, companies interviewed first were asked to 

identify other innovative companies in Oregon. This process yielded another nine

companies (table 2). Again, company names are withheld to provide anonymity.

Data Collection 

Owing to the nature of the innovative model of marketing planning, whenever 

possible, more than one individual from each company were interviewed. Having

the perspectives of several individuals is ideal, as those most knowledgeable about

strategy and structure may not be the same individuals who have a thorough understanding of the marketing functions. Owing to a variety of constraints, however,

interviewing several people was not always possible. This does not pose a significant problem as many of the companies were small and one individual often served

many functions (e.g., chief executive officer, marketing manager, and product

champion).

This technique has been used previously in innovation research (Griffin and

Page 1996). Table 3 shows the individuals who are likely to be most knowledgeable about each concept in the study.

Key issues with case study data are reliability and consistency across multiple

cases. In an attempt to address these issues and to guide the data collection phase

of the research, a case study protocol was developed as defined by Yin (1994):

• An overview of the case study project (objectives, issues, relevant readings)

• Field procedures (credentials, sources of information, procedural reminders)

• Case study questions (specific questions, table “shells”)

• Guide for the case study report (outline, narrative format, documentation)

Table 2—Profile of innovative forest products companies studied in Oregon

Sector Interviewee(s)

Secondary President/CEO

Secondary Owner/operator

Secondary Owner/operator

Secondary Vice president/general manager

Secondary President

Secondary President

Secondary Production manager and bookkeeper

Secondary Owners/operators

Both primary Owners/operators

and secondary
Innovation in the Forest Products Industry: an Analysis of Companies in Alaska and Oregon

11

Data Analysis 

Data collected through case studies are inherently qualitative and can be both 

descriptive and explanatory in nature. For the purposes of this study, the case 

studies were used to identify key innovation concepts and characteristics of the

forest products industry. This was accomplished by looking for patterns in the way

that an innovative company was described across the case studies. Yin (1994)

describes this technique as “pattern matching.” The patterns that emerged were key

concepts and ideas used to characterize a typical innovative forest products company.

For example, the case studies revealed commonalities among innovative forest

products companies such as:

• A competent management team that is focused on innovation.

• Proficiency in market research and obtaining market information.

• Organizational structures that encourage innovative activities.

• Adequate innovation resources (expertise, money, risk-taking attitude).

• A product champion (a dynamic and visionary individual).

Results

Forest products companies define innovation in a variety of ways. Nine different

definitions were identified in the interview data. Each of the definitions was supported by at least three companies. 

Table 3—Research concepts and individuals most knowledgeable

Level in marketing 

planning Concept Key individuals

Strategy Products Chief executive officer, top management

Strategy Competitive advantages Chief executive officer, top management

Structure Management All managers

Structure Organization Top management, marketing manager, 

production manager

Structure Planning and info. systems All managers

Function Marketing communication Marketing manager, sales manager

Function Market information Marketing manager, sales manager

Function Product planning Product champions, team leaders, 

production manager, project manager
GENERAL TECHNICAL REPORT PNW-629

12

Definitions of innovation in forest products companies

Aspect of innovation Supporting quotations

Way of thinking “You have problems and you have solutions. You have

to be willing to have a totally open, unstructured mind

to address the problems.”

“Well first of all it had to start with process...a process

of mindset, a process of how we are going to do our

business.”

The only one “I have to say that we are very innovative...because

nobody else is doing it.”

“Our product is unique, one-of-a-kind, and something

that has never been seen before.”

People “Everything I read about with innovators and entrepreneurs is that there is something a little bit different.

They are like their own drummer. That’s us.” 

“You really want that combination of free spirit, 

there are no boundaries and that independent drive to

accomplish tasks without defined limits and without

defined timelines.”

Niche products “Trying as best as you can to move from a high voland markets ume commodity to more of a niche market...you have

your basic commodity market that keeps you alive and

then you start targeting with special woods, some

small runs of niche market type of products. I think

that’s where the successes are going to be. The commodity keeps you alive and the niche just gives you

that edge.”

“We’ve gotten very good at what we do, but it’s a very

small niche...it’s so small that the big companies aren’t

going to address it...there’s an opportunity for innovative companies, in quality design in the high end.”

Customer oriented “We certainly make innovative stuff when we’re

allowed to by the customers [who say], ‘Well I need

one of these and I want you to design one for me.’”
13

Innovation in the Forest Products Industry: an Analysis of Companies in Alaska and Oregon

“I think innovation means that you identify the need

from the customer. You identify problems that your

customers have and you are able to deliver a product

that adds value to their problem...they have an issue

and as an innovator, you can identify the problem and

then you go out and solve it.”

Marketing “Innovation is more likely to come in with products

that people find that are marketable...I don’t think

Alaska is going to produce a new use for wood. It’s

more a matter of finding a way to market our stuff.” 

“You’ve got a market for everything that goes

out...marketing has to be up there at the top of the list

in terms of being capable of not being dependent on a

single product.”

“I think innovation is trying to be successful in 

marketing it.”

Process “We are removed from other people by a certain unique

manufacturing process that works, an innovative

process.”

“Well certainly efficiency in raw material use.”

“We tend to think of machinery as innovation...we’ve

built machines to solve specific needs.”

“To get more recovery out of your existing supply.

Keep up with the technology, basically to get more

fiber out of what you got.”

“I think that one of the things that innovative companies do is they simply take advantage of innovative

processes from other industries that are ahead of their

industry...they go outside their industry and they learn

from and take advantage of things that other industries

do well.”

Product “We have to take an innovative product and make it

[more] innovative. We have to go to another product

level.”
14

GENERAL TECHNICAL REPORT PNW-629

“I know with us innovation is design. That’s how we

try to set ourselves a step ahead and a step apart...we

make things that are just a little different.”

“Being capable of having a diversity of product line to

survive through seasonality and economic cycles.”

“I think an innovative company would be one that

would do everything it could to try to get new acceptance for an old product on a national scale.”

Business Structure “That’s another semi-innovative part of this business... 

the way we treat our suppliers and customers is as a

partnership as opposed to trying to get the best thing

for the buck right now.”

“So you have this mill that is now owned by an owner

and a nonprofit with the idea that ok, so now we have

the incentive. We can get grants. We can go out there

and try and get more certified lands around us. We’ll

be one of the only mills that is producing stud lumber

that’s Doug fir, certified material. That’s innovation...

how do we structure this thing that’s going out of 

business? How do we structure it and partner?

Relationship innovation...get out of the old paradigm

of, you’ve got to do it alone or die.” 

A review of the literature and company interviews revealed nine concepts 

present in innovative companies: product focus, competitive advantage, customer

focus, management, organization, planning and information systems, marketing

communications, market information, and product planning (a review of the literature is included in app. 1). In addition to these main concepts, the interviews 

revealed that cost-efficiency, persistence, ability to survive, and environmental 

sensitivity were key characteristics of innovative forest products companies. 

Product Focus (Concept 1) 

To assess the product focus of innovative companies, interviewees were asked 

to place their product on a spectrum with commodity products on one side and

specialized products on the opposite side.1 None of the interviewees placed all 

1 In the case of lumber, commodity products include dimensioned lumber such as that used 

in housing construction. Specialized products in the case of softwood lumber include shop 

and select lumber that is often remanufactured into value-added products. 

Several interviewees

placed their product

on the commodity

side of the spectrum

and their production

process on the 

innovative side.
15

Innovation in the Forest Products Industry: an Analysis of Companies in Alaska and Oregon

aspects of their business on the commodity side. This is expected as our sample should

contain only innovative companies. Interestingly, several interviewees placed their

product on the commodity side of the spectrum and their production process on the

innovative side. One interviewee stated it this way, “From a technological standpoint, there are not many new things that you can do to wood furniture. ...On the

other hand, what we are doing is we’re applying other industries’ technology to our

industry. There are things that we do in our plant that aren’t found in other woodworking plants.” Another interviewee stated it slightly differently when he said, “I

think our [tool handles] fit... towards the commodity, typically. I think the application or how we do it tends to be at the higher [innovative] end.” 

