Queen Essays

chApter 4

sourcing for innoVation

The previous two chapters have dealt mostly with methods, tools, and processes for new product and service development with the aim to con- vert ideas and inventions into innovations. What has been left out is that people, working independently or in organizations, have originated many of these ideas and inventions. Merely enhancing the generation of ideas and inventions is key to creating commercially successful products and services, but at the same time, not enough. A report by Targeting Inno- vation (2008, p. 14) states: “good management with average technology is preferable to average management with good technology”. Neverthe- less, any innovation starts with an idea or invention. An invention can be described as a unique or novel device, method, or process, either as an improvement upon a machine or product or a new process for creating an object or a result. An invention that achieves a completely unique function or result may be a radical breakthrough. No matter how the term invention sounds, serendipity plays but a small role in innovations. A case in point is the story of the negative feedback amplifier by Harold Stephen Black in the 1920s, though documented later (Black 1977); it was only through many steps, rethinking, and hard work that the concept of this specific amplifier was realized. These inventions are based on ideas; Subsection 1.2.2 has shown how many ideas are necessary for one successful product or service. Hence, getting ideas that might result in inventions is not enough, but a starting point. To this purpose, this chapter also discusses how actors can be best involved for generating ideas and inventions.

Who are behind the ideas and inventions, and thus are sources for innovations, and how they can be involved in new product and service development are the topics of this chapter. Section 4.1 starts with the inventors, a category of people who easily grab the attention when speak- ing about innovation. The following section, 4.2, pays attention to users. In addition, it looks at how customers and users can be best involved in the

C o p y r i g h t 2 0 1 8 . M o m e n t u m P r e s s .

A l l r i g h t s r e s e r v e d . M a y n o t b e r e p r o d u c e d i n a n y f o r m w i t h o u t p e r m i s s i o n f r o m t h e p u b l i s h e r , e x c e p t f a i r u s e s p e r m i t t e d u n d e r U . S . o r a p p l i c a b l e c o p y r i g h t l a w .

EBSCO Publishing : eBook Collection (EBSCOhost) – printed on 11/13/2023 8:06 PM via TRINE UNIVERSITY AN: 1881425 ; Rob Dekkers.; Innovation Management and New Product Development for Engineers, Volume I : Basic Concepts Account: s8991307.main.ehost

120   •   innovAtion MAnAgeMent And npd for engineers

development of new products and services. Section 4.3 discusses suppli- ers and commercial research organizations as source of innovation; how suppliers are best integrated in new product and service development is also presented. Universities are another source of innovation, and Section 4.4 will look at their role. Section 4.5 considers how employees contribute as source of innovation. Section 4.6 will contemplate on the dual role of competitors for generating ideas and inventions.

4.1  inventors

The first group that ideas and technological advancements can come from are inventors. Examples of famous inventors are abound; in addition to those mentioned in the introductory chapter, a few more are listed here. The first one to mention is Thomas Alva Edison (1847–1931), who was an American inventor and businessman. He developed many devices that greatly influenced life around the world, including the phonograph, the motion picture camera, and the long-lasting electric light bulb. Another inventor is Johannes Gensfleisch zur Laden zum Gutenberg (1398–1468), a German blacksmith, goldsmith, printer, and publisher, who introduced printing to Europe. His introduction of the mechanical movable-type printing to Europe started the printing revolution and is widely regarded as the most important event of the modern period. Yi Xing (683–727), born Zhang Sui, was a Chinese astronomer, mathematician, mechanical engi- neer, and Buddhist monk of the Tang dynasty (618–907). His astronomical celestial globe featured a clockwork escapement mechanism, the first in a long tradition of Chinese astronomical clockworks. Abū al-Qāsim Khalaf ibn al-‘Abbās az-Zahrāwī (936–1013), popularly known as Al-Zahrawi, was an Arab Muslim physician and surgeon who lived in Al-Andalus. He is considered the greatest medieval surgeon to have appeared from the Islamic World and has been described as the father of surgery. His great- est contribution to medicine is the Kitab al-Tasrif, a 30-volume encyclo- pedia of medical practices. His pioneering contributions to the field of surgical procedures and instruments had an enormous impact in the East and West well into the modern period, where some of his discoveries are still applied in medicine to this day. These are just examples of inventors whose inventions have been documented, and they show to some extent the diversity of inventions and innovations.

Whereas there are many inventions that have been turned into com- mercial success, there are also many inventions that did not make it. The fact that many ideas and inventions do not end up in commercialization is captured by the innovation funnel (see Subsection 1.2.2 and Figure 1.4);

EBSCOhost – printed on 11/13/2023 8:06 PM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

sourcing for innovAtion   •   121

subsequent stages of new product and service development see only infea- sible ideas and inventions being weeded out. For the first stages of the innovation process, this means that, although an inventor may have ideas for new products, new services, or improvements to existing processes, these are not considered an innovation until the ideas have been trans- formed into something real, such as a prototype with the potential for practical application. Even then, some of these are not commercialized; Box 4.1 captures some failed inventions and ideas. This shows that market acceptance plays a large role for the success of an invention turned into an innovation (see also Subsection 3.3.5).

These are just a few example of inventions that failed for a variety of reasons:

AVE Mizar, a roadable aircraft based on combining the rear of a Cessna Skymaster to a Ford Pinto, built between 1971 and 1973. Inventor Henry Smolinski and the Vice President of AVE, Harold Blake, were killed in a crash during a test flight; this was attributed to the right wing strut base mounting attachment to a body panel of the car that failed.

The Bell Rocket Belt was a very promising invention for the U.S. army in the 1950s and 1960s. The rocket pack was designed so that it helped a person leap for a short distance. President John F. Kennedy was even given a personal demonstration, but the belt only put a person in the air for 21 seconds at a time, enough to reach a mere 120 meters. So, along with the limited potential altitude, the army also lost interest.

Cinerama was the predecessor to the modern-day IMAX screens, but it was more complicated. Projecting the movie required three per- fectly synchronized projectors all aligned with each other. This was in the age before digital technology, so it meant that three very skilled projectionists has to sit in the projector boxes to make everything work. Most theaters did not want to put up the investment to upgrade nor did they want to have to pay more staff to play a movie. Ultimately, few movies were ever recorded in this format and this invention soon died.

Thomas Alva Edison invented an electric pen, which would make copies of documents people were writing by creating stencils as they wrote. It had some initial success, but could not compete with other inventions, such as the typewriter. The basic design was later reused for another invention, a much less efficient way of creating documents: the first electric tattoo needle in 1891.

Box 4.1. Examples of Failed Inventions

EBSCOhost – printed on 11/13/2023 8:06 PM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

122   •   innovAtion MAnAgeMent And npd for engineers

Perhaps, for this reason, some inventors just remain inventors, whereas others become entrepreneurs and founders of corporations. For example, Thomas Alva Edison did not only invent, he also turned these inventions into business opportunities for his own company. Other well- known inventors who have become founders of large corporations include Alexander Graham Bell (founding the Bell Telephone Company, later AT&T), George Eastman (Eastman Kodak Company), and the Wright brothers (airplanes, Wright Company, later successively, Wright-Martin, Wright Aeronautical, Curtiss-Wright). That some do get involved in firms can be attributed to the very different nature of inventing and innovat- ing. Due to the nature of their work, inventors are technology- and solu- tion-oriented, and thus tend to work autonomously, whereas innovators focus on markets and stakeholders (including investors), and are therefore collaborative-oriented. This different orientation might explain why only few inventors eventually found firms based on their own inventions.

Even if inventors, for whatever reason, are not commercializing the products and services themselves, it is still beneficial to involve inventors during the later stages of the innovation process. Studies by Braunerhjelm and Svensson (2010) and Fahimi-Steingraeber (2015) point out that the involvement of the original inventor during the successive stages of devel- opment of patents is of paramount importance to successful commercial- ization. The study by Braunerhjelm and Svensson (2010) even suggests that commercialization of inventions might have more chances of being successful when the original inventor is not involved in the commercial- ization. Hence, the involvement of the inventor during commercialization stages of the innovation process should be considered with care.

