The Implementation of Social Innovation Learning Model Based on Local Wisdom:

A Study of Traditional Fabrics in Indonesia

Retno Kusumastuti, Umanto, Achmad Fauzi, Eko Sakapurnama

rekusuma@yahoo.com

Abstract

Innovation activities should be carried out by every organization not merely to survive but

also to grow and develop. To be able to compete with other products, the innovation should

have a competitive advantage. This study aims to analyze the determinants of innovation

activities in MSMEs producing Indonesian traditional fabrics by exploring the potential of

local wisdom values to enrich unique superior products that cannot be duplicated. Innovation

through co-creation activities involving customers, suppliers and competitors will create

superior value proposition. This process of value creation is a fundamental source of

innovation to create regional competitive advantage. This study applies mixed methods by

combining quantitative and qualitative methods with concurrent mixed methods. The locus of

the study is woven fabric of Bayan in North Lombok and Central Lombok. The findings

show that the learning model of innovation activities at the level of MSMEs occurs in the

form of alignment and adaptability.

Keywords: social innovation, learning model, local wisdom, SMEs

1. Introduction

Every organization must actively find new ways to adapt to the occurring changes

(Comez, 2013). Innovation is the key to the success for any organization in the long term

because it is an effort to adapt to the changing environment. The effort to adapt is not

sufficient because it must be accompanied by exploring the potential to create values to

achieve the competitive advantage of the organization (Huseini, 2000). The need for learning

about innovation activities is not only the need of large-scale enterprises but also the need of

Micro, Small and Medium Enterprises (MSMEs). However, for MSMEs, to balance both

activities are not easy because of limited resources (Voos and Voos, 2012). In fact, MSMEs

in Indonesia give the largest contribution in sustaining the country's economic growth. In

addition, they are proven resilient when economic crisis hit our country in 1997.Considering

their strategic role, the idea of how to build innovative MSMEs is crucial. The following

table shows the development of MSMEs in Indonesia:

Table 1. Data on the Development of MSMEs in Indonesia 2010-2012

Enterprises Units 2010 2011 2012

Micro, Small and Medium Enterprises

(unit) 54,114,821 55,206,444 56,534,592

Micro Enterprises (unit) 53,504,416 54,559,969 55,856,176

Small Enterprises (unit) 568,397 602,195 629,418

Medium Enterprises (unit) 42,008 44,280 48,997

Source: www.depkop.go.id , 2012, reprocessed

The data center of MSMEs in Bank Indonesia shows that the profile of MSME in Indonesia is

still greatly limited. One of the superior products of MSMEs in Indonesia is traditional

fabrics. This industry is highly interesting because it has a unique Indonesian content. One of

the traditional fabrics that have been recognized by UNESCO as a cultural heritage is Batik,

spread over nine (9) centers of batik in Indonesia (Jawa Pos, October 2, 2009). In fact,

Indonesia still has hundreds of traditional fabrics to develop. In addition to center of Batik,

Indonesia also has a center of Sasirangan fabric, embroidery fabric and woven fabric. These

traditional fabrics are cultural products of Indonesia that must be preserved and supported

because they have distinctive characteristic compared to the work of other Asian neighboring

countries. Popular traditional fabrics of the neighboring countries that have cultural

characteristic are kimono from Japan, Hanbok from Korea and Cheong Sam from China.

Considering many foreign competitors, the innovation of Indonesian traditional fabrics is

important in order to compete with traditional fabrics of other countries.

Fabric enterprise is a fairly complex sector because it involves various parties ranging from

suppliers, textile industries, services and even waste management (Defra, 2011). The activity

of fabric design as a material of clothes is strongly influenced by the production process and

its utilization by the society. It is even closely linked to the rapid cycle of trends and tastes of

the customers. Moreover, the production process involves many workers and spends a lot of

resources. Design has the ability to influence social and environmental aspects. Furthermore,

design is considered as a powerful tool in creating new rules, patterns of behavior, and even

cultural change (Fletcher and Grose, 2012). A fabric design can even influence lifestyle,

particularly if combined with the contemporary aspect. Therefore, any opinions, ideas and

complaints from the customers are highly valuable inputs that should be accommodated in

innovation activities of a company.

Basically, innovation activities in an organization consist of two types, namely

exploitative and exploratory innovation activities (Birkinshaw and Gibson, 2004).