Competitive Advantage (Concept 2)

Innovative companies described their competitive advantages in a variety of ways.

At least 3 companies supported each of 10 competitive advantages. This indicates

that innovative companies draw on a variety of competitive advantages to survive

in the forest products industry.

Competitive advantages of innovative forest products companies

Benefit Supporting quotations

Technology “We’re hoping that the computer will be a competitive

advantage in the future.”

“We’ve had to automate to stay ahead of the lower

priced competition that has always been out there. 

I think that’s probably our strength, the building of

automation to stay price competitive.”

Shortened supply chain “We install our projects too....we can design it, we 

can build it, and we can install it.”

“We only build custom-made cabinets. You have to

come in here with a design and a drawing and we 

custom build them. We don’t build anything to inventory and sell to Home Depot so they can put it on 

their shelf.”

Customer focus “You get on the phone and you don’t get ‘Press one to

talk to someone in sales, press two to talk to our shipping department, press three to,’ they call and they get

me. Every time they call they get me. Be attentive, 
GENERAL TECHNICAL REPORT PNW-629

16

call back, follow through, talk to people. For a lot of

people, that’s it. They want to feel like they know who

they are buying from.”

“I’d have to say public relations, our relationship with

our customers. It’s very one-on-one. It’s not just talking and purchasing. We’re in the cabinet shop talking

to the cabinet shop guy almost on a daily basis.”

Local (mostly an advan- “It’s local, and it’s local...it’s the local workmanship,

tage to Alaska companies) it’s the local material.”

“If it’s made in Alaska, they will buy it.”

Material utilization “Being able to do more with less.”

“We’ve got to create a use that [overseas competition]

is not creating. They’re taking old technology and old

ideas and coming up with cheap labor to put something

to market...but it’s a container. We want to be something that just happens to be shaped like a container.” 

Cost reduction “That includes reducing the cost of labor and reducing

the cost of wood. There are various ways to do that but

you have to get very innovative in reducing your costs

so that you can stay competitive.”

“We buy our raw product cheap. That’s a big plus.”

No competition “We had to do something that wouldn’t pop up in 

Wal-Mart. Our kiln drying process was the first ever

for [our product].”

“How you compete with the big boys is don’t do what

they do, don’t compete with them...do something that

you’re more suited to do.”

Quality “I built my business on service to the customer, 

quality, and attention to detail.”

“The competitive advantage that we have right now 

is our quality. Our quality is not gallery but its better

than what you’ll see for a similar price anywhere

else...quality and then its American made, those are the
two main things that people like to hear from us.” 

Outsourcing activities “We’ve had a few products that we’ve had to outsource to stay competitive. We’ve even had to take

them out of people’s hands making them here. That’s

not an easy, fun decision when your whole mentality 

is to make it local.”

“So how do we get innovative and compete in that

market? One of them is we’ve actually decided to 

purchase these products from Chileans and Brazilians

...so what we’ve done is essentially walked away from

producing that inside our company and bought it outside...but we will make all the odds and ends, the specialty items that they aren’t good at.”

Marketing “My competitive edge is I sell direct. I don’t wholesale

out to anybody. I just deal with the end customer.”

[The brand] “puts us in a very, very good position...to

stay competitive and more importantly, keep the Chileans

and the other South Americans from getting a foothold

in our...market.” 

In addition to these aspects, some interviewees cited flexibility, adding value

to products, superior material characteristics, and environmental sensitivity as

components of their competitive advantage.

Customer Focus (Concept 3)

Most companies interviewed had a strong focus on the customer. Focusing on the 

customer provides a variety of benefits to companies including product improvements, design improvements, repeat purchases, and new product ideas. 

Benefits of a customer focus in forest products companies

Benefit Supporting quotations

Product improvements “We’re working on trying to put together an order 

system where [customers] can actually place their

orders and manage their orders...when they have a

change in the shop, they have to go through 10 people

to get the change to us, which sometimes can be too

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Innovation in the Forest Products Industry: an Analysis of Companies in Alaska and Oregon
late. This way we are trying to create a live system

that they can make their updates...and next time we 

cut one it will be ready.”

“While I was waiting my turn to talk to the store owner,

a consumer comes raging in and she says, ‘My feeder

that you sold me yesterday, it leaks seed all over the

ground. The birds are eating on the ground and the cat

just got a bird right in front of me...’ So our feeders

don’t spill seed.”

Design improvements “You come up with a plan, [the customer] might have

a sketch but then you start drawing it out and you put

your input into it...you engineer it, you tweak it this

way and that. You get it to where they want it...almost

every job we get involved in revolves around those

custom spaces.”

“Quite often somebody will call you up on the phone

and you’ll sit there with a pad in hand and they’ll be

rattling off numbers. Well I want a table this size and 

I want it to look like this. So you’re sketching it out

right before your eyes. You might even be working on

some numbers or...this kind of wood versus that,

maybe get an idea of [which] wood might be a little

more expensive and/or harder to get.” 

Repeat purchases “We do have a lot of young couples, a lot of people

who have never built. They come in and we spend

some time with them. Then while they’re doing the

project they can call up the office...we’re there for any

questions they have on their project, which you don’t

get anywhere. That has been a really big deal with

us...and they’ll come back.”

“We’re trying to concentrate on repeat areas. We can

get them at birth and high school graduation. So that’s

a very important part of our marketing.”

“Now with our stamp on the back of them, whoever

buys them there, we’ll probably get four or five repeat

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GENERAL TECHNICAL REPORT PNW-629
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Innovation in the Forest Products Industry: an Analysis of Companies in Alaska and Oregon

calls from just our name being on the back of them. So

you don’t know where it’s going to end. It will slowly

start mushrooming out.”

New products ideas “I would say that 99 percent of all new ideas come

from the customers. What happens in a lot of industries, ours included, is that people take credit for it.

They say, I have this wonderful new invention that

I’ve created...I would argue that a customer clued them

in on that somewhere...its highly unusual that somebody creates innovation without a demand.”

“Greenhouses...that came from a client. They said,

‘This is a great building, I could grow something in

this.’ I had somebody else that said, ‘I would love to

have a kids’ playhouse at the top’...That’s how a lot of

the ideas have come.”

“I was at a tradeshow and a lady came up to me and

said, ‘Don’t you have anything that will hold little

knives? Because we sell a million of these little knives

and people want to display them, they collect them.

They have eight sets. They have nowhere to store

them. Can’t you make me something?’ Sure, we can

do that.”

“A customer will come and say, ‘I’ve got a sample that

looks like this...how much will it cost to get something

like that?’ Sometimes we just look at it and say, how

do we do it? Go back and look at what have we done

similar to this before.” 

Management (Concept 4)

Interviewees were asked to describe the management structure of their organization 

and the role that management plays in the innovation process. Management theories

ranged from a top-down, military mentality to more commonly, an open exchange

of information between all levels in the organization. Although the following form

of management is rare, a retired military officer described his management philosophy in this manner:
GENERAL TECHNICAL REPORT PNW-629

20

Everybody in this organization believes in and agrees with my framework, 

my thought process, and my set of goals, standards, and objectives. I’m 

a retired military officer, 30 years in the Army. I don’t have a problem 

getting people to do things the way I want them to do things...But I will 

tell you that in 9 years of manufacturing now in three different companies, 

it’s not easy getting civilians to do what you want them to do. You don’t 

own their hearts, minds, and souls like you do a soldier. And they have 

this propensity to ask you questions like, “why?” At times it takes three 

or four times. I’m not in that mindset.