The Intellivision is Mattel’s video game console creation released in 1979 in order to compete with the Atari 2600. The console was not exactly the worst thing in the world, but it ended up failing and almost bankrupting the company.

The ill-fated Smell-o-Vision gimmick, funded by Mike Todd Jr. in 1960, was an elaborate system that allowed a film reel to trigger the release of bottled scents that were piped to the audience in sync with pivotal moments in the movie. The only film to make use of Smell- o-Vision was 1960’s Scent of Mystery, written specifically with the gimmick in mind. The results, predictably, stunk, and Smell-o-Vision was never used again.

Box 4.1. (Continued)

EBSCOhost – printed on 11/13/2023 8:06 PM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

sourcing for innovAtion   •   123

4.2  custoMers And users

The second group that might bring about technological advances are customers and users. In the context of this book, user-led innovation refers to innovation by intermediate users (for example, firms that are using out- put of another firm, such as machinery) or consumer users (for instance, individual end-users or user communities, those who are buying the products and services), rather than by suppliers (producers or manufactur- ers). Customers might be individual people buying a product or organiza- tions when asking for new requirements and functions to be fulfilled by a product or service; an example of the latter is a firm buying an enterprise resource planning system and requiring it is tailored to its business model.

4.2.1 uSeR-leD innovaTion aS Beneficial

During the commercialization as the final stage of development, con- sumers and users start engaging with new product and services. Some of these products and services may have been initiated by users, and some- times, these new products and services are not entirely fit for purpose. This leads to many products and services being at least refined, and some developed, by customers and users, at the site of implementation and use (see Von Hippel 2001). Often, user innovators will share their ideas with manufacturers and providers in the hope of having them produce the product or service, a process called free revealing. Consequently, these ideas and modifications are fed back into the network of product and service development. A case in point is the European manufacturer of manipulators for foundries and forges (85 employees). Most of its inno- vative solutions are generated on request by firms in this supply chain to automate the production processes; for this reason, it does not have its own R&D department, though the solutions are often very innova- tive. This means that the concept of user innovation is a core part of the argument against the linear innovation model (Williams and Edge 1996, p. 893), the first-generation innovation process (see Section 3.4), that is, new products and services are generated through research and develop- ment, then marketed and diffused to users and consumers. Instead, new product and service development is a non-linear process involving actors with possible innovation occurring at all stages. This means that users and consumers can constitute a base for the generation of new ideas and their involvement might be happening during all stages of new product and service development.

EBSCOhost – printed on 11/13/2023 8:06 PM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

124   •   innovAtion MAnAgeMent And npd for engineers

There are some compelling examples of user-led innovation. The development of Linux is one of the most prominent examples of free and open-source software collaboration. The underlying source code for the software may be used, modified, and distributed—commercially or non-commercially—by anyone under the terms of its respective licenses. Its origins can be traced back to the development of the operating sys- tem Unix in 1969, and it was a result of MINIX developed by Andrew Tanenbaum that Linus Torvalds started developing Linux as open-source software in the beginning of the 1990s. The development of the software now depends on developer and user communities, even though compa- nies build commercial applications on it; the Android operating system for mobile applications is a case in point. Another example is the implemen- tation of enterprise resource planning systems by organizations; enterprise resource planning is software that allows organizations to use integrated applications to manage processes across procurement, manufacturing, service, sales, finance, and human resources. This software is often pur- chased from vendors who deliver standard or standardized applications. Often, organizations have to integrate this software in their business processes, leading to adaptations and complementary applications (for example, shop floor scheduling). This has led to the large vendors of enter- prise resource planning systems to make their software modular so that applications developed by customers can be better integrated, and even- tually these vendors taking on the development of these applications. The final example here is sports. Von Hippel (2001, pp. 82–83) provides the example of using foot straps for windsurfing to control the surfboard when in the air. Thus, the three examples show that user innovation can lead to innovations in products and services.

Lead users have a particular place in user-led innovation. Von Hip- pel (1986) advocates the lead user method that can be used to system- atically learn about user innovation in order to apply it in new product and service development. Lead users are to be seen as those users who present needs that will become more spread among a class of users in the future. In this view, in addition to trying to fill the needs they experience, they might also provide firms with new product and service concepts and data for designing these; hence, these users are positioned to benefit significantly by obtaining a solution to their needs. Figure 4.1 shows the steps for involving lead users (derived from von Hippel 1986; Urban and von Hippel 1988). An example is the development of hygienic protec- tive coverings and a microbial-treated incision foil that was developed by working together with doctors, particularly surgeons, and users in analogous fields, such as micro-biologists and make-up artists. Another specific type of lead user is the creative consumer (Long 2004, p. 65).

EBSCOhost – printed on 11/13/2023 8:06 PM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

sourcing for innovAtion   •   125

These are consumers who adapt, modify, or transform a proprietary offering as opposed to creating completely new products and often have deep knowledge about products, services, and the context they are used in; some home owners fall in this category. However, innovation ini- tiated by lead users differs from user-led innovation, because for the first companies develop new and products and services, whereas for the latter, the users are the actual developers. Henceforth, the identification of lead users and creative consumers may assist companies in identify- ing future needs for products and services, finding novel concepts for products and services, and learning about new applications for existing products and services.

While the lead user methodology has its merits, there are contexts in which it may be less effective for product and service development. For example, it will be less applicable to highly secretive industries where lead users may not feel comfortable or may not be able to disclose infor- mation and knowledge. Also, the lengthy nature of user-led innovation can prevent this method from being applied effectively in industries with short-term cycles for new product and service development or where short time-to-market is required. Hence, the method is better suited to meet the needs of the industrial goods market, rather than consumer goods market as lead users of industrial goods can typically be identified more reliably than lead users of most consumer goods. Whereas the lead user method can lead to breakthroughs, adopting the approach can be difficult for some organizations and within specific contexts.

4.2.2 PaRTiciPaToRy DeSign

Different but somewhat similar to user-led innovation, participatory design, also called co-design, is an approach to new product and service development that attempts to actively involve all stakeholders in the design process to help ensure the result meets their needs and is usable; these stakeholders span from employees, partners, customers, citizens to end users. Originally, it was called co-operative design, mainly used for the design of information systems, particularly their interfaces (Bødker et al. 2000). The approach is used in a variety of fields, for example,

Figure 4.1. Method for involving lead users.

Stage 1 Start-up

• Interdisciplinary team • Definition target market

• Goals of lead user involvement

Stage 2 Identification of needs and trends • Interviews with experts markets • Interviews with technological experts • Scanning of literature, databases, etc. • Selection of most attractive trends

Stage 3 Identification of lead users

• Networking-based search • Investigation of analogous markets

• Screening of first ideas and solutions (generated by lead users)

Stage 4 Design of concepts • Workshop with lead users to generate or improve product concepts • Evaluation of concepts

EBSCOhost – printed on 11/13/2023 8:06 PM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

126   •   innovAtion MAnAgeMent And npd for engineers

architecture, graphic design, health care, landscape architecture, prod- uct design, software design, sustainability, and urban design. Participa- tory design is an approach that is focused on processes and procedures of design and is not a design style. For some, this approach has a political dimension of user empowerment and democratization. In this sense, it has parallels with critical systems thinking (see Dekkers 2017, pp. 291–93; Ulrich 2000). For others, it is seen as a way of abrogating design responsi- bility and innovation by designers. This means that participatory design is a useful method for eliciting ideas and requirements from users and other actors, but also that it requires adequate product and service development, not solely relying on these sources.

An example of participatory design is the Whittington Hospital Pharmacy (Design for Europe 2017). The Whittington Hospital employs 4,000 staff who provide care for more than 500,000 people across North London; the chief pharmacist knew that collecting a prescription at the hospital was not a pleasant experience for patients. They entered the pharmacy often feeling unwell and anxious, and these feelings were exacerbated by long waiting times and lack of communication. Previous efforts to improve the situation, such as user questionnaires, had resulted in poor levels of patient participation and provided no clear insights into what should be changed. A designer began by introducing core design concepts to patients, staff, doctors, and senior management. From this, larger groups were engaged until a shared definition of the problem was developed in addition to establishing consensus on the priorities for improvement:

• Enhancing the patient experience. • Developing ways to use the space to promote health care messages. • Offsetting expenditure by increasing pharmacy sales.

