Creative Change and Innovation: Nicolo’s Italian Bakery & Deli

Introduction

It is hard to disagree that many small and medium sized companies may seem prosperous and successful, but they actually have a number of problems that prevent them from getting higher revenues. There are many examples of such enterprises in the baking industry. It was and still is a dream of many families to start their own business and pass it on from generation to generation, and many people choose to open bakeries. Indeed, delicious and fresh-baked bread, biscuits and cupcakes made with top-quality ingredients attract many customers, and one can earn money from it. Nevertheless, many of these bakeries stop developing further after achieving local success, and their owners are unable to increase profits and reach a higher level because of the lack of change management (Barrow, Annamaraju and Toney-Butler, 2017).

The Company’s Background

One such bakery is Nicolo’s Italian Bakery & Deli, located in Montclair on Baldwin Street, New Jersey. It was founded in 1967 by Nicolo Zecchino, who in his youth got involved in the bakery trade, and later his own bakery became the culmination of his knowledge, hospitality and passion (Nicolo’s Italian Bakery & Deli, 2021a). Nowadays, Nicolo’s Italian Bakery & Deli has an estimated 107 employees and is operated by the Zecchino family.

According to the company’s website, it “specialises in Italian Bread for both retail and wholesale customers, homemade lunch and dinner platters for pickup or catering, fresh deli sandwiches and salads, and Italian specialities such as homemade pasta and sauces” (Nicolo’s Italian Bakery & Deli, 2021a). Therefore, this bakery provides the finest baked goods, not reducing the quality, and has gained a great reputation among its customers.

The Corporate Culture

It is also essential to talk about the mission and values of Nicolo’s Italian Bakery & Deli. This information may be found on the enterprise’s website. The bakery’s mission is to follow the initial principles implemented by Nicolo in 1967 and make sure that all clients are provided with unparalleled service excellence (Nicolo’s Italian Bakery & Deli, 2021a). As for the values of the enterprise, they include food, community and family, which is entirely reflected in the company itself (Nicolo’s Italian Bakery & Deli, 2021c). The owners of the bakery do not mention its vision on the website, but it is possible to suggest that it is connected with honouring the company’s founder and increasing customer satisfaction. However, since the current owners do not depart from the old principles that have guided business decisions for the past fifty-five years, the bakery is resistant to innovation and change.

The Purpose of the Presentation

The purpose of this assignment is to analyse the business strategy and conditions of the chosen bakery, explore the problems that prevent it from innovation, including limited resources, and then define its advantages like fast decision making and high flexibility that may help it prosper. In this presentation, innovative change solutions will be proposed with the help of an innovation management model.

Analysis Methods

The analysis methods used in the following section describe the existing triggers for change (Dawson and Andriopoulos, 2017). Corporate issues are analysed at three levels, including macro-environment, industry environment and internal corporate environment.

PESTEL Model

PESTEL model is a special tool that allows professionals to analyse a business’s external conditions (Perera, 2017). The model consists of six aspects, and in this presentation, they are used to evaluate the general environment of the country in which the company is located (Corporate Finance Institute, 2021).

1. Political factors: Trade tensions between the U.S. and China impact the American economy and businesses and make taxes grow. According to the Bureau of East Asian and Pacific Affairs (2020, para. 4) “PRC’s abusive and coercive economic practices in the trade space” worsen the situation in the U.S. Additionally, there is an increasing level of corruption in the country. Economic factors: Higher taxation and inflation negatively affect the company’s operations and reduce its revenue, and “many small businesses struggle to grow and compete globally due to a tax code” (The White House, 2021a, para. 2).
2. Social factors: Most people in the U.S. prefer fast food and are likely to become the clients of Nicolo’s Italian Bakery & Deli. Still, there are also persons who choose pastries made from natural and quality ingredients, and this is what the bakery is proud of. Further, Americans can be divided into those who support small enterprises and those who do not.
3. Technological factors: There is a rapid development of technologies in the U.S. (U.S. Department of State, n.d.), and now business owners have to use new technological tools to promote their companies or provide clients with more services.
4. Environmental factors: Problems with ecology and Americans’ awareness of them make business owners pay increased attention to these factors and spend a lot of money on avoiding plastic and unnecessary waste of food. The latter is a rather significant issue in America: “30 to 40 percent of the food supply is never eaten, wasting the resources used to produce it and creating many environmental impacts” (United States Environmental Protection Agency, no date, para. 2). Additionally, there are many natural disasters happening in New Jersey, including floods, severe storms and hurricanes.
5. Legal factors: There is a necessity to meet serious food safety standards (U.S. Food and Drug Administration, 2018).