Other companies had attempted a team structure with mixed success. One company stated, “There’s a team structure...we’re all in the same boat together kind of

a thing. We all just have different tasks that we have to do.” Another commented,

“We have a general manager. We have team leaders. We have morning leader meetings. Who’s on first, what’s going out, and what’s happening...we try to keep [communication] strong but everything is still just crazy.” The president of a large

softwood manufacturing company had implemented a team structure that eventually

failed. He describes his philosophy of management below:

Our goal was to use these teams to establish plant goals for improvement; 

plant goals for productivity and to identify various projects within the 

plant that could help them achieve those goals. In that we took people right 

off the production line, off the floor, along with management and we went 

in and told them, “You guys come up with it and you have to come up with 

it with everybody being equal.” The net result was we took the leadership 

out of the plant manager’s hands, forced them to spread it out amongst 

everybody and try to come up with a consensus and a decision on what we 

are going to do. What happened was nothing happened. It takes you four

months to come up with goals. You meet once a month or once a week and 

you go through this whole process of trying to educate everybody on the 

various aspects of the company, the financial part of how the plant operates

...and four months later you finally come up with some goals. In all reality, 

the plant manager, if he’s prudent and does his job right, he can come up 

with the goals. There’s no big secret there. If they are good quality goals 

that are well communicated, nobody is going to have a problem with it.

Unreasonable goals, then yes, people are going to have a problem with it. 

As a good manager and as a good leader you have to recognize [that you] 

don’t take leadership out of the organization, you enhance leadership. 
You allow leaders to organize their people rather than taking that leadership out of a person’s hands because when it comes down to it, the guy 

running the plant is the one who’s in charge of running the plant. If it goes

belly up, he’s the one that gets fired. You can’t take that out of his hands...

you don’t have to delegate that down to the smallest, lowest level. 

Even if a formal team structure is not always a successful management structure, Open communication between all levels in the organization was beneficial for

nearly all of the companies interviewed. However, companies may lack the ability

to structure that communication and derive meaningful opportunities from the

exchange. An interviewee commented, “We have a lot of people that at times work

really well together and come up with really free-flowing type ideas. Then there

are other times where those ideas are in conflict. We don’t have a real good way to

have competition, to find a clear winner.” Another interviewee summarized their

difficulties in the following manner, “The ideas are there [from line workers],

maybe some people have the capability to do it but they’re so busy doing other

things that...we never get to that. I know it’s our general desire to make the people

grow, help them grow in capabilities but we don’t always invest in training or the

time to get them there.”

Organization (Concept 5)

Linked with a company’s management structure is the organizational culture of 

an innovative company. Many of the companies interviewed were operated and

owned by one individual or a husband and wife team. This is the nature of smaller

companies in this industry and especially in Alaska. In these companies, an individual becomes responsible for the entire organization. 

When the company is this small, it does not seem appropriate to discuss the

organizational culture, because it rests solely on the mindset and activities of one

or two people. In the larger companies interviewed (more than five employees) a

variety of working environments existed. The organizational culture of these companies displays one or more of three features: family atmosphere, employee

focused, reception to change.

The organizational culture of forest products companies

Cultural aspect Supporting quotations

Family “We’re always helping each other out. We had a cabin

raising for one of our employees, one of our guys who

21

Innovation in the Forest Products Industry: an Analysis of Companies in Alaska and Oregon

Open communication

between all levels in

the organization was

beneficial for nearly

all of the companies

interviewed.
is putting up a place...We’re going on a company fishing [trip]...we’re leaving on Thursday.”

Employee focused “You have to listen to your employees. They’re the

ones out there. We all have open-door policies.”

“You want people to do a quality job and increase 

production and quality and everything else. You cannot

let them perceive that they are going to work themselves out of a job. So what I tell them is this: I want

you to work yourself out of a job, and I promise you

that I’ll find you a better job. I’ll create a job for you.”

“So we empowered every employee in this plant to

pull the chain and stop the plant. They see a mistake or

an error or a problem, stop. Everybody in this building

walks over to where their problem is...we solve that

problem...get it put in process, solid stone procedure...

then it doesn’t get [further along in the manufacturing

process]. Worst of all, it doesn’t get out the door to a

customer...every employee is empowered to stop the

plant.”

Receptive to change “Over the last 20 years or 15 years we’ve gone from

100 people to 1,200 people, we’ve essentially built a

company facility. We’ve essentially engineered and

built almost every component in the company except

for the primary equipment...everything else we built

ourselves. So what you get is an extremely aggressive

can-do attitude...people are not at all afraid to change

as compared to most companies...so as a culture it’s

very easy to change what we are doing.” 

Planning and Information Systems (Concept 6)

Although present in the literature, as a key concept of innovative firms, once the 

interview process began, it became apparent that this concept was not relevant for

smaller forest products companies. Because only one of the companies interviewed

performed any formal market research (see “Market Information”), most companies

would have no way of incorporating those data into product planning or information

22

GENERAL TECHNICAL REPORT PNW-629
systems. Consequently, this concept was dropped during the analysis stage of the

research.

Marketing Communications (Concept 7)

Within the marketing communications concept are the pricing of new products, 

outsourcing activities, marketing tools, and marketing tactics used by innovative

forest products companies.

Pricing new products —

For nearly all of the companies interviewed, marketing is a significant challenge.

In particular, many innovative companies expressed difficulty in pricing new and

even existing products. One interviewee stated, 

Keeping updated with all the prices is always a challenge. When we first 

started doing this, we did not price these accurately...we’ve got the wages 

and then you still have to make something for all the equipment that’s 

breaking down, the trucks that are delivering it. So it’s a hard call...we are 

still trying to figure out if we are at the correct amount. I bet out of all my

challenges, pricing is my biggest challenge. 

In pricing new products, companies employed various strategies:

“I could not come out with a product introduction and slap a 30-percent 

price increase on it. Nobody would even listen to us...so what we did sell 

was very low margin. I didn’t raise the price to pass on the cost of the 

materials.” 

“I look at what things cost, what could go wrong, and what the fixed costs are.”

“Certainly I went out and got all my competition’s price lists...go to the floor

ing magazines or the home magazines and in the back where they have all the

lists of the people who sell flooring, just check off those boxes and have them

send you all the literature that they’ve got...and certainly you have to know

what your costs of production are. I’ve found that a lot of manufacturers don’t.”

[Paraphrased] Pricing of newer products is paired with that of the competition.

Outsourcing—

A portion of the interviewed companies have decided to outsource their marketing

to larger firms with more marketing expertise. About one-half of the companies

interviewed were using this approach to marketing:

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Innovation in the Forest Products Industry: an Analysis of Companies in Alaska and Oregon
“We’re working with an outfit down in Oregon...we’re starting in veneer, 

not knowing a whole lot about it. We wanted to concentrate on production,

efficiencies, and recoveries. So we went with those guys for a few years to 

let them do the marketing. Because a new guy, with the volume that we 

expect to produce is not going to say ‘OK, here we are, buy our wood.’ So

they’ve been buying it...it’s been a very, very good relationship. They said,

‘We’ll consume it internally until you can get on your feet and we’re going 

to start marketing for you.’ So they do our marketing.” 

“We’re a little bit short on marketing expertise or experience like that. On 

the main stuff, we went with one of the guys who works for [company]...

so we engaged his help to market the stuff that went out of here.”

“How do we get it out of state? How do we get it into other people’s hands?

Pretty difficult. We’re not going to do a big mass mailing. The easiest way is

to get under somebody’s already established marketing program and that’s

what we hope to do with [company].” 

“We have a company up in Seattle that sells a lot of our veneers...We’ve 

dealt with a company in California for years on firewood.”

“Then [company] stepped in and said ‘OK, you guys really aren’t good 

marketers. We’re the better marketers so we’ll take this from you and we’ll 

do it from here.’” 

Marketing tools—

Innovative forest products companies that do not outsource their marketing 

activities use a variety of tools to promote their products. 

Marketing tools of forest products companies

Marketing tool Supporting quotations

Displays “Then they also had a display in their entryway and so

they had our [product] also on that display, and we got

quite a bit of inquiries from that point of view.”

“He said, ‘You might want to make a display like this

and show the wainscot and have a cabinet and a piece

of base and have some trim in the corner. Maybe have

a little window and some wallpaper.’ You know we

went through the whole marketing deal to try and grab

people.”