Working with the Whittington team, the designer turned these priorities into a detailed design brief. Contracting an architectural co-design expert Studio TILT and a service design agency meant the designers’ focus was on allowing pharmacy users to collaboratively create a space that would work best for them. This began by establishing a program of workshops with representatives from patient, staff, and management groups; 38 patients and staff took part in codesign workshops. Together, they came up with new ideas for how the space could work; see Figure 4.2. These ideas were then tested and retested; first in model form, then at half scale, and finally, at full scale within the pharmacy itself. The feedback from the project was overwhelmingly positive, providing new insights and lessons that have changed how the pharmacy space is used. As a result, the queue of patients at the registration area has been shortened, prescription tracking has been introduced, and new areas for confidential

EBSCOhost – printed on 11/13/2023 8:06 PM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

sourcing for innovAtion   •   127

consultations have been created. The work has measurably improved the patient experience, boosting staff morale, and increasing sales at the pharmacy. This case of the co-design of a hospital does not only show the merits of participatory design, but also that it should be approached from a process perspective.

4.2.3 cuSTomeR involvemenT

In a more generic sense, the involvement of customers in new product and service development will have positive effects. The potential bene- fits from customer involvement (Koukou, Dekkers, and Jespersen 2015) reported are:

• Better identification of customers’ needs and requirements. • Increased engagement of customers during new product and service

development results in increased adoption of these new products and services.

• Reduced uncertainty of product and service designs. • Increased number of ideas and solutions (see also previous

subsection). • Improved planning of new products and services through improved

insight. • More relevant prioritization of product and service requirements.

Figure 4.2. Mock-up for early design.

EBSCOhost – printed on 11/13/2023 8:06 PM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

128   •   innovAtion MAnAgeMent And npd for engineers

• More adequate analysis of competitive products and services. • Reduced cost for development of new products and services. • Reduced time-to-market. • Identification of new markets. • Enhanced communication between departments involved in new

product and service development and their commercialization. Though these potential benefits are many, how they are achieved depends on how new product and service development is undertaken.

Customer involvement in new product and service development can take many forms; moreover, the methods and tools are applied in different phases of this process. The overview of methods and tools for customer involvement related to the phases of new product and service development is found in Table 4.1. It is distinguishing three categories for the interaction. The first one is the class of indirect methods, which

Category/ method

Idea generation

Product concept

Develop- ment

Testing Launch

Indirect methods Feedback • • Interviews • • • • Observation • • Questionnaires • • • Surveys • • • • User clinics • • •

Direct methods Brainstorming • • Evaluation sessions

• •

Focus groups • • Inspirational stories or cards

• • •

Living labs • Mock-ups and prototype testing

• •

Table 4.1. Overview of methods for customer involvement for each phase of development

EBSCOhost – printed on 11/13/2023 8:06 PM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

sourcing for innovAtion   •   129

means that there is no direct interaction with the users to generate ideas or concepts. Besides interviewing, conducting surveys, and using feedback, it features observation of users and user clinics. The latter are where potential users are introduced to the subject by experienced moderators at sequentially arranged stations; generally, there is support from prod- uct managers, engineers, psychologists, or marketing experts from the innovating company. The second category is the direct methods, in which there is face-to-face contact with product and service designers. In addi- tion to brainstorming, focus groups, presentations, and workshops, this includes the use of inspirational stories (and visualization with picture cards) and living labs; the concept of living labs is discussed in the next subsection. The third category is that of those methods that are enabled by using web technology. There are indirect methods in this category, such as interviews, surveys, and for a, but also specific ones to this class, for example, open-source software, virtual design platforms, and wikis. Though these methods can be beneficial to the effectiveness of new prod- uct and service development, they also take time, and therefore may impede the time-to-market.

4.2.4 living laBS

A specific method for user involvement is the concept of living labs (see also Subsection 9.3.1.). The emergence of these living labs originates in the need for evaluating computing and information technologies during the 1990s (e.g., Intille et al. 2005) and later expanded into a wider concept for innovation with user involvement (see Dekkers 2011, p. 59). Now, it

Presentations • • Workshops • • •

Web-based methods Online forums • • • • Online interviews

•

Online surveys • Open source software

• •

Virtual design platform

• •

Wikis • •

EBSCOhost – printed on 11/13/2023 8:06 PM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

130   •   innovAtion MAnAgeMent And npd for engineers

includes user-centered, open-innovation ecosystems, often operating in a territorial context (e.g., cities, agglomerations, and regions), integrating concurrent research and innovation processes, often in a public- private partnership. The concept is based on a systematic user co-creation approach integrating research and innovation processes. These are integrated through the co-creation, exploration, experimentation, and evaluation of innovative ideas, scenarios, concepts, and related technological artifacts in real-life use cases. It could also involve user communities, not only as observed subjects, but also as a source of creation. Considerations from users in living labs may be made at the earlier stage of research and devel- opment and through all elements of the product life-cycle, from design to recycling. This approach of living labs allows all involved stakeholders to concurrently consider both the performance of a product or service and its potential adoption by users.

4.2.5 PaRaDoxeS anD conTRoveRSieS SuRRounDing uSeR innovaTion

Though widely lauded, as one of the setbacks, user-led innovation and customer involvement have been associated with incremental innovation. The close proximity to lead users or customers might drive companies to incremental innovation (Veryzer 1998), limiting the scope of new products and services to those that already exist. In this sense, user innovation is a variant of the second-generation innovation process (see Section 3.4), which also points to relatively minor technological advances.

Although there seems to be a paradox that user-led innovation does not lead to radical innovation, there are instances where it did. For example, Truffer (2003) presents the case of organized car sharing in Switzerland. This innovation started in two neighborhood-based experiments in the late 1980s. At the time of his publication, it was run by a professional service enterprise, served some 50,000 customers around the country, and contin- ued to expand at a considerable pace. This innovation was realized long before Uber, the taxi service, started to make headlines. Nowadays, these applications are seen as radical innovations, even though its roots can be traced back to user innovation.

User involvement and user-led innovation are self-evident for those firms that deliver engineer-to-order products and custom-made services. In the case of engineer-to-order, a product or service is tailored to the requirements of the customer (see Subsection 2.6.2). This in itself entails the involvement of the customer. For example, machinery and tooling

EBSCOhost – printed on 11/13/2023 8:06 PM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

sourcing for innovAtion   •   131

normally need the input of customers from the moment an offer is made all the way through commissioning. Thus, in some instances, user involve- ment is a necessity, rather than a matter of choice.

4.3   suppLiers And coMMerciAL reseArch  orgAnizAtions

A third source for ideas and inventions for new product and service devel- opment are suppliers and commercial research organizations. These are noted for having large innovation potential, because they know what companies—that is, their customers—are doing and what they need, and the mechanisms to transfer knowledge related to ideas and inventions are generally in place. For this purpose, the first subsection will discuss suppliers as source of innovation, the second subsection early supplier involvement during the development process, and the third subsection commercial research organizations as source of innovation.

4.3.1 innovaTion By SuPPlieRS

Firms can involve suppliers in various stages of their product or service life-cycle. This involvement ranges from the earliest stages, when they may provide ideas and suggestions, to the later stages, when suppliers may sup- port commercialization of products and services. The benefits of involving suppliers include shortened product development cycle times resulting in reduced time-to-market, lower costs, and higher- quality end-products in addition to innovation in products and services. For example, Unilever has publicly stated that it estimates that 70 percent of its innovation is linked to working with strategic suppliers. Another case in point is Ford’s supplier BASF, who saved the manufacturer significant amounts of pro- duction costs by developing a new resin to give interior components the desired high-gloss appearance. Thus, involving suppliers in early stages of new product and service development may lead to innovation and also yield other benefits, such as improved performance.