PESTEL Model: Opportunities for Growth

According to the PESTEL model, several opportunities for growth are available for the bakery. First, it is possible to attract more customers by offering them fast food like pizza, muffins and sandwiches and also more healthy pastries like homemade salads and pasta. Further, the bakery may promote itself on social media and also offer its clients quality and fast delivery. Finally, joining the fight against problems with ecology by reducing waste may attract younger generations.

Porter’s Five Forces Model

Another model that can be useful for business owners is Porter’s Five Forces Model. It helps to assess the competitive environment in which companies operate.

1. Rivalry among existing competitors: In the U.S., there is a vast number of small and medium-sized bakeries with relatively similar goods, and they compete on client satisfaction, quality, price, and differentiation (Visual Paradigm, no date). However, according to the government, competition declines and “holds back economic growth and innovation,” which makes the situation controversial (The White House, 2021b, para. 6).
2. Threat of new entrants: As mentioned above, many people decide to open a bakery as their family business. Sometimes, they have something new and interesting to offer, and it may have a negative effect on the existing bakeries.
3. Threat of substitutes: Due to the current safety measures, it is recommended by the government to limit food service to “drive-through, delivery, take-out, and curb-side pick-up” (Centers for Disease Control and Prevention, 2021, para. 2). Therefore, many customers may choose to reduce social contacts and buy food once a week to cook meals at home.
4. Bargaining power of buyers: Since there are many bakeries, clients can choose between them, and this is why they have power over companies because enterprises have to lower their prices in order to attract more customers.
5. Bargaining power of suppliers: Suppliers do not have much power over bakeries because of the commoditisation of their products.
6. As for the actual threats that Nicolo’s Italian Bakery & Deli face because of high competitiveness, one of them is the threat of substitutes (due to the economic problems caused by COVID-19, more and more people are trying to spend less money and cook at home). Further, there is also rivalry of the chosen bakery with existing competitors who have also been on the market for a long time and use quality products.

VRIO Model

After analysing external factors and the environment affecting Nicolo’s Italian Bakery & Deli, it is also necessary to talk about its internal resources. It can be done with the help of the VRIO model that allows specialists to check whether a company’s core resources are valuable, rare, difficult to imitate and well organised (Morris, 2018).

First, the bakery’s main products are valuable because they are highly differentiated and quality. They are not rare as salads, pasta, bread, and other pastries are offered by most bakeries, and they are also imitable, and it will not be costly for the competitors to imitate the products. However, they are well-organised. The bakery’s employees are a valuable and rare resource since they are trained, skilled, loyal and responsible. This resource is imitable because competitors can train their own workers, and it will not be too costly for them; the employees are well-organised. Finally, the bakery’s distribution network is valuable as supplying restaurants with bread brings the company additional revenue and clients (Nicolo’s Italian Bakery & Deli, 2021a). This resource is also rare because not all bakeries can get chosen to be suppliers. It is also rather costly for enterprises to create and maintain a profitable and effective distribution network, and this bakery has it well-organised. Thus, products and employees are the company’s competitive parities that require improvements, while the distribution network is the bakery’s strength.

Lewin Three-Stage Change Process

Kurt Lewin’s three-stage change model is valuable for companies that want to adopt changes and new behaviours. There are three stages in this model, including unfreezing, changing and refreezing (Lumen Learning, no date). It aims at achieving successful innovation without bringing the enterprise and its employees into stress (Burnes, 2020). The first phase is about creating the momentum for the upcoming changes, the second is the implementation of the plan, and the final one is devoted to stabilising the new behaviours.

It is possible to define four driving and four resisting forces that either promote or postpone the proposed innovation (Force field analysis: analysing the pressures for and against change, 2020). The plan for the bakery is to address the clients’ need for same-day delivery by investing in logistics and developing supply chain infrastructure. The driving forces are the following:

• The necessity to increase profitability (4). Even though this is a family business, and its owners receive great pleasure by serving their customers, higher revenue is needed for maintaining the high quality of the bakery’s products, which justifies the force’s score.
• Customers’ growing demand for delivery (3). It is essential for every enterprise to pay attention to their clients’ needs and address them when possible. Since the customers are loyal and prefer this bakery over other local cafes, it is extremely beneficial to implement changes and provide them with delivery. Since addressing this force will have a positive impact on the three other forces, its score is 3.
• The need to be more competitive (1). This is a great benefit for the bakery if it is achieved simultaneously with other objectives. Still, this is not the primary goal of the bakery since it is already rather competitive.
• Obtaining more loyal customers (4). This force’s score is 4 because having more clients will lead to increased revenue, which is one of the main purposes of the bakery.