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GENERAL TECHNICAL REPORT PNW-629
“It’s important to have things displayed correctly and

visible in retail stores.”

Phone book “When you think about your advertising in the phone

book, and it’s mostly outlay of cash to deal with, it’s

incredible. But we do get calls from the phone book. 

It is a payback.”

Newspaper “Newspaper was our initial [marketing tool] and still

we are in the newspaper every day, all day long. We

have a newspaper contract. We do larger ads at certain

times, building times.”

“A lot of people have really liked that newspaper 

article.”

Word of mouth “We get a lot of word of mouth...we send a thank 

you out to every client after they are done with their

project, their storage barn or their garage. That’s really

important because...the word of mouth is how we have

grown.”

“Ninety percent of our business is word of mouth.”

“It’s referral. It’s huge...we do a lot of data collection...

we know that 87 percent of our business is referral.”

“Most business is word of mouth.”

Shows “We went to home shows, wholesale show...we went

to the holiday marketplace. So that’s how we started

out showing people what we were selling. We went to

the sportsmen’s show...I tried to stay away from...

bazaars because it’s all retail and I wanted to stay in 

the wholesale end of it.”

“So primarily we sell through gourmet products...the

nice thing about the gourmet products as a wholesale

show is it’s not just that you meet buyers, but you

meet other manufacturers. The networking between

other manufacturers is tremendous.”

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Innovation in the Forest Products Industry: an Analysis of Companies in Alaska and Oregon
26

GENERAL TECHNICAL REPORT PNW-629

Internet “I did the Web page when we first started...It’s been

very successful. I figure 70 percent of our clients have

been to our Web page...they’ve fought it out between

significant others on what size, what price, everything

before I get them.”

“My only marketing tool of any significance is the

Web site.”

“I sell directly off my Web site as a retailer. But it’s

not significant. It’s maybe one or two orders a month...

I haven’t really done much with the Web site and 

with marketing it.”

“We hoped that the Internet site would be functional

enough and we were wrong...Internet sites are just like

anything. It works, but if you’re not fully committed to

it, you get no results.”

A few forest products companies have tried television ads, radio announcements, free promotional products, door-to-door selling, cold calls, and magazine

ads, although these tools were in the minority.

Marketing tactics— 

The companies interviewed were oftentimes pursuing one of two tactics in marketing their innovative products: segmentation or differentiation. Segmenting serves

to divide a market into smaller niches with specific needs. A company using this

tactic targets its products to satisfy a niche market need. Differentiation works to

separate or differentiate a company’s product from that of the competition. In theory,

this difference enhances the value of the product in the customer’s mind. 

Marketing tactics of forest products companies

Tactic Supporting quotations

Segmentation “We checked into doing ads at the theatre too. You

know, aimed at certain types of movies, certain types

of people who are going to buy our product. We certainly have a pretty good idea [of who will buy our

products]...they have to be able to afford your product.

Middle-income to high-income bracket is where our

product usually goes.”

The companies

interviewed often

pursued segmentation or differentiation

in their marketing

tactics. 
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Innovation in the Forest Products Industry: an Analysis of Companies in Alaska and Oregon

“It was an opportunity to set up an either/or, which is

always nice in marketing. Knotty, displayed, less

money. Clear, functional, more money.”

“You think of yourself as being the customer and

you’re not...It’s taken me a long time to realize that

I’m not who I’m targeting. I’m targeting the guys who

work for Bill Gates. I’m targeting people that have a

lot more zeros after their bank account number.”

“Well let’s talk about target markets. There’s the distributor, there’s the flooring retailer, and there’s the

architect/interior designer market, and the homeowner.

Each one kind of requires a different approach...but

start with one market category, learn it well, do it well,

know the marketing tools to really be successful there,

and then expand once we have success instead of trying to diversify.”

“The window companies are redesigning their entire

product line with the idea of creating...their goal is to

produce a more segmented marketing approach and try

and come in with some very good price pointed windows on the bottom end of the market with the effort

to compete against the vinyl window.”

Differentiation “The transition for marketing for me was...where I 

figured out that I could do them as a kit.”

“One of my ideas...to take [the furniture] further, is to

put tags on it. Give a description of the piece and the

harvesting and that....Another thing I wanted to do was

to scoop out an area and stamp our name on it with a

logo on it somewhere. ‘Cause it comes from Fairbanks,

Alaska, and I think people would like that.”

“We came up with a marketing plan to... distinguish

our [product] as different from everybody else’s...

We’ve focused very hard on explaining the fine points

of [our product], the difference...explaining essentially

why it works to the benefit of our customers...I think
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GENERAL TECHNICAL REPORT PNW-629

we’ve successfully created... a very recognizable brand

that is definitely unique in the market”

“Our marketing concept is build the very best product

and then present it and promote the fact that it’s the

best product. But it has to genuinely be the best product...you have to create the best design, the best product, the best function...the whole marketing concept is,

I think, misleading for a lot of people....You find a

need and you address it and you solve it. That’s what

innovation is.” 

“We have fairly unique stuff and we’re not trying to

sell to the person who is looking for a #2 red oak...

what we try and do is position ourselves as the provider

of fairly unique floorings so we’re not going to compete price-wise with that lower grade common floor.”

Market Information (Concept 8)

The majority of companies interviewed had no formal marketing research efforts.

As with marketing, there is some evidence to suggest that companies may outsource

their marketing research activities. Of those who attempt marketing research,

searching the Internet, magazines, and books; asking employees; attending conferences; conducting surveys; making field visits; and networking with other manufacturers are among the methods that companies may choose. Only one company

of the 18 interviewed had formal marketing research techniques. The president of

that company stated, “It’s so important for a company to know who their customer

is and to know as much about the customer as possible. So we do annual surveys

of our customers... to find out [about] demographics and design tastes.” 

When asked why marketing research is not attempted, companies most commonly cited lack of time and money.

Product Planning (Concept 9)

Product planning includes three topics: drivers of innovation, resources helpful in 

planning innovations, and the stages of the innovation process. 

Drivers of Innovation

The drivers of innovative activities in interviewed companies can be easily

split into two categories: external and internal drivers. A list of the external drivers

of innovation identified in the interviews follows.
29

Innovation in the Forest Products Industry: an Analysis of Companies in Alaska and Oregon

External drivers of innovation in forest products companies

External drivers Supporting quotations

Environmental pressures “The pressures from a lot of outside interest [and] 

environmental changes, everything else was sort of

working on the industry.”

Governmental pressures “The government people have been talking about

value-added for a number of years...so that’s why we

decided to do something to it.”

Customer pressures “Probably our relationship with our customers... 

working together you find better ways to do things.”

“So if you look at innovation, what drives innovation?

To a certain extent, our customers are driving the need

from innovation on the distribution side because of

cost. So really the customer is trying to pull that innovation through the process so we can get continued 

cost reduction.” 

Competitive pressures “Innovation really is driven, a lot of times, by crisis

competitiveness. Where if you have one company, even

if they’re very good, they may not be competitive unless

they’re forced to....I can’t think of any examples where

innovation has happened in a void. It’s always happened in a cooker with a variety of people.”

“But very, very stiff competition that way...in part due

to our own mistakes in thinking that we’ve got it all

down. We’re the number one supplier and nobody else

can bust into us. That, oh yeah, we did have to improve

our quality and, oh yeah, we did have to improve our

delivery, and, oh yeah, we had to make better machines...

that’s part of the external push to change how we do

things.” 

There are also significant internal drivers that put pressure on forest products

companies to innovate. The two main internal drivers are employees and company

needs.
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GENERAL TECHNICAL REPORT PNW-629

Internal drivers of innovation in forest product companies

Internal drivers Supporting quotations

Employees “All of our maintenance people, they come up with

lots of ideas and you just have to work that one. That’s

the advantage of a small company. You don’t get

locked into that corporate structure.”