Innovation by suppliers is often related to the position of their mate- rials, parts, components, and subassemblies in the product or service configuration (the collaboration with suppliers is described in Section 5.2). For instance, Prencipe (2000) describes how Rolls-Royce for its aero-engines relies on innovations by suppliers; this requires Rolls-Royce to engage and collaborate with these suppliers to integrate knowledge

EBSCOhost – printed on 11/13/2023 8:06 PM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

132   •   innovAtion MAnAgeMent And npd for engineers

into the overall propulsion system and to coordinate the development of components, not only internally but also externally. This means that the product configuration plays an important role in relation to the capabilities of focal firms and the capabilities of suppliers. For example, some firms use categorization, such as an ABC classification, to identify critical and non-critical materials, parts, components, and subassemblies. Based on the categorization, they deal with suppliers in a different way. Hence, the interaction with suppliers is based on the position in the configuration and to what extent they supply critical components.

This makes the selection of these critical suppliers of paramount importance to product and service development of firms. One dimension for selecting suppliers is the technological capability of the suppliers relative to the focal firm. To this purpose, the classification of Roussel, Saad, and Erickson (1991) can be used; see Subsection 3.3.1. Omta (2004) suggests that base technologies, those that are widespread and shared, are outsourced to suppliers. But also, suppliers might possess key tech- nologies; in such cases, collaboration with a supplier is necessary. For pacing technologies, collaboration with a supplier may be necessary, and for emerging technologies, it may be necessary to monitor technological developments. The second dimension for selection of suppliers is the risks and level of collaboration during new product and service development. Figure 4.3 shows the process for selection and collaboration, combining Roussel’s classification for technologies with Handfield et al.’s (1999, p. 65) process model for supplier integration. The screening of suppliers is informed by strategy formation for core competencies of firms, con- siderations of product-market combinations, and technology roadmapping (see Section 3.5); also, specifications for materials, components, parts, and assemblies inform the screening (depending on how the contributions of the supplier are positioned within the product configuration). This screen- ing is followed by a risk assessment; this covers whether the supplier is able to meet performance requirements, such as costs, quality, and sched- ule, and has the technological capability to contribute to new product and service development. Based on the outcomes of this assessment, the involvement of the supplier during the development process can be set. In the case that the technology is not critical and does not align with the roadmap for products, services, and technology, companies might opt not to integrate suppliers in the process of development; in all other cases, suppliers should become involved. Thus, the selection and involvement of suppliers are a stage-wise process at strategic, tactical, and operational levels covering risks and technological capabilities.

EBSCOhost – printed on 11/13/2023 8:06 PM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

sourcing for innovAtion   •   133

4.3.2 (eaRly) SuPPlieR involvemenT

After selecting appropriate suppliers, the integration of suppliers in various stages of product and service life-cycles is beneficial. This involvement may be positioned at the earliest stages of development when suppliers may provide design suggestions or even have complete design responsi- bility, to the later stages, when suppliers support the commercialization of products and services and manage after-sale product quality. Based on Figure 4.3, the phases in which suppliers will be involved in the develop- ment process depends on the degree that the technology of the suppliers will change and to what degree they have the capability to contribute to the design and engineering process. In general, the increased coordination will make suppliers more engaged with the interests of the focal company and more motivated to invest further in this relationship. And, as suppliers become more involved in and knowledgeable about companies’ needs, plans, and strategies, they will feel more able to secure future business opportunities with the companies. Thus, they will be more inclined to work on innovative activities. However, companies can hinder the like- lihood that suppliers will innovate if they set forth conflicting objectives about what they want from the suppliers. They also risk this outcome if they are too late or too demanding, when it comes to the engineering and specification challenges that need to be met. Finally, if companies push suppliers too hard to reduce their prices, then they also lessen the chances that suppliers will strive to innovate. Hence, the involvement of suppli- ers in the development process is a balancing act to meet objectives for

Figure 4.3. Map for selection and involvement of suppliers in new product and service development.

Pool of potential suppliers

Screening of suppliers

Technological information for product and service

Risk assessment

Product and technology roadmapping

Evaluation of alignment

Strategic level

Tactical level

Operationalization

Strategic decision-making for outsourcing

If not aligned, but key or emerging technology, then integrate supplier in NPD or find alternate sources and solutions

If aligned and high degree of technological change expected, then integrate supplier in later stages of NPD

If aligned and low degree of technological change expected, then integrate supplier in NPD, depending on capabilities for design

EBSCOhost – printed on 11/13/2023 8:06 PM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

134   •   innovAtion MAnAgeMent And npd for engineers

specific projects for new products and services and to establish beneficial long-term relationships.

4.3.3 commeRcial ReSeaRch oRganizaTionS

The same benefits can be obtained from commercial research organiza- tions that undertake contract research for other companies. These com- mercial research organizations can be divided in companies that provide services to product and service development projects and companies that develop technology. The first category can be test facilities, prototyp- ing, testing, and so on. For example, in the pharmaceutical, biotech- nology, and medical device industries, it is common to use so-called contract research organizations. Such organizations may provide such services as pharmaceutical development, biologic assay development, commercialization, preclinical research, clinical research, and clinical trials management depending on the capabilities of the firm that uses these services. The second category consists of companies that develop technology themselves, but do not commercialize this in their own prod- uct and services. A case in point is AVL List, located in Austria. It is the largest independent company for development, simulation, and testing technology of powertrains for passenger cars, trucks, and large engines. It is this latter category of commercial research organizations that is especially important as supplier of technology to the development of new products and services. Thus, service contract research organizations provides services to companies that are developing new products and services, whereas contract research organizations develop independently technology for other companies or develop technology based on speci- fications from other companies, from both companies can benefit, albeit in different ways.

4.4  universities

A fourth source of ideas and inventions are universities. There is strong evidence of complementarity between publicly funded research (mostly taking place at universities) and private investment on R&D and corpo- rate innovation (for example, Veugelers and Del Rey 2014, pp. 19–20). Looking at the contribution by universities to innovation, three distinct roles can be distinguished for their contribution to ideas and inventions (Universities UK 2015, pp. 12–19).

EBSCOhost – printed on 11/13/2023 8:06 PM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

sourcing for innovAtion   •   135

4.4.1 univeRSiTieS aS knowleDge PRoviDeRS

The first role of universities comes from their engagement in a wide range of knowledge exchange activities, such as long-term collaborative research programs, consultancy, and bespoke training. The involvement of universities in knowledge-exchange activities has a number of important advantages for innovation by firms:

• By conducting long-term, speculative research, academic researchers can create and spot upstream innovation opportuni- ties that other players, such as customers and suppliers, might not; these opportunities are distant from the market that companies operate in and allow some degree of exploring without directly needing to reap benefits. A growing body of evidence shows that public funding for research is fundamental to enabling this, as individual and business incentives differ from those of govern- ments; see Box 4.2 for the development of MRI. Markets encour- age activities that generate returns on rapid timescales. However, this can be at odds with the basic scientific exploration that some forms of innovation, particularly technological innovation, depend on; these timescales for exploration are sometimes com- mercially not viable.

• When downstream innovation opportunities have already been identified, firms in an innovation system are not necessarily able to procure all the expertise needed to bring the product or ser- vice to market; these downstream opportunities for innovation are close to market, but not always ready for the market. Sometimes, it requires complementary peer-reviewed knowledge, highly spe- cific skills, or experimental approaches that may only be available in universities.

• Academic support can be easily adapted to firms of all sizes: uni- versities’ wide portfolios of research, consultancy, and training make it possible for them to tailor support to the needs and scale of individual organizations. Engagement can occur through ambi- tious, long-term collaborative R&D programs. However, it is often done effectively on a much smaller scale, for example, through the exchange of people, feasibility studies, or innovation voucher schemes.