At the same time, there are also resisting forces:

• Fear of change and new responsibilities (3). It is uncommon for employees to welcome innovations, and many of them may be afraid of changes, new rules and responsibilities and possible negative consequences. Since workers are one of the primary parts of any business, the resisting staff is a strong force.
• Possible adverse effects on ecology (1). Deliveries lead to an increased volume of waste in the form of disposable packaging. This resisting force should be taken into account, but its score is 1 because the problems with waste can be solved.
• Increased costs (4). Since the bakery aims at increasing revenue, higher costs are rather dangerous and can lead to reduced profitability. Many business owners refuse planned changes precisely because they require large financial investments and do not always pay off.
• Necessity for additional training (2). This resisting force does not have a strong impact on the decision. Still, it has to be considered because additional training can lead to either higher costs or loss of employees who do not want to adapt to innovations.

Since the driving force is greater than the resistance, it is possible to say that corporate change is imperative in the case of Nicolo’s Italian Bakery & Deli.

Two Paths to Innovation

According to Lubik et al. (2013) and Mierzwa (2021), there are two innovation strategies, including technology-push and market-pull ones. The former is used by businesses when they want to interest their market in new services and products and base them on modern solutions. The latter aims to address the needs of the clients and provide the services and goods demanded by the market.

The Driving Force the Bakery Falls Into

As mentioned above, one of the main driving forces of the bakery is satisfying the customers’ needs and providing them with deliveries. Therefore, the innovation of Nicolo’s Italian Bakery & Deli is market-driven. The specific change measures that the bakery needs to implement are the following:

• assessing the benefits and risks of starting to deliver their products;
• making sure that the staff agrees with the upcoming changes;
• providing the employees with training;
• reducing the risks;
• introducing the innovation;
• and promoting the new service among the customers.

It is evident that Greggs holds a technological advantage with their delivery system and a corporate-level POS system. As a smaller business, Nicolos can tackle threats by either attempting to match Greggs or finding their own technological advantage. Unfortunately, in the food space, especially at the retail level, it is difficult to create some technology or innovation that is unique to the point of creating a competitive advantage. Therefore, Nicolo’s should ultimately invest in delivery services and establish an internal system along with online portal to track data and offer a greater range of choices of product acquisition for consumers. By doing so, Nicolo’s is also future proofing its business and operations, transitioning from the traditional model of business into a more innovative approach.

New technology and offerings is based on the driving forces of the organization and pushes towards innovation and adaptation to the market. By shifting their model, Nicolo’s is ensuring that the long-term plan for achieving growth of the business is possible, as technology and innovation contributes to the flexibility and analytical capabilities of the business. It makes the bakery a competitive player in the industry, forming a base which can be used for further innovation in product selection, customer services, and back-end operations.

SCA Model

The strategic choice approach helps businesses find solutions to complex problems (Friend, 2011). It is used “as a means of facilitating communication among decision-makers with diverse perspectives, allegiances and skills” “to enable them to make sustained progress together in exploring the structure of complex decision problems” (Friend, 2011, para. 1). It consists of four modes or steps that are concentrated on identifying the issues, defining the solutions, comparing the courses of action and then building a specific plan (Friend and Hickling, 2004).

Shaping Mode

There are several issues faced by the bakery, and they can be labelled as increased taxation, employees resisting innovation, absence of delivery, not enough diversity in products, and non-ecological packaging. After finding the interconnections between them, it is possible to state that delivery and diversity are the main problems, and it is necessary to expand the range of products and start delivering them to customers.

Comparing Mode

It may be beneficial to compare Nicolo’s Italian Bakery & Deli with Greggs – a famous British bakery chain. Greggs specialises in savoury products like sandwiches, sausage rolls and bakes and also sweets, including vanilla slices and doughnuts. It is rather competitive and effective in the market.

Nicolo’s Italian Bakery & Deli and Greggs have something in common. For example, both bakeries are focused on customer satisfaction, loyal to their mission and values and make their products from high-quality ingredients (Greggs, 2021b). However, Greggs offers delivery to the clients, and this is a great competitive advantage (Greggs, 2021a; Willson, 2021). The bakery chain partners with Just Eat exclusively, and this online food ordering company is known for the quality of its services. Further, Greggs also constantly expands its range, attracting new customers, and addresses the needs of communities by offering fast food (pizza, burgers and doughnuts) and healthier meals like salads.