“There’s probably more internal innovation...the

requirements, quality wise, that we’ve had to go

through have required a lot of innovative thinking,

innovative processes and stuff like that. But even when

things were fairly stable as far as the product that we

were making at that time, there was a lot of internal

pressure to change, to do something different, to do

something better. So I think there’s a strong internal

need to change.”

Company needs “When you look at what drives [innovation, it] was not

so much the customer’s desire, it was our need to sell

wood....We had to push this wood into the market. We

had to find a market and we had to find a way to get

the market to accept it.”

Resources

In general, companies could not recommend many resources that were helpful in 

planning innovative projects. Several companies mentioned the local chamber of

commerce and builders and manufacturers associations as useful for networking

with other manufacturers and a way to meet local suppliers. One company mentioned a formal seminar that was helpful in marketing products to Japan. 

One manufacturer in Oregon commented that a product champion or visionary

individual is an essential resource in any company. He says, “You find that the

company was started by somebody who really loved that product and just had a

tremendous passion. I think that’s a requirement.”

Innovation Process

Most interview discussions focused on the innovation process. Overall, the companies interviewed did not have a formal innovation process; there was no manual

or official company policy on this topic. Although the process is often influenced
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Innovation in the Forest Products Industry: an Analysis of Companies in Alaska and Oregon

by company strengths and skills, gut feeling, being in the right place at the right

time, luck, and accidents, there are identifiable stages to the innovation process.

These stages are not completed in any particular order. Instead, forest products

companies use a tailor-made approach specific to their company’s needs. Rather

than going through all stages, the interviews showed that forest products companies

tend to pick and choose an innovation process based on their unique needs.

Stages of the innovation process in forest products companies

Stage of 

innovation process Supporting quotations

Idea generation “The process: how we can load things better, how we

can get it out better, how we can make movement...

keeping equipment repaired. Keeping an equipment log

of who’s done what to what. But most of our products

have developed because we’ve thought about it.”

“Probably 98 percent of the product ideas come from

my head, although a few originate from customers.”

[Paraphrased] At the start of the NPD process we have 

a brainstorming session with employees, board of

directors, customers, and salespeople to generate new

ideas.

“Anything that comes down the pipe...that’s something

within our realm of doing without tipping over the

cart.”

“We’ve created things by accident but those things

came as the result of a lot of hard work and the typical

capitalistic drive. It didn’t come about wondering.” 

Screening “The cuteness factor...any building won’t do. It’s got 

to be cute and well built.”

[Paraphrased] All products go through a design check

where we question its feasibility and its manufacturability. 
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GENERAL TECHNICAL REPORT PNW-629

“I think more than anything...the design of the product

is determined by the machinery. You want to make it

efficiently. You want to make it as cheaply as possible.

So we develop everything so that it can be created by

the router.”

Design “So for the last year and a half there’s been a significant R&D effort and design effort to put a brand new

window on the market. [Our customer] in a lot of ways

drives much of the process through product specs,

product lines, at least initially. Then we come back in

with offering various engineered products and various

changes to patterns to reduce the amount of wood and

keep the part within the standards of our industry...and

we also introduced LVL into the window, which they

hadn’t integrated before.”

“I played around with different assembly techniques,

different sized roofs, and different body sizes, and different length sizes, and then different types of roofs.”

Samples/prototypes “Sometimes we’ll make a prototype. With the furniture

we make prototypes of pieces.”

Trial and error/testing “We sent some [samples] down with their local rep 

to a regional meeting. It was one of these last-minute

things and he came back very positive.”

“I drilled 100 [products]. I tried drying them in the

microwave, and I tried putting in cat litter so it would

pull the moisture out. I tried doing it in the oven, and 

I tried polyethylene glycol...it’s supposed to keep

wood from cracking...that didn’t work. I tried every

experiment I could do.”

“We jump up and down on [the furniture] to see how

much of a load they can carry at the joints. And so you

find out...that’s going to fail and we don’t want to deal

with that. We want it to change it around.”
33

Innovation in the Forest Products Industry: an Analysis of Companies in Alaska and Oregon

“A lot of trial and error, lots of trial and error...I

revamped and designed a bit of my own so I can 

interchange lathes.”

“We did it by field testing.”

“[Wheatboard] repels water 100 percent better than

particleboard because the straw itself has a flaxen

cover on the outside. Then we put the plastic polymer

in there and it just repels water. We floated it in a goldfish pond for a month and it didn’t sink. Particleboard

was at the bottom of the goldfish pond the next morning. And the MDF was like oatmeal and mush and

sunk two days later.” 

Customer involvement “Before we do it we’ll draw up a real shop drawing 

or a plane drawing and fax it to [the customers] and

[they] have to approve it. Or they’ll say, ‘Well that

sounds OK but I want this, this, and this done.’ So

then you sit down and you really start drawing it and

you incorporate all those different changes. You just 

go through that process with a customer.”

“We did it by...talking with consumers and storeowners.” 

“Usually what happens is the customer comes to me

and says, ‘I need a such and such.’ Then I say to [my

husband], ‘I need a such and such, make me one.’

Then he’ll design what he likes. Then I put in my two

cents and we end up with a finished product.”

“Ninety percent of the time what we are making satisfies [the customer’s] needs. It’s the 10 percent of the

time, which is the leading edge of innovation, where

they need something that we don’t have or they can’t

find. At that point, we have to greet them, we have to

find something in common and then we have to say,

‘Well what was it that you are looking for’...you 

deliver a product that satisfies a problem.”
34

GENERAL TECHNICAL REPORT PNW-629

Employee involvement “[Our employees] keep saying, ‘What if we could?”

“We had one of our employees take the slab that we

cut out of the middle, which is part of the heartwood...

and he takes it and makes some matching spoon and

fork sets. So we buy those back from him. We supply

the wood, he supplies the labor, and we buy those

products back...I think we maintain a supplier-customer

relationship as well as an employee-employer relationship.”

“One of our employees...he’s a very articulate artist.

He’s one of our cutters...and this guy is extremely

talented, irritatingly talented. He says he puts on his

headset and when the classical music is over with, he

happens just to be finished...so again, an employee

starting something...so henceforth comes the [product].”

Plant layout “Basically they came in with a crew. They went

through the plant and they timed everybody...they

made a map of the plant layout...we came up with a

better design for all of the equipment...moved all the

equipment around, set it up, moved the duct system,

all the electrical system.”

[Paraphrased] We have a separate building for developing new products so that we don’t have to stop production in the main building during the design phase.

“One of the things that I, as a manufacturing designer

[do is] I go into their businesses and say ‘OK, where

can we streamline? What can we do here?” Sometimes

its just lining up so you’re not carrying wood from one

place to another place...setting up your equipment in a

fashion that allows the wood to just flow through...

Little things that I think most larger manufacturers do

anyway but bringing that down to a smaller scale.”

Marketing “This is cute...and everybody says ‘Oh, ah, isn’t that

cute’...who would buy this? Well grandparents like to

visit their kids and gosh wouldn’t they like to get the
35

Innovation in the Forest Products Industry: an Analysis of Companies in Alaska and Oregon

kids something before they left? Well grandma and

grandpa probably have more money than the folks that

have a couple of kids at that age...so that would be our

market probably, grandma and grandpa. How would

we display it? Everything kind of goes [on display at]

the road, then it goes on the Web site.”

Types of Product Development

Product development efforts in innovative forest products companies were usually 

product improvements or line extensions. On occasion, a new product was developed, and in one company, a rapid product development process was undertaken

Types of product development in forest products companies

Development type Supporting quotations

Product improvement “The first hot tub, the original one was crude in 

comparison. A lot of different parts of it have been

refined.”

“Every client comes in and they’ve got their own

needs, wants, and desires for the look of their building...we do two sizes of trusses for the garages and 

the cabins. We have an engineered stamp. If you have

every size, you can’t do that...we can keep a standardsized look design with a couple odds and ends changed

...the basic design, that’s where we can produce it at 

a really fair rate.”

“Part of it is just better equipment in the shop

and...making them dependable enough...So I had to

make the fit up that much more accurate and just 

accuracy mainly on the whole thing.” 