In this perspective, research commissioned by the Department of Business Innovation & Skills (2014) highlights the substantial positive impact of collaboration with universities and public sector research establishments on business performance. Businesses that engage in these partnerships are

EBSCOhost – printed on 11/13/2023 8:06 PM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

136   •   innovAtion MAnAgeMent And npd for engineers

not only more likely to invest in R&D themselves, but tend to perform significantly better on process and product innovation, sales of novel products, and use of technical information than similar firms over a three- year period. In addition, firms that collaborate with universities are more

An important early figure in the research on nuclear magnetic resonance is Isidor Rabi, who worked at Columbia University, where in the 1930s he developed an apparatus that succeeded in detecting and measuring single states of rotation of atoms and molecules and in determining the magnetic moment of nuclei. In 1946, Felix Bloch, at Stanford University, and Edward Purcell, at Harvard University, found nuclear magnetic resonance, the phenomenon where nuclei absorb then read- mit electromagnetic energy. Over the next 25 years, many researchers developed this into a sensitive probe of materials properties.

Paul Lauterbur produced the first two-dimensional image with nuclear magnetic resonance while working at the State University of New York at Stony Brook in 1973. A year later, Peter Mansfield, at the University of Nottingham, filed a patent and published a paper on image formation by nuclear magnetic resonance. Richard Ernst devel- oped the basic technique of today’s magnetic resonance imaging (MRI) in 1975, inspired by a talk by Lauterbur a year earlier. All three won the Nobel prize. MRI continued to be improved; by the 1980s, performing cardiac MRI was possible, as well as the imaging of congenital heart disease. The National Institutes of Health have played a long-term role in the development of MRI.

Advances in the 1990s led to new technologies based on MRI, such as diffusion tensor MRI (DT-MRI). This is able to measure the motion of hydrogen atoms. Unlike conventional MRI, this spin-off technology can show white matter in the brain, providing a new tool for studying concussions, schizophrenia, and Alzheimer’s. Peter J. Basser, James Mattiello, and Denis LeBihan invented DT-MRI while working at the National Institutes of Health.

Both the National Institutes of Health and the National Science Foundation (United States) have played a role in the long-term devel- opment of MRI, which allows enhanced diagnosis of disease and an improved ability to monitor treatments. The National Science Foundation supported this development of nuclear magnetic resonance with 90 million U.S. dollars from 1955 until the 1990s.

Box 4.2. Development of Magnetic Resonance Imaging

Sources: Singer (2014, pp. 20–21).

EBSCOhost – printed on 11/13/2023 8:06 PM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

sourcing for innovAtion   •   137

likely to report that they introduced product innovations and more likely to report that they introduced service innovations. As further suggested in a report commissioned by Universities UK (2015), businesses that engage with universities on innovation are much more likely to report a better per- formance on product range, market share, and product quality than those that do not. These outcomes of investigations mean that engagement with universities for generating ideas and creating inventions is potentially of great benefit to firms.

However, this literature also emphasizes the large time lags required, the importance of the innovative system’s position relative to the techno- logical frontier, the restriction of these positive effects to specific subsets of technological fields, and the importance of geographic proximity. The large time lag is a result of the efforts needed to establish academic knowl- edge that eventually can result in commercialized products and services. A case in point are technologies of the semi-conductor industry; these also require investments in highly specialized manufacturing facilities, and for this reason only, there has to be certainty about the application of technologies before commercialization comes into view. Moreover, the universities and industries should be at the leading edge of technology to make this work. Again, look at the semi-conductor industry, in this case in Taiwan, where universities and firms collaborate in research; the Hsinchu Science Park is an example of such collaboration. Even though these firms and universities are closely linked, their advances are limited to cer- tain technological domains. Companies in the Hsinchu Science Park are reportedly not having the capabilities to transform these products of the semi -conductor industry in more lucrative products and services. There- fore, the link between science and industry is neither direct nor obvious.

4.4.2 univeRSiTieS aS innovaTion faciliTaToRS anD BRokeRS

Aside from contributing to business innovation directly by collaborat- ing on the development of new products or services, universities also play an important role in facilitating innovation indirectly. For example, they provide space for innovative firms to interact closely and assist in the development of networks. Increasingly, universities are investing in spaces, equipment, and facilities that are open to, or shared with, the local innovation community; for example, the University of Glasgow is creat- ing a Research and Innovation Hub to this purpose. This is an effective way to accommodate the needs of the local innovation community and to help maintain the world-class facilities that are needed to attract talent

EBSCOhost – printed on 11/13/2023 8:06 PM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

138   •   innovAtion MAnAgeMent And npd for engineers

and investment from all around the world. For example, in the 1980s, the United Kingdom only counted a handful of university-owned science parks. Nowadays, about half of the around 100 United Kingdom’s science parks are owned by or linked to universities. Furthermore, equipment-shar- ing arrangements between universities and businesses are increasingly common. Access to university infrastructure comes with expertise that becomes critical to innovation processes for businesses. Most commonly, universities use so-called technology transfer offices for the commercial- ization of their inventions; these offices mediate between universities and commercial organizations about inventions and patents resulting from academic research. Thus, universities are entangled in relationships with the local innovation community and interact with this community, rather than just providing knowledge and inventions.

4.4.3 univeRSiTieS aS innovaTion inveSToRS

As part of their role as innovators, universities have taken steps to help innovative ideas cross the so-called valley of death between research and its commercial exploitation; this valley of death refers to outcomes of research, such as new technologies and new artifacts, not being picked up by firms to turn them into new products and services. To cross this valley, universities may take a proactive role in the commercialization of their research when opportunities arise, through investment in academic and graduate spin-offs, and backing ventures that can add value and com- plementary expertise to their internal facilities for research. A report by Targeting Innovation (2008) shows the importance of these spin-offs for the Scottish economy. Although these activities often generate a return for universities, the greatest value added from these investments comes in the form of strengthened research and commercialization skills for staff, successful innovation by firms and other forms of ventures, and social and economic benefits for customers, users, and beneficiaries.

Despite the fact that spin-off activities represent a small fraction of universities’ third mission activities, they are, nonetheless, an important vehicle for research impact and innovation. Between 2010 to 2011 and 2013 to 2014 alone, United Kingdom’s universities helped generate nearly 15,000 new graduate startups and academic spin-offs, helping many of these with seed funding, subsidized space, mentoring, and business support (Universities UK 2015, p. 17). In addition to spin-offs, there are further ways in which universities are facilitating the move of ground-breaking ideas to markets. These include activities such as creating or investing

EBSCOhost – printed on 11/13/2023 8:06 PM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

sourcing for innovAtion   •   139

in venture capital funds to setting up full-blown venture capital and loan entities, individually or in partnership with other institutions. These activ- ities are sometimes found in incubators (companies that support new and start-up companies to develop by providing services such as management training or office space), science parks, and licensing (see also Section 8.2). Particularly, incubators are momentarily seen as a fertile ground for innovation. A case in point is LCFT Innovation Incubator in Lancashire (UK) that stimulates innovation in the health care sector; two partners are universities in the region, Lancaster University and the University of Cen- tral Lancashire. Thus, universities in their role as investors are involved in a broad range of activities to commercialize academic output, ranging from spin-offs to incubators to venture capital funds.

4.5  eMpLoyees

A fifth source of innovation is found within the firm. Employees in addi- tion to sales and marketing together make up one of the largest sources for ideas. By virtue of experience and exposure within an industry and its related products, employees are often the most well-informed source for ideas and can provide detailed, structured proposals for new products and services. This means that companies should encourage employees to generate ideas by providing them with the necessary infrastructure to submit new proposals. The Post-It notes, small pieces of paper with a re- adherent strip of glue on its back, by 3M, are an example of how an idea by an employee can turn into a commercial success, see Box 4.3. Another example is the pharmaceutical firm Bristol-Myers Squibb, which involved its employees in constantly seeking innovative new ideas. The company instituted a series of ideation campaigns that generated ideas from many sources. And, it installed tip-lines on its intranet, which enabled employ- ees to easily submit ideas. In a typical campaign, some 4,000 individual ideas were generated (Tucker 2003). In addition to individual employ- ees, the sales and marketing department usually experiences the greatest balance between customer relations and internal communication. This allows them to easily anticipate and articulate the needs of consumers and translate them into usable ideas. During a session about open innovation (see Section 9.2) organized by the Centre for Engineering Education and Development, participants relayed some worries about how ideas gener- ated by employees are managed; particularly, when ideas are not picked up, this may lead to demotivation (Dekkers et al. 2016). In this sense, it is important that the process of idea generation and evaluation is transparent.