Basic Information About In-House Bakers

There is another way for those who want to open a bakery but do not have money to buy or rent a store. It is probably even more beneficial because it offers a vast number of opportunities while also adding fewer risks and responsibilities. This option is an In-house bakery; persons who love baking can buy all the necessary tools and ingredients, meet the legal requirements and find clients who are willing to purchase from an in-house baker (How to start a home bakery, 2021). Additionally, Nicolo’s Italian Bakery & Deli might pick up some tips from its own bakers. For instance, the latter consistently add new items to their inventory, such as various breads, cakes, cupcakes, doughnuts, pizza, and even salads. In order to retain their clientele, these in-house bakers typically serve a large number of loyal customers (How to start a home bakery, 2021). A lot of them also charge extra for delivery. Therefore, it is advised that Nicolo’s Italian Bakery & Deli focus more on its customers and provide deliveries and new items that can draw in additional business.

Comparing and Contrasting Two Companies

When comparing and contrasting Greggs and Nicolo’s Italian Bakery & Deli, it is possible to find similarities and differences that mean that the American bakery is on the right path but still requires some changes and innovations. As mentioned above, both companies have an extended menu, offering different types of pastries and meals. They also have merchandise with their logos; Nicolo’s Italian Bakery currently offers hoodies, t-shirts and bags to its customers (Nicolo’s Italian Bakery & Deli, 2021b), while Greggs produces masks, socks, and other branded merchandise. The differences between these companies are that Nicolo’s Italian Bakery does not offer deliveries and rarely expand its assortment. It is also possible for Nicolo’s Italian Bakery & Deli to learn something from in-house bakers. For example, the latter constantly expand their assortment by adding new products, including different types of bread, cakes, cupcakes, doughnuts, pizza, and even meals like salads. Such in-house bakers usually have many regular clients and address their needs in order to keep them (How to start a home bakery, 2021). Many of them also offer delivery for an additional cost. Thus, it is recommended for Nicolo’s Italian Bakery & Deli to become more customer oriented and offer deliveries and new products that may attract new buyers.

In order to effectively implement the operational and technological changes, Nicolo’s should apply the Lewin’s change model. It allows for a smooth transition and helps the organization and its staff to adapt effectively. The organization’s driving forces inform new technologies and offers, which encourage innovation and market adaption. It is recommended for Nicolo’s Italian Bakery to organise deliveries to local areas, with a minimal order price for deliver. It is also recommended for the shop to expand their assortment of baked goods so that more people can find their favourite products in the bakery. These strategic expansions to operation will place it at a more competitive advantage compared to both in-house bakeries, and at least somewhat match the capabilities of large bakeries such as Gregg’s. This will come at some cost, but minimal enough to where increased sales from delivery should be able to cover the expenses.

It is also recommended that Nicolo’s establish an online system of placing orders, where customers can order either for delivery or place pre-orders – with the whole menu being visually placed on the platform. This innovative solution will offer consumers the opportunity to order baked goods virtually and also potentially make operations much more efficient as management will be able to track statistics and track quantities and types of products that are most popular with consumers, making changes as appropriate to daily production and product offerings in order to maximize value.

Conclusion

Finally, the last mode is about selecting the right innovation direction and strategy. Based on the issues, opportunities and driving forces mentioned above, it is recommended for Nicolo’s Italian Bakery to organise deliveries to local customers and then expand their assortment so that more people can find their favourite products in the bakery.

References

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Dawson, P. and Andriopoulos, C. (2017) Managing change, creativity & innovation. Singapore: SAGE Publications.

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Greggs (2021b) Take a look and tuck in.

Friend, J. (2011). The strategic choice approach.

Friend, J. and Hickling, A. (2004) Planning under pressure: the strategic choice approach. Oxford: Elsevier.

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Mierzwa, T. J. (2021) Which innovation strategy: technology-push or market-pull?

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Nicolo’s Italian Bakery & Deli (2021a) About us.

Nicolo’s Italian Bakery & Deli (2021b) Featured products. 

Nicolo’s Italian Bakery & Deli (2021c) Nicolo’s Merchandise and Apparel.

Perera, R. (2017) The PESTLE analysis. Avissawella: Nerdynaut.

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Willson, S. S. (2021) Does Greggs do delivery?