Line extension “We ended up with a third product. Most people would

call it a second, sort of a throw away [product]. But

out of that we developed our bird feeder...and I would

venture to say this is probably the only place where

you’ll find that type of bird feeder. We used to sell

them for $12 or $15 apiece and just happy to get that.

Product development

efforts were most 

often product 

improvements or 

line extensions.
36

GENERAL TECHNICAL REPORT PNW-629

But by going back and putting a little bit more work

into the [product], putting a brand on it and getting it

to where it really looked better and was shaped better,

we were able to generate three different sizes.”

“I was trying to create different price points and 

more products out of the same parts...there are about

10 different lengths that we cut, and I bet I’ve got 80

different products.”

“You have to have a line. You have to have enough to

show them. If you show them 12 items then they’ll be

excited and they will pick out the 3 they like best. If

you show them two items, they’ll say, ‘Well that’s

nice’ and walk off.”

New product development “Another product I want to expand into is predrilled

kits where they can use that electric, cordless screwdriver, like a flashlight. Real easy to hold, two hands,

push the button, the screw goes in. And this 3-year old

girl says, ‘I can build a bird feeder.’...They’ll have a

totally different attitude the rest of their life. It’s true.

So those are the things that we can make money at

doing.”

Rapid product So a week before the show we designed the [proddevelopment uct]...we did all of those in like the week before the

show. It’s like quick samples, quick get them in the

box, and quick get it to the show. It was great. We 

got a tremendous response.”

Overall Innovation Process

Two interviewees summarized their innovation process in a paragraph or less. 

They provide good examples of the innovation process in forest products companies. 

The first is an example of a product development process. 

We boil it down to a five-step process and it happens both at a retail level 

and it happens on a national level...the first step is, you have to genuinely 

greet someone. You have to be able to greet the customer at whatever level.

The second step is the one that is most lacking in industry...you have to have

something in common with that person...maybe you went to the same college,
37

Innovation in the Forest Products Industry: an Analysis of Companies in Alaska and Oregon

maybe you’re both Scandinavian, maybe you’re both football players, maybe

you both like kayaking, but that’s a required step in the innovation process.

You have to have something in common with that person. And the reason is...

if you don’t have anything in common with that person, then the customer or

the end-user won’t let you go to the next [third] step, which is asking questions

to find out, to understand the need. The fourth level is addressing that need. Of

course the fifth is the application of it. 

The second is an example of a process development process.

There seems to be a certain series of steps that everything goes through.

There’s the concept phase...how [will] it remove material? How is it going 

to shape the basic handle? What is it going to do...then there’s a design 

phase. Actually how do you build [it]...how do you put the steel and components and that kind of stuff together to do that, the concept. And then 

there’s the fabrication of the machine to put that design together, to put it 

into real time. Then we test it. We’re starting to debug it, and this machine 

will have a lot of debugging to do. Then there’s basically production testing

and production. Maintenance...we hardly ever design our machines with 

maintenance in mind...After maintenance comes the end of the life cycle 

on that machine. So phase it out and get something else. 

Comparing Alaska and Oregon Companies

Definition of Innovation

In general, companies in Alaska and Oregon have similar ways of defining an 

innovative forest products company. However, there were two subtle differences.

First, Oregon companies tended to define innovation in terms of the process

whereas Alaska producers were more focused on the product. Secondly, several

Oregon companies felt that unique business arrangements and structures could be

termed innovative in the forest products industry. Furthermore, two Oregon producers identified cost-efficiency as an innovative characteristic. Neither of these

characteristics was used by Alaska companies to define an innovative forest 

products company.

Product Focus (Concept 1)

There does not appear to be any distinct difference in whether Alaska or Oregon 

companies focus on commodity or specialized products. Both regions seem to have

a mix of commodity and specialized products in their product lines.

Oregon companies

tended to define

innovation in terms

of the process

whereas Alaska 

producers were

more focused on 

the product.
38

GENERAL TECHNICAL REPORT PNW-629

Competitive Advantage (Concept 2)

Alaska companies cited flexibility, local resources and workmanship, and efficient 

material utilization as key competitive advantages, whereas Oregon companies

mentioned shorter supply chains, reduced costs, and unique approaches to marketing. Both regions make use of technology, focusing on customers, quality, and outsourcing of activities to gain a competitive advantage.

Customer Focus (Concept 3)

Customers are important to the innovation process. However, Alaska was different 

in that companies used customer suggestions for design improvements and to personalize the product. In addition, Alaska companies focused on customers in hopes

of yielding repeat purchases. On the other hand, Oregon companies more often

used customer feedback to improve existing products. In addition, Oregon companies were more likely to get new product ideas from customers.

Management (Concept 4)

As mentioned previously, most of the companies interviewed did not have any 

formal management structures in place. However, Oregon was more likely to have

a more organized system in place. This is probably due to company size rather

than regional differences; the companies interviewed in Oregon were slightly larger

than those in Alaska. Several companies in Oregon and the largest company interviewed in Alaska had experimented with different management structures and

delegating greater responsibility farther down in the organization. Overall, the

smaller companies (1 or 2 employees) in Alaska and Oregon were managed similarly, whereas the somewhat larger companies (5 to 50 employees) were managed

differently from the small, although similarly across regions.

Organization (Concept 5)

Of those companies interviewed, there did not appear to be significant differences 

in the organizational cultures of Alaska and Oregon companies.

Planning and Information Systems (Concept 6)

As mentioned earlier, this concept was eliminated once the research began because 

it was irrelevant for the companies interviewed.

Customers are

important to the

innovation 

process.
39

Innovation in the Forest Products Industry: an Analysis of Companies in Alaska and Oregon

Marketing Communications (Concept 7)

The pricing of new and existing products posed significant challenges in both 

regions although Alaska companies struggled with it a bit more. This probably is

due to the remoteness and lack of resources available to most Alaska companies.

For example, it would be difficult for an Alaska company to obtain a competitor’s

price list when there may not be another producer in Alaska. If that were the case,

it would be impossible for that company to pair its pricing with a company in the

Lower 48 States because the cost structure is drastically different (e.g., shipping,

labor, and materials). 

Although the companies interviewed in both regions used a variety of marketing tactics, the Alaska producers use displays, phone books, newspaper ads, and

shows more often than Oregon producers. Most companies interviewed claimed

that word-of-mouth advertising is one of the more important means of obtaining

new customers. Furthermore, there are companies in both regions that use a mix 

of segmenting and differentiation marketing tactics.

Market Information (Concept 8)

Although market research activities are limited in both regions, some companies 

choose to conduct more informal types of market research. Alaska companies that

attempt to informally gather information more commonly used the Internet, employees,

field visits with other manufacturers, magazines, books, and conferences. On the

other hand, one Oregon company focused on formal customer surveys, and several

others outsourced market research activities to partner companies, suppliers, or customers. Companies in both Alaska and Oregon relied on conversations with fellow

manufacturers (networking) as an informal means of obtaining market information. 

Product Planning (Concept 9)

The factors that drive innovation differ from region to region. In terms of external 

forces, Alaska is more driven by environmental pressures and government regulations whereas Oregon companies are more influenced by customer pressures and

competitive forces. In terms of internal drivers, both receive pressure from employees,

but only Oregon companies indicated that internal company needs drive innovation. In general, among the companies interviewed, the innovative pressure is more

external in Alaska and more internal in Oregon. 

There are no recognizable differences in the resources that were used to plan

innovative projects. Both regions seemed to draw the most benefit from networking with other forest products companies.
40

GENERAL TECHNICAL REPORT PNW-629

There are differences in the paths that the interviewed companies take through

the innovation process. In particular, the screening stage seems to be implemented

more often by the Oregon companies. In addition, the Alaska companies were more

likely to make samples and prototypes of innovative products. This is probably

because most innovative activities in the Alaska companies were focused on products. Oftentimes it is not feasible to make samples of the process type innovations

that were more common in the Oregon companies. Although the interviewed companies in both regions use customer feedback and attempt to include customers in

the innovation process, this occurred more often in the Oregon companies. Again,

this likely is due to the remoteness of many companies in Alaska. Of those interviewed, Alaska employees were more involved in their companies. This is probably

because of the smaller size and the more family-oriented work environment of the

Alaska companies interviewed. Oregon companies were more concerned about

plant layout and material flow considerations than were the Alaska companies.