EBSCOhost – printed on 11/13/2023 8:06 PM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

140   •   innovAtion MAnAgeMent And npd for engineers

Once this transparency is created, the generation of ideas and inventions by employees may be a worthwhile source of innovation.

Another view is that the generation of ideas and inventions and their commercialization does not happen within one discipline or department, but rather, that it emerges in the white spaces between disciplines and departments, according to DeGraff and DeGraff (2017). White spaces are where unmet and unarticulated needs are uncovered to create innovation opportunities. These new products and services do not exist yet based on the present understanding of values, definition of business, or even exist- ing competencies. This is why it is more important to include all employ- ees in the innovation process and build links across departments. These links offer further opportunities to discover gaps in provision, and new products and services. Because innovation is highly iterative, it is neces- sary to not only allow all employees to submit ideas, but also to give them a way to comment and participate in the ongoing process of innovation. By doing so in an open and transparent process, the ownership of success through innovation becomes part of the fabric of an organization, and it is not restricted to R&D departments and engineering. The engagement of

In 1968, a scientist at 3M in the United States, Dr. Spencer Silver, was attempting to develop a super-strong adhesive. Instead, he acci- dentally created a low-tack, reusable, pressure-sensitive adhesive. For five years, Silver promoted his solution without a problem within 3M both informally and through seminars, but failed to gain acceptance. In 1974, a colleague who had attended one of his seminars, Art Fry, came up with the idea of using the adhesive to anchor his bookmark in his hymnbook. Fry then utilized 3M’s officially sanctioned permit- ted bootlegging policy to develop the idea. The original notes’ yellow color was chosen by accident, as the lab next-door to the Post-it team had only yellow scrap paper to use.

3M launched the product as Press ‘n Peel in stores in four cities in 1977, but the results were disappointing. A year later, 3M instead issued free samples directly to consumers in Boise, Idaho, with 94 per- cent of those who tried them indicating they would buy the product. On April 6, 1980, the notes were re-introduced in U.S. stores as Post-It Notes. The following year they were launched in Canada and Europe.

Box 4.3. Development of Post-It Notes

Sources: Wikipedia (2015).

EBSCOhost – printed on 11/13/2023 8:06 PM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

sourcing for innovAtion   •   141

all employees and departments is seen as key factor for achieving a high rate of innovation in firms.

4.6  coMpetitors

Competing organizations, leading firms, and business leaders are a sixth source for innovation. Indicative information about their views, strategies, and activities are often presented at industry conferences, exhibitions, and trade shows; sometimes, this type of information is found in professional publications, such as business magazines. By being aware of what the competition is developing or researching, organizations can often build on these ideas by appending or modifying them to create new products or services themselves. Staying well-connected and networked with other leaders in their industry, across industrial sectors, and markets is another avenue for gathering ideas. Thus, the compilation of information from competitors is an additional activity for sourcing ideas and inventions.

Sometimes, competitors work together for the purpose of innovation, which is called co-opetition. Several examples are mentioned to highlight the value these strategic alliances have brought to fierce competitors, such as Ford and Toyota for hybrid powertrains and Boeing and Lockheed Mar- tin for specific defense contracts. Without these collaborative efforts, these companies would not have been able to be as competitive and innovative as if they acted on their own, certainly for mitigating risks and alloca- tion of resources in times of technological discontinuities (Gnyawali and Park 2011, p. 652). Furthermore, co-opetition allows also the participating firms to establish industry standards; think about the dominant design that will emerge after a period of technological discontinuities (see Subsec- tion 3.3.1). These collaborations are sometimes marred with distrust and conflict. In that sense, a study by Bouncken and Fredrich (2011) on the information technology industry shows that co-opetition can be associated with increased radical innovation. However, this requires a high degree of trust between the partners, even when they are quite dependent on the outcomes of the collaboration. This indicates that co-opetition can lead to success and enhance the capacity to innovate for firms.

Very differently, collaboration with competitors for the purpose of innovation, might also serve a different purpose. Narula and Santangelo (2009, p. 400) infer, based on an econometric analysis of 17 European ICT firms and their alliances, that R&D alliances might be motivated more by monitoring of competitors’ activities, rather than knowledge creation. This

EBSCOhost – printed on 11/13/2023 8:06 PM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

142   •   innovAtion MAnAgeMent And npd for engineers

means that, under the disguise of collaboration, companies actively seek information about the innovation activities of their competitors.

4.7  Key points

• The generation of ideas and inventions constitute the core of inno- vation processes and management. For these ideas and inventions, there are six sources:  Inventors. Both independent and entrepreneurs generate

inventions and ideas. Generally speaking, these ideas and inventions are subsequently commercialized or sold to others for commercialization.

 Users. According to some studies, users inspire inventions and innovation. This happens in a variety of industries, sports being among them. There are many ways for involving customers, according to the stage of development of a new product and service. User involvement is often associated with incremental innovation.

 Suppliers and commercial research organizations. This third source of innovation is seen as supplementing the internal sources of innovation by a firm. The disadvantage is this source of ideas and inventions is also available to competitors.

 Universities. Research at universities may result in new ideas and invention that can be commercialized by firms. It is quite common that this commercialization is supported by so-called technology transfer offices.

 Employees. Because of their innate knowledge about the firm’s products and services, employees are seen as a powerful source of innovation. It is also seen as motivation to involve employ- ees, given that idea generation and evaluation is transparent. Others view the so-called white spaces between departments as opportunities for new business models, products, and services.

 Competitors. This source of innovation, called co-opetition, should be considered a component in the innovation process. Without collaborative efforts, companies may not be able to be as innovative as if they acted on their own.

• Historically, innovation by individual inventors is seen as a major contribution to the development of economies by creating new jobs and companies.

EBSCOhost – printed on 11/13/2023 8:06 PM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

sourcing for innovAtion   •   143

• Universities have multiple roles in innovation processes. The first is that of providing knowledge-exchange activities, such as long- term collaborative research programs, consultancy, and bespoke training. The second one is providing facilities indirectly through technology transfer offices, innovation hubs, and so on. And, the final one is a proactive role in the commercialization of their research through spin-offs, ventures, science parks, and so on.

• Lead users are defined as an extremely valuable cluster of customers and potential customers who can contribute to identifi- cation of future opportunities and evaluation of emerging concepts. Engaging with these lead users may result in new opportunities for products and enhancement of services.

• Co-opetition occurs when a group of competitors cooperate in activities associated with creating mutual benefits, while at the same time, they compete with each other in activities associated with dividing up the benefits. Thus, there is the need to collabo- rate on innovation with competitors when competitive conditions in the market compel rivals to join forces for new product and service development. However, competitors may also have ulterior motives when collaborating.

4.8  references

Black, H.S. 1977. “Inventing the Negative Feedback Amplifier: Six years of persistent Search Helped the Author Conceive the Idea ‘in a flash’ Aboard the Old Lackawanna Ferry.” IEEE Spectrum Magazine 14, no. 12, 55–60. doi:10.1109/MSPEC.1977.6501721

Bødker, S., P. Ehn, D. Sjögren, and Y. Sundblad. 2000. Cooperative Design—per- spectives on 20 years with the Scandinavian IT Design Model (CID-104). Stockholm: R. I. o. Technology.

Bouncken, R.B., and V. Fredrich. July 31–August 4, 2011. “Coopetition: Its Successful Management in the Nexus of Dependency and Trust.” Paper Presented at the PICMET Conference, Portland, OR.