Organizational ambidexterity refers to a condition in which an organization engages in both

exploitative and exploratory innovative learning process (Duncan, 1976). Exploitative

innovation activities related to the deepening of the existing capabilities while exploratory

innovation activities related to the search for new opportunities (Tushman and O'Reilly,

1991) and knowledge to continuously improve, modify, and carry out incremental changes to

the existing process, product or service (March, 1991, O'Reilly and Tushman, 2008).

The effort to innovate certainly cannot be carried out unilaterally and personally. The

learning process of innovation activities requires leadership support, adequate organizational

context and management of the external environment. Innovation activities carried out by the

company should manage the internal resources and have dynamic quality towards the

environment.

This study is important because it attempts to analyze the occurring processes in

learning organization about how knowledge is acquired through learning process to generate

innovation.

The concept of ambidexterity has long been introduced although it is difficult to

practice because the concept of exploitation and exploration contradicts each other.

Therefore, the appropriate settings are required for both to run simultaneously. Kusumastuti

(2013) explains that ambidexterity is derived from the Latin word ‘amby’ meaning 'two' and

‘dexter’ meaning 'right' or 'proper'. Thus, literally, ambidexterity means 'right on both sides'.

In biology, ambidextrous refers to people with the ability to balance the use of their right and

left hand or right and left brain. Meanwhile, in organizational science, ambidextrous is

defined as an organization with excellent capabilities in exploring and exploiting

simultaneously.

There are two forms of ambidexterity, namely structural and contextual

ambidexterity. Duncan (1976) explains that there are two structures within an organization in

which the organization must place both structures properly because initiating and

implementing innovations have different needs. These structures can be placed either in a

different work unit or in a different group in one work unit. Organization can adjust the

pressure between exploration and exploitation through structurally separated work units.

In structural ambidexterity, different sub-units have different competencies, systems,

incentives, processes, and cultures that are internally aligned and arranged for exploration and

exploitation. Meanwhile, contextual ambidexterity is "the behavioral capacity to

simultaneously demonstrate alignment and adaptability across an entire business unit"

(Birkinshaw and Gibson, 2004). Contextual ambidexterity focuses on capability at individual

level. It is seen as a valuable, rare, and costly resource to imitate, having the potential to be an

important resource for an organization's competitive advantage. Birkinshaw and Gibson

(2004) further notice that contextual ambidexterity is obtained by establishing a set of system

or process (a combination of discipline, support, confidence, and strength) that enables and

supports individuals in an organization to make their own assessment of their actions.

In the context of ambidextrous organization, Kusumastuti (2013) finds that

ambidexterity focuses on how organizations use the activities of exploration and exploitation

internally, later strengthened by their studies of dynamic capabilities that show interrelations

between the process of internal and external knowledge playing an important role in the

renewal of an organization. The final objective of an ambidextrous organization is to have a

competitive advantage and an ability to improve its future performance.

2. The Method of the Study

The study applies mixed methods, combining qualitative and quantitative method with

concurrent mixed methods in which the quantitative and qualitative data is combined to

obtain a comprehensive analysis of the question of the study. In this strategy, two types of

data are collected simultaneously then combined in the interpretation of the overall results

(Creswell, 2010: 23). Quantitative method is carried out through an analysis of existing

statistical data, while qualitative method is carried out through in-depth interview with some

informants and observation in the field. In this study, the relevant quantitative data are

collected then confirmed and strengthened by qualitative data obtained from in-depth

interviews.

In-depth interview is carried out on several informants with sufficient information

related to the theme of the study. Interview Guidelines are compiled using theory about

innovation learning process, ambidexterity of MSMEs, value creation, and co-creation. The

criteria for the informants are: understand the centers of traditional fabrics of Indonesia,

understand business process of traditional fabrics, have the experience working as a

manager/artisan, understand local cultures and values in the location of the centers of

traditional fabrics, understand the policy context related to the industry of traditional fabrics

in the area. Meanwhile, the survey is carried out on respondents who meet the criteria of the

samples of the study, namely: have the experience working as an artisan of traditional fabrics

and understand the production process of traditional fabrics. The locus of the study is (1)

North Lombok with typical woven fabric of Bayan and (2) Central Lombok with typical

woven fabric of Sasak.

3. Findings and Discussion

Identity and Characteristics of Respondents

CENTRAL LOMBOK

The secondary data related to the identity of respondents are presented in the following

figure. All respondents are female because they generally act as entrepreneurs as well as

the artisans of woven fabrics in the area.