This is expected as the innovative activities in Oregon are more process oriented.

Of the types of innovations that companies undertook, Alaska companies tended

to focus more on product improvements whereas Oregon companies concentrated

efforts on product line extensions or new product development.

Constraints on Innovation

A wide variety of internal and external factors constrain forest products companies

from pursuing innovative activities. The most commonly cited problems are listed

below.

Constraints on innovative activities for forest products companies

Constraint Supporting quotations

Government regulations “The Undersecretary of Agriculture just arbitrarily 

cut 100 million board feet per year off the allowable

cut with a stroke of a pen, no due process, nothing. 

He just chopped it...he said the market demand wasn’t

there...he just assumed...so after $13 million and 8 to

10 years of due process, he just [cut it with] a stroke 

of the pen.”

“Probably the biggest constraint to us right now, the

growing of our business substantially, is the Canadian

tariffs and antidumping they just imposed. A significant issue for [us]...we could have easily added 
41

Innovation in the Forest Products Industry: an Analysis of Companies in Alaska and Oregon

another $20 million to our business without it. But

with it, it all but eliminated some options we had for

growing our business.” 

Shipping and labor “Shipping and labor, I would say. That I-5 corridor, its

(mostly in the Alaska pretty tough to compete. Those guys down there with 

companies) lower wages and they ship out by truck...we ship by

bargeload or shipload.”

“It’s one of the more critical parts of this business,

skilled personnel. We’ve hired a lot of people here that

talk a big story and they come in here and they don’t

know as much as they claim to know.”

“I went through 50 people last year...keeping them is

tough...the government jobs pay $38.00 per hour for a

carpenter. I can’t compete with $38.00 per hour...why

are they paying so much? Why are they screwing up

the market? I don’t understand it.”

Machinery “There is lots of machinery that we could use to

upgrade. Our drill press is pretty ancient. We need an

adjustable table on our drill press...we spend a lot of

extra time horsing around...we don’t even have a lineboring machine. We should have a line-boring machine.

I mean that’s the machine that we need to have. It’s not

like we can pay a lot of money for them or anything. It

would help us be more efficient. It would save a little

bit of wear and tear manually on tools and the person

doing the job.”

“It seems like we never have enough machinery, or

enough guys, or enough good weather to get all the

logs we need.”

Raw materials “The Alaskan birch we have here is paper birch, it’s 

(mostly in the terrible stuff...there’s at least 50 percent waste right off 

Alaska companies) the get go...I would be willing to pay more money for

the material if the material was worthy of that. Instead

of having this broad range, every time you got an order
42

GENERAL TECHNICAL REPORT PNW-629

you would get an order of clear, straight-grained material...because we spend a lot of time sorting through

that; we sort through those materials.”

“[Consumers in the Lower 48 States] want the clear,

white wood. Eight percent of what you do is all 

you’re going to get of clear, white wood. That’s on a

good day. So you’re going to have to cut how many

millions of feet to get one million feet of clear, white

wood. It’s just stupid to even think that way.”

Drying capacity “We have a furnace room that we put stuff in and stack 

(mostly in the it up in there but it’s not very big. The furnace is going,

Alaska companies) in the wintertime it’s going pretty much all the time...It’s

not efficient...If we got any busier quite often we have

to schedule things further down the road just to wait

for materials to dry. So drying of materials is a biggie.”

“I haven’t been able to keep up with the demand on

some things. The kiln doesn’t hold enough volume.

I’m at a point where I’m maxed out here as far as how

much wood I can get through here.”

Supply “I’ve never gone out there and tried to [aggressively]

sell myself because I was always worried about the

supply...The worst thing you can do is promise somebody something and then not deliver it. That’s terrible.

You’ve not only shot yourself in the foot with that 

person, but you’ve shot yourself in the foot with every

person that that person knows.”

“There’s the supply problem of...the environmental

groups constantly [taking] away the supply...whether

there is going to be logs or not. That creates uncertainty

among someone who is going to go ahead and try to

do the logging end of it....If I can have that supply

there where I didn’t have to worry about it...I could

focus my time and energy into the business aspect of

it, instead of the political aspect.”
43

Innovation in the Forest Products Industry: an Analysis of Companies in Alaska and Oregon

“One of the constraints would be wood fiber...just

being able to get enough domestic wood for the

process and stay competitive.”

Cash flow “Being undercapitalized is a problem for most small

businesses. The bank is not going to lend you a bunch

of money because you don’t have anything.”

“Cash...cash and also manpower. But manpower is

tied to cash. If you had the cash you could hire the

qualified people that you need.”

“There started to become a market. It was more [a

matter of] no money in it. We had to come up with

money to cut it. We had to come up with the money to

dry it. We had to sit on it until it sold...If you sit on it

too long it cracks and splits.”

Market “What’s our biggest stumbling block? I always say

market because they’ll say, ‘Is it supply?’ ‘Is it financial?’ It’s not...because if the market is there, the rest

just falls into place.” 

“One of the challenges we’re faced with is the byproduct. Right now we’re faced with chips, getting rid

of our chips.”

Limitations

This research was conducted with a small sample of forest products companies in

Alaska and Oregon. The sample was not randomly chosen; therefore no inferences

can be drawn for the larger population of forest products companies in either state

or on a nationwide basis. The results presented in this paper are limited to those

companies interviewed and represent their opinions and ideas about the topics

explored.

Conclusion

Because there is a lack of innovation research in the forest products industry, this

study attempted to fill that void by examining innovation through various concepts. Interviews with innovative forest products companies in Alaska and Oregon

revealed several aspects of innovation in the forest products industry. 
44

GENERAL TECHNICAL REPORT PNW-629

Product focus—These results can be summarized into two groups: product innovation and production innovation. Many companies stated that their innovative

advantage lies in the production process rather than the product itself.

Competitive advantage—Innovative companies draw on a variety of competitive

advantages in order to survive in the forest products industry. These include flexibility, adding value to the product, material characteristics, and environmental 

sensitivity.

Customer focus—Customer focus was found to be a major source of innovation.

Companies found that customer focus leads to improved products, repeat purchases,

and new product ideas.

Management—Innovative companies differ in the type of management structure

they implement. The most effective structure seems to be one that has clear leadership and allows ideas to be transferred through two-way communication.

Organization—In small companies, organization culture tends to mirror the proprietor, whereas in larger companies culture is influenced by a variety of working

environments.

Planning and information systems—Respondents had very little experience with

planning and information systems.

Marketing communications—The major marketing tools used by respondents

were product displays, print ads, word of mouth, tradeshows, and the Internet.

Many companies stated that word of mouth was the most important venue for 

finding new customers.

Market information—A majority of these innovative companies did not engage in

formal market research because of the lack of time and money. Rather they relied

on informal methods such as field visits, books, magazines, and conferences.

Product planning—The results showed that innovation sometimes is the result of

planning and execution. However, often innovation is a natural progression influenced by gut feelings, being at the right place at the right time, accidents, and luck.

The innovation process is a combination of semiformal development stages,

trial and error, intuition, and luck. A variety of factors constrain companies from

being more innovative including government regulations, shipping and labor costs,

lack of cash flow, raw material characteristics, marketing expertise, and supply.
45

Innovation in the Forest Products Industry: an Analysis of Companies in Alaska and Oregon

Offering producers the chance to exchange ideas and network is the most valuable

resource available.

The innovation environments in Alaska and Oregon are somewhat similar, 

yet different in the marketing tactics employed and the techniques used to obtain

market information. Furthermore, the type of development projects that each

region focuses on differs, as does the actual process used to develop innovative

projects. 