Braunerhjelm, P., and R. Svensson. 2010. “The Inventor’s Role: was Schumpeter Right?” Journal of Evolutionary Economics 20, no. 3, 413–44. doi:10.1007/ s00191-009-0157-5

Degraff, J., and S. DeGraff. 2017. The Innovation Code: The Creative Power of Constructive Conflict. Oakland, CA: Berrett-Koehler Publishers.

Dekkers, R. 2011. “Perspectives on Living Labs as Innovation Networks.” Inter- national Journal of Networking and Virtual Organisations 9, no. 1, 58–85. doi:10.1504/IJNVO.2011.040935

EBSCOhost – printed on 11/13/2023 8:06 PM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

144   •   innovAtion MAnAgeMent And npd for engineers

Dekkers, R., S. Sinclair, S. Mitchell, M.I. Koukou, Q. Zhou, and M.A. Al-Dossary. 2016. “Engaging With Open Innovation: A Scottish Perspective on its Opportunities, Challenges and Risks.” Paper presented at the Inter- national Conference on Production Research—Region Africa, Europe and Middle-East, Cluj-Napoca.

Dekkers, R. 2017. Applied Systems Theory, 2nd ed. Cham: Springer. Department for Business Innovation & Skills. 2014. Estimating the Effect of UK

Direct Public Support for Innovation, 4. London. Design for Europe. 2017. “Whittington Hospital Pharmacy: Creating a Better

Pharmacy Service for Patients and Staff.” Retrieved from http://designforeu- rope.eu/case-study/whittington-hospital-pharmacy

Fahimi-Steingraeber, G. 2015. Technology Transfer by Non-Practicing Entities (NPEs)—First Empirical Case Study. Doctoral, University of the West of Scotland, Paisley.

Gnyawali, D.R., and B.J. Park. 2011. “Co-opetition Between Giants: Collabora- tion with Competitors for Technological Innovation.” Research Policy 40, no. 5, 650–63, doi:10.1016/j.respol.2011.01.009

Handfield, R.B., G.L. Ragatz, J.K. Petersen, and R.M. Monczka. 1999. “Involving Suppliers in New Product Development?” California Management Review 42, no. 1, pp. 59–82.

von Hippel, E. 1986. “Lead Users: A Source of Novel Product Concepts.” Man- agement Science 32, no. 7, 791–805. Retrieved from http://search.ebscohost. com/login.aspx?direct=true&db=buh&AN=7023344&site=ehost-live

von Hippel, E. 2001. “Innovation by User Communities: Learning from Open- Source Software.” MIT Sloan Management Review 42, no. 4, pp. 82–86.

Intille, S.S., K. Larson, J.S. Beaudin, J. Nawyn, E. Munguia Tapia, and P. Kaushik. April 2–7, 2005. “A Living Laboratory for the Design and Evaluation of Ubiquitous Computing Technologies.” Paper Presented at the Conference on Human Factors in Computing Systems, Portland, OR.

Koukou, M.I., R. Dekkers, and K.R. Jespersen. June 14–16, 2015. “Evaluat- ing Three Approaches of NPD on Effectiveness of Customer Involvement: A Literature Review.” Paper Presented at the 22nd Innovation and Product Development Management Conference, Copenhagen.

Long, K. 2004. “Customer Loyalty and Experience Design in E-business.” Design Management Review 15, no. 2, 60–67. doi:10.1111/j.1948-7169.2004. tb00163.x

Narula, R., and G.D. Santangelo. 2009. “Location, Collocation and R&D Alli- ances in the European ICT Industry.” Research Policy 38, no. 2, 393–403. doi:10.1016/j.respol.2008.11.005

Omta, S.W.F. 2004. “Increasing the Innovative Potential in Chains and Networks.” Journal on Chain and Network Science 4, no. 2, 75–81. Retrieved from http:// edepot.wur.nl/348776

Prencipe, A. 2000. “Breadth and Depth of Technological Capabilities in CoPS: The Case of the Aircraft Engine Control System.” Research Policy 29, nos. 7–8, pp. 895–911.

EBSCOhost – printed on 11/13/2023 8:06 PM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

sourcing for innovAtion   •   145

Roussel, P.A., K.A. Saad, and T.J. Erickson. 1991. Third Generation R&D: Managing the Link to Corporate Strategy. Boston: Harvard Business School Press.

Singer, P.L. 2014. Federally Supported Innovations: 22 Examples of Major Tech- nological Advances That Stem From Federal Research Support. Washington, D.C: Information Technology and Innovation Foundation.

Targeting Innovation. 2008. Scottish University Spin-Out Study. Glasgow. Truffer, B. 2003. “User-led Innovation Processes: The Development of

Professional Car Sharing by Environmentally Concerned Citizens.” Innova- tion: The European Journal of Social Science Research 16, no. 2, 139–54. doi:10.1080/13511610304517

Tucker, R.B. 2003. “Seven Strategies for Generating Ideas.” Retrieved from http:// innovationresource.com/seven-strategies-for-generating-ideas/

Ulrich, W. 2000. “Reflective Practice in the Civil Society: The Contribution of Critically Systemic Thinking.” Reflective Practice 1, no. 2, 247–68. doi:10.1080/713693151

Universities UK. 2015. The Economic Role of UK Universities. London. Urban, G.L., and E. von Hippel. 1988. “Lead User Analyses for the Develop-

ment of New Industrial Products.” Management Science 34, no. 5, 569–82. doi:10.1287/mnsc.34.5.569

Veryzer, R.W. 1998. “Discontinuous Innovation and the New Product Devel- opment Process.” Journal of Product Innovation Management 15, no. 4, pp. 304–21.

Veugelers, R., and E. del Rey. 2014. The Contribution of Universities to Innova- tion (regional) Growth and Employment. Munich: European Expert Network on Economics of Education.

Wikipedia. 2015. “Post-it Note.” Retrieved from https://en.wikipedia.org/w/index. php?title=Post-it_note&oldid=698667831

Williams, R., and D. Edge. 1996. “The Social Shaping of Technology.” Research Policy 25, no. 6, 865–99. doi:10.1016/0048-7333(96)00885-2

EBSCOhost – printed on 11/13/2023 8:06 PM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

EBSCOhost – printed on 11/13/2023 8:06 PM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

chApter 5

collaBoration for innoVation

Not is it only important to work for ideas and inventions with external parties, such as commercial research organizations, competitors, inven- tors, suppliers, and universities (as discussed in Chapter 4), the collabo- ration with these during new product and service development will also determine the success of projects aiming at innovation, among other factors. However, the collaboration with partners is often perceived as dif- ficult, when speaking to firms. Particularly, this is the case for innovation, which is associated with risks at the long run. From this perspective, often issues such as trust and power are mentioned. This mix of risks, trade-offs between long run and short-term benefits, trust, and power make collabo- rations often complex and challenging for those involved.

To look at how companies can collaborate effectively, how to work in networked organizational forms, and how to avoid pitfalls in these collaborations are the topics of this chapter. The first section of this chapter looks at so-called strategic networks for collaboration. This type of networks includes alliances and joint ventures. Section 5.2 will look into collaborations with suppliers. It covers the selection of suppliers during new product and service development, the involvement of suppliers and the development of the capabilities of suppliers. In Section 5.3 innovation networks are discussed, which consist of more loosely-connected actors that collaborate to achieve innovations. How those actors work together is found in Section 5.4. In these collaborations the absorptive capacity of individual firms plays a key role, according to Section 5.5. Global research networks in Section 5.6 and innovation management in supply chains in Section 5.7 conclude this chapter.

C o p y r i g h t 2 0 1 8 . M o m e n t u m P r e s s .

A l l r i g h t s r e s e r v e d . M a y n o t b e r e p r o d u c e d i n a n y f o r m w i t h o u t p e r m i s s i o n f r o m t h e p u b l i s h e r , e x c e p t f a i r u s e s p e r m i t t e d u n d e r U . S . o r a p p l i c a b l e c o p y r i g h t l a w .