100

Male

Female

The age of the owner of MSMEs

0

5

10

15

20

25

30

35

40

45

32.7

38.5

15.413.5

15-23 Years Old24-32 Years Old33-41 Years Old42-48 Years Old

The age of MSMEs

0

10

20

30

40

50

60

70

80

90

100

1-3 Years Old4-6 Years Old7-9 Years Old10-13 Years Old

The number of employees

0

10

20

30

40

50

60

70

8073.1

25

0 1.9

3-8 Employees9-14 Employees15-20 Employees21-26 Employees

The average education of employees

10%

37%

2%4%

48%

Unschooled SD

SMP SMA

No Answer

The average of working hours of the employees

34.6

34.6

1.9

28.8

2-4 hours/day5-7 hours/day8-10 hours/day11-12 hours/day

NORTH LOMBOK

Gender of respondents

100

MaleFemale

The age of the owner of MSMEs

0

5

10

15

20

25

30

35

40

45

16-28 Years Old29-41 Years Old42-54 Years Old55-65 Years Old

The age of MSMEs

The average of working hours of the employees

30%

4%65%

2%

6 hours/day7 hours/day8 hours/dayNo Answer

7.1 Social Innovation Learning Model of MSMEs of Woven Fabrics in CENTRAL

LOMBOK

Related to the environmental changes, each organization can implement strategic

management in innovation learning. Tushman and O'Reilly state that every organization can

carry out alignment and adaptability process. The findings of the study show that most of

MSMEs of woven fabric in North Lombok and Central Lombok District carry out both

processes.

Alignment

5.8

94.2 UnfavorableFavorable

Alignment is measured by using three statements, namely “The management system of the

organization is in line with organizational goals”; ”The management system of the

organization is still inefficient and wasting available resources”; and “The management

system of the organization makes many people carrying out similar work". The answers show

that 94.2% of respondents state that Alignment is in favorable category, while the rest of

5.8% state that Alignment is in unfavorable category.

Adaptability

7.7

92.3

UnfavorableFavorable

Adaptability is measured by using three statements, namely “The management system of the

organization allows people to search for new ways/practices/methods”; “The management

system of the organization is flexible in allowing people to respond to the various

environmental changes”; and “The management system of the organization always keeps

abreast as a result of changes in business priorities”. The answers show that 92.3% of

respondents state that Adaptability is in favorable category, while the rest of 7.7% state that

Adaptability is in unfavorable category.

Ambidexterity in MSMEs

Ambidexterity in MSMEs indicates explorative innovation learning within MSMEs. The

secondary data show explorative and exploitative learning activities for the respondents in

Central Lombok.

Exploratory Learning Activities

0

20

40

60

80

100

120

3.8

96.2

Unfavorable

Favorable

Exploratory Learning Activities is measured by using four statements, namely “Every

individual can search for new business opportunities in terms of design/motif/pattern of

fabrics, manufacturing process and market expansion”; “Every individual focuses on

improving the quality of traditional fabrics, manufacturing process and market expansion”;

“Every individual must be able to adjust to the occurring changes”; and “Every individual

must learn new skills and knowledge related to running a traditional business”. The answers

show that 96.2% of respondents state that Exploratory Learning Activities is in favorable

category, while the rest of 3.8% state that Exploratory Learning Activities is in unfavorable

category.

Exploitative Learning Activities

0102030405060708090

100

Category 1; 7.7

Category 1; 92.3

Unfavorable Favorable

Exploitative Learning Activities is measured by using five statements, namely “Every

individual has the opportunity to obtain their own knowledge and experience”; “Every

individual focuses on the work given without regard to new opportunities”; “Every individual

has the clarity of their responsibility”; “I always focus on short-term work (1 year)”; and “I

can do the work using existing knowledge and skills”. The answers show that 92.3% of

respondents state that Exploitative Learning Activities is in favorable category, while the rest

of 7.7% state that Exploitative Learning Activities is in unfavorable category.

Knowledge Co-Creation Process

In terms of knowledge flows within MSMEs, the process can occur from leaders to

subordinates (top down) and subordinates to superiors (bottom up).