Future research should focus on completing a quantitative component to this

study, developing short courses or 1-day seminars, identifying factors that contribute to innovation success and failure, investigating why the forest products

industry is not innovative by nature, and exploring the external acquisition of 

innovation. 

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CA: Sage Publications. 170 p.
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Innovation in the Forest Products Industry: an Analysis of Companies in Alaska and Oregon

Appendix: Previous Research

Studies that examine innovation in the forest products industry are few and far

between. However, there have been several noteworthy studies over the last 15

years. Calantone et al. (1995) completed one of the few product development 

studies in the forest products industry. 

These researchers attempted to find a link between performance of certain

innovative activities and business performance in the furniture industry. They evaluated eight product development activities (discussed in 2.1.1.) for their effect on

six business performance measures: 

• Return on investment (ROI)

• ROI growth

• Return on sales (ROS)

• ROS growth

• Market share

• Market share growth

Their results show that:

• Top-performing companies place a greater emphasis on innovative activities

than do other companies.

• Innovative activities have a strong positive influence on ROI and ROI growth.

• Most innovative activities are related to increases in all performance measures.

• Overall company performance is linked to excellence in innovative activities.

Other research in the furniture industry was recently completed by Bumgardner,

et al. (2000) in their investigation of product development and marketing issues

surrounding character-marked furniture. Through the use of interview-based case

studies, they examined the influence of designers, retailers, and product design on

the successful development and marketing of character-marked furniture. They

found that retailers are persuaded to buy from manufacturers with a reputation for

“design proactiveness.”

In another study involving the furniture industry, determinant attribute analysis

was used to determine which physical characteristics of furniture are most important in a consumer’s purchase decision (Trinka et al. 1992). These results were in

turn used to develop products that fit the needs of consumers, thereby creating a

competitive advantage in the marketplace.

More recently, Cohen was involved in a study of technology in sawmills (Lee

et al. 1999). This study focused on the interrelationships among innovation, quality
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GENERAL TECHNICAL REPORT PNW-629

control, and markets. They found that markets have a dramatic influence on innovation because they dictate a manufacturer’s ability to survive and sell products.

Finally, Nystrom (1985) completed case histories of 14 new products developed by 4 pulp and paper companies in the 1970s. In his research, Nystrom distinguishes between what he terms an “open strategy”and a “closed strategy” to both

the technology and the marketing environments. These differences are shown in

table 4. In his research of several industries over a 10-year period, Nystrom found

that companies that pursue a more open strategy, both in technology and marketing

environments, are more likely to be successful in product development. 

The Forest Products Industry in Alaska and Oregon

Size

Parrent (2000) listed over 160 Alaska companies in the secondary forest products 

sector, most of them small operations (usually fewer than 5 employees). Companies

listed in this directory focus on a variety of products including house logs, prefabricated buildings, furniture, certified “Made in Alaska” products, artwork, carvings,

bowls and utensils, musical instruments, molding, cabinets, craft products, and

other specialty items. These smaller secondary companies also abound in Oregon.

As of June 2000, approximately 130 companies were listed as primary producers in Alaska (Parrent 2000). These companies mainly concentrate on manufacturing lumber, cants, railroad ties, siding, decking, shingles, and timbers. However,

the average Alaska sawmill operates one shift a day, 150 days a year, and has only

seven employees (Laufenberg and Brady 2000). This is in stark contrast to the

larger producers in Oregon and Washington who operate 24 hours a day, 365 days

a year, and with thousands of employees.

Table 4—Open strategy vs. closed strategy

Open strategy: creative Closed strategy: focus 

potential for changing, for efficiency in stable

uncertain environments environments

Technology orientation External to firm Internal in firm

Technology use Interdisciplinary Intradisciplinary

Product line focus Diversification Modification

Customer focus New Existing

Product design General needs Specific needs

Process design General production Specific production
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Innovation in the Forest Products Industry: an Analysis of Companies in Alaska and Oregon

As a result, the majority of research to date is focused on the secondary sector

of the industry. It would be too difficult to compare the primary industry across

regions because of the large fundamental differences. 

Market Access and Competition

Because Alaska markets are small and the cost of transportation within Alaska is 

extremely high, most of Alaska’s wood products are exported to the Lower 48 States

or to overseas markets, especially to Japan (Wurtz and Gasbarro 1996). However,

access to markets in the Lower 48 States is difficult for Alaska because of the

remoteness of most producers and the constraints of shipping products on barges.

In contrast, Oregon producers have access to trucking and rail corridors and therefore much greater market assess within the United States. 

The domestic market within Alaska is relatively small and insufficient to solely

support the industry. However, a local forest products market exists in Oregon and

the surrounding Pacific Northwest (PNW) region.

Recently, Alaska forest products producers have received more competition

from European (primarily Scandinavian), Canadian, and Pacific Northwest companies (Brooks and Haynes 1997). The Oregon industry has received more competition from Scandinavia, Canada, New Zealand, and South America.

Supply

The Alaska industry is also complicated by a decreasing supply of commercial 

timberlands. As of 1994, 1.7 million acres of commercial forest land existed in the

Tongass National Forest of southeast Alaska, the largest timber base in the state.

This acreage had decreased from 6.4 million owing to the reclassification of lands

and transfers to private, Native corporations (Wurtz and Gasbarro 1996). 

This decreased timber supply has placed constraints on forest products companies and will force the industry to consolidate and use a shrinking resource in a

more efficient manner. In a study completed by Rule and O’Laughlin (1990), one

panelist reported that “Alaska’s timber industry needs innovative planning, management, and investment to properly utilize the resource.”

The supply of timberlands in Oregon, at least on public lands, has been similarly scarce throughout the last decade. However, the larger Oregon primary producers have been able to stay afloat through their private timber holdings. Alaska

producers, those in southeastern Alaska in particular, do not have this luxury as

nearly all the harvestable timberland is in government hands.
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GENERAL TECHNICAL REPORT PNW-629

Costs

A recent report produced by the Center for Industrial Trade and Forest Products 

Marketing at University of Washington compares the primary producers in the

PNW (Oregon, Washington, and British Columbia) to those in Alaska (Braden et

al. 2000). From table 5, it is apparent that Alaska producers will have difficulty

competing in the primary wood processing industry when shipping to 

the Lower 48 States.

These higher production and shipping costs along with size, market, competition, and supply factors are all unfavorable for the primary forest products industry

in Alaska. In fact, lumber shipments from Alaska to Japan decreased by nearly 90

percent from 1990 to 1996 (Brooks and Haynes 1997). This also is due, in part, to

newer products (i.e., laminated veneer lumber and other engineered wood products)

that have received increased acceptance in Japanese markets and have contributed

to the decline of Alaska lumber producers’ competitive position in international

markets. Consequently, more emphasis is now being placed on developing Alaska’s

secondary forest products industry.
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Innovation in the Forest Products Industry: an Analysis of Companies in Alaska and Oregon

Table 5—Producers in PNW (Oregon, Washington, and British Columbia) compared to 

producers in Alaska 

Alaska PNW

Percentage of manufacturing 50% 21%-27% 

costs in the cost of lumber

Labor costs 65% higher than the PNW

Number of employees in Half employ fewer than Usually 100 or more

an average sawmill four people

Harvesting costs High due to high labor, fuel, 

and transportation costs, as 

well as minimal road 

infrastructure

Processing technology Low High

Manufacturing costs High due to smaller Lower due to gains in 

economies of scale efficiency, processing 

technology, and 

infrastructure 

improvements

Competitive advantage High-quality wood Efficiencies in harvesting 

and manufacturing

Transportation Shipped by barge to Lower Shipped by truck and rail 

48 States throughout the United States

Energy costs in 1995 9.8 cents per kilowatt hour 3.25 cents per kilowatt 

hour; more cogeneration 

plants

Domestic market Very small Large

Cost to produce 1,000 board $370 $170

feet of lumber in 1995

Source: Braden et al. 2000.
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