Top Down

7.7

92.3

UnfavorableFavorable

Top Down is measured by using single statement, namely “I immediately provide guidance

and instruction for the work that must be carried out by the employees”. The answers show

that 92.3% of respondents state that Top Down is in favorable category, while the rest of

7.7% state that Top Down is in unfavorable category.

Bottom Up

Bottom Up is measured by using single statement, namely “I gain experience, skills and

knowledge from subordinates directly”. The answers show that 84.6% of respondents state

that Bottom Up is in favorable category, while the rest of 15.4% state that Bottom Up is in

unfavorable category.

15.4

84.6

Unfavorable

Favorable

7.2 Social Innovation Learning Model of MSMEs of Woven Fabrics in NORTH

LOMBOK

The learning of MSMEs at the organizational level in responding to environmental changes

can occur in alignment and adaptability process. The findings of the study show that the level

of approval of the respondents related to this statement is generally above 80 percent.

Alignment

Alignment is measured by using three statements, namely “The management system of the

organization is in line with organizational goals”; ”The management system of the

organization is still inefficient and wasting available resources”; and “The management

system of the organization makes many people carrying out similar work".

Unfavorable37%

Favorable63%

Unfavorable

Favorable

The answers show that 63% of respondents state that Alignment is in favorable category,

while the rest of 37% state that Alignment is in unfavorable category.

Adaptability

Adaptability is measured by using three statements, namely “The management system of the

organization allows people to search for new ways/practices/methods”; “The management

system of the organization is flexible in allowing people to respond to the various

environmental changes”; and “The management system of the organization always keeps

abreast as a result of changes in business priorities”. The answers show that 100% of

respondents state that Adaptability is in favorable category.

100 Unfavorable

Favorable

Ambidexterity in MSMEs

Ambidexterity in MSMEs indicates explorative innovation learning within MSMEs. The

secondary data show explorative and exploitative learning activities for the respondents in

North Lombok.

Exploratory Learning Activities

0

20

40

60

80

100

120

1.9

98.1

Unfavorable

Favorable

Exploratory Learning Activities is measured by using four statements, namely “Every

individual can search for new business opportunities in terms of design/motif/pattern of

fabrics, manufacturing process and market expansion”; “Every individual focuses on

improving the quality of traditional fabrics, manufacturing process and market expansion”;

“Every individual must be able to adjust to the occurring changes”; and “Every individual

must learn new skills and knowledge related to running a traditional business”. The answers

show that 98.1% of respondents state that Exploratory Learning Activities is in favorable

category, while the rest of 1.9% state that Exploratory Learning Activities is in unfavorable

category.

Exploitative Learning Activities

Exploitative Learning Activities is measured by using five statements, namely “Every

individual has the opportunity to obtain their own knowledge and experience”; “Every

individual focuses on the work given without regard to new opportunities”; “Every individual

has the clarity of their responsibility”; “I always focus on short-term work (1 year)”; and “I

can do the work using existing knowledge and skills”. The answers show that 75.9% of

respondents state that Exploitative Learning Activities is in favorable category, while the rest

of 24.1% state that Exploitative Learning Activities is in unfavorable category.

Exploitative Learning Activities

0 10 20 30 40 50 60 70 80

24.1

75.9

Favorable Unfavorable

Knowledge Co-Creation Process

In terms of knowledge flows within MSMEs, the process can occur from leaders to

subordinates (top down) and subordinates to superiors (bottom up).

Top Down

100

Unfavorable

Favorable

Top Down is measured by using single statement, namely “I immediately provide guidance

and instruction for the work that must be carried out by the employees”. The answers show

that 100% of respondents state that Top Down is in favorable category.

Bottom Up

100

Unfavorable

Favorable

Bottom Up is measured by using single statement, namely “I gain experience, skills and

knowledge from subordinates directly”. The answers show that 100% of respondents state

that Bottom Up is in favorable category.

4. Conclusion

The learning model of innovation activities at the level of MSMEs occurs in the form of alignment and adaptability. Most respondents state that the management of the organization is still in line with the objectives, namely to preserve the culture of Indonesia as well as to make the ends meet through profit seeking. In this learning process, the flow of knowledge occurs between superiors and subordinates. Generally knowledge inflow in MSMEs is still in the form of tacit knowledge passed down from one generation to the next. Innovation learning is carried out in exploitative or exploratory manner, although in practice they have not reached the stage of scaling from a process of social innovation. There are many prototypes produced but limited in a traditional way that should be consistently maintained.

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