EBSCO Publishing : eBook Collection (EBSCOhost) – printed on 11/18/2023 5:19 AM via TRINE UNIVERSITY AN: 1881425 ; Rob Dekkers.; Innovation Management and New Product Development for Engineers, Volume I : Basic Concepts Account: s8991307.main.ehost

148   •   innovAtion MAnAgeMent And npd for engineers

5.1  strAtegic netWorKs for innovAtion

One way of collaborating for innovation is through strategic networks. The study of these networks as a key aspect of industrial organization goes back to the 1980s with the seminal work of Håkansson (1990) at Uppsala University, who defined networks as sets of more or less special- ized, interdependent actors involved in exchange processes; this means that these actors work together, but retain their independence. Around the same time, the study of urban, networked organizations in the industri- alized regions of northern Italy recognized the importance of networks for innovation aiming at improving logistical efficiency (Camagni 1988, 1993). Simultaneously, writings appeared on strategic networks, which are defined as long-term, purposeful arrangements among distinct, but related, for-profit organizations that allow members to gain or sustain competitive advantage over their competitors outside the arrangement (Ireland et al. 2002; Jarillo 1988, p. 32). According to this view, strategic networks are merely a superior method of managing the process necessary for the generation and sale of a chosen set of products (like in Freiling 1998); this applies also to innovation and new product development (e.g., Deeds and Hill 1996). The participation of companies in these networks depends on managing product and service development, both at the level of the network and individual companies, and on managing operational processes; the purpose of these networks is to gain competitive advantage through access to resources and through the development of competitive products and services.

These strategic networks are usually in the form of strategic alliances and joint ventures. SMEs tend to work together in networks or virtual networks. These forms of strategic networks will appear in the next sub- sections, followed by how best to select a mechanism for collaboration.

5.1.1 STRaTegic allianceS

As one form of strategic networks, a strategic alliance is an agreement between two or more parties to pursue a set of agreed-upon objectives needed while remaining independent organizations. This form of coop- eration can be positioned between mergers and acquisitions, and organic growth of firms. Strategic alliances happen when two or more organiza- tions join together to pursue mutual benefits. These benefits are found in what the partners may provide to the strategic alliance, such as products and services, distribution channels, manufacturing capability, project funding, capital equipment, knowledge, expertise, or intellectual property.

EBSCOhost – printed on 11/18/2023 5:19 AM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

coLLAborAtion for innovAtion   •   149

Therefore, an alliance is a cooperation or collaboration that aims for a synergy where each partner hopes that the benefits from the alliance will be greater than those from individual efforts.

The alliance often involves technology transfer (access to knowl- edge and expertise), economic specialization, shared expenses, and shared risk. Alliances tend to maintain and improve competitive advan- tage by making strategic decisions, which are primarily focused on the development of new products, services, and processes. These decisions are aimed at aligning the strengths of the alliance with its external pos- sibilities. Entering these cooperative arrangements lowers the costs and risks, as the costs and market risks for new product and service develop- ment tend to be very high for an individual company. Bearing in mind the increase in costs, risks, and needs for new technologies, the pre- requisite for competitive success is cooperation in terms of innovative activities, production, and distribution of new products. An innovation strategy can introduce new perspectives for development of strategic alliances aiming at specific market. Therefore, forming of strategic alli- ances and formulating a related innovation strategy are key processes for sustaining alliances.

By applying strategies of innovation, these strategic alliances offer new products for customers and position themselves at (new) market segments. Some innovation strategies for these alliances are platform strategy, co-creation strategy, technology strategy, research strategy, part- nership strategy, knowledge-based strategy, and risk mitigation strategy (derived from Stefanović and Dukić 2011, pp. 61–2):

• The application of a platform strategy enables each firm in a stra- tegic alliance to offer products for specific market segments, while sharing a generic product or service architecture. For example, Nokia and Siemens as partners created different phones, in terms of external design, while their manufacturing technology was 80 per- cent the same (Lord et al. 2005, p. 126). This practice has also been used in the automotive industry among others (Meyer and Utterback 1993). For instance, Citroen, Fiat, Lancia, and Peugeot in the 1980s developed a common platform for mini-vans (or multi-purpose vehicles); this allowed the companies to share their development costs while still retaining their own specific (external) design. Also, this allows firms in this type of alliances to expand their business globally, at the same time adapting their products to specific mar- kets. This strategy demands strong visionary leadership, intensive teamwork, which is focused on innovation and product develop- ment. In case of implementation of this strategy, strategic alliances come along with financial and technological risks (Bowonder et al.

EBSCOhost – printed on 11/18/2023 5:19 AM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

150   •   innovAtion MAnAgeMent And npd for engineers

2010, p. 21). Therefore, a new product is the same technologically when an alliance focuses on a platform strategy, but differs in its special characteristics depending on the target market.

• A co-creation strategy of a strategic alliance creates value by involving customers in new product creation and development with a goal to increase customer satisfaction. The needs and sugges- tions of customers are captured and new products are developed accordingly (Bowonder et al. 2010, p. 23). For example, Procter & Gamble reached an agreement with the International Olympic Comity and connected to mothers of six top Olympic athletes worldwide. Within this arrangement, ideas were created for new products development aimed at improving the life of athletes; 50 percent of these ideas emerged from the interviews with these mothers (Lord et al. 2005, p. 130). Thus, the co-creation strategy aims at reaching out to (potential) customers and eliciting ideas for new products and services.

• A technology strategy for a strategic alliance aims at the use of innovative technologies in order to achieve dominant competitive positions. These technologies may have been generated internally within the alliance or acquired externally. Strategic alliances could also use technologies from more than one source and maintain their leadership position in this manner (Bowonder et al. 2010, pp. 26–7). For example, at the time Nokia entered a strategic alliance with Microsoft with the purpose of expelling Android-based mobile phones and Apple’s iPhone; it was going to exploit Microsoft’s Windows Phone 7 platform, while its competitors used platforms made by Google, and Apple had its own operating system. How- ever, this had not only to be seen as a battle between Nokia on one side and Google and Apple on the other, but also as a battle between Microsoft and Google in the field of modern technologies (Lord et al. 2005, p. 135). Thus, this type of strategy for strategic alliances aims at creating partnerships for one of competing technologies in order to strengthen the position of all partners in the alliance.

• A research strategy for strategic alliances implies that collabora- tion is seen as beneficial based on monitoring technology trends and as strengthening positions of individual firms for the future. However, the future cannot be predicted easily, so firms and stra- tegic alliances must have more than one option (see Dekkers [2017, pp. 247–54] for multiple strategies and scenario planning). A case in point is that Canon foresaw that LCD monitors would be replaced with more technologically advanced solutions. However, it was not able to develop advanced technology, so it entered the

EBSCOhost – printed on 11/18/2023 5:19 AM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

coLLAborAtion for innovAtion   •   151

partnership with Toshiba and began developing flat screens based on surface-conduction electron-emitter technology as an alternative strategy (Bowonder et al. 2010, p. 27).

• A partnership strategy for a strategic alliance is used to improve the innovation process, to exploit complementary competencies of each partner, and to share risk and resources. The objective of these alliances is to beat the competition by innovating in partnership. For example, Airbus forged an alliance with Aérospatiale, British Aerospace, CASA, and Deutsche Aerospace AG to develop the A380. The exchange of knowledge and resources between the five partners helped Airbus in creating the biggest airliner in the world (Bowonder et al. 2010, pp. 27–8). Thus, the aim of a strategic alli- ance based on a partnership strategy is because the capacity and capabilities of an individual firm are insufficient for the develop- ment of a process, product, or service; this also means that risks are being shared in such a strategic arrangement.

• Strategic alliances that use a knowledge-based strategy of innova- tion are oriented toward development of new high-quality products with high level of different types of knowledge built into them. The application of this strategy aims at improving technology in order to satisfy specific needs of certain customer segments. This hap- pens specifically when technological and market uncertainties are deemed high (Whitly 2000, p. 871). For instance, Daimler AG and Renault-Nissan joined up so that they could develop technology for small electrical cars. This cooperation entailed joined development of small volume batteries and aggregates that are built into electric cars. The main objective of the cooperation was the development of small city car for the needs of Daimler. In return, Daimler helped Nissan with developing technology of large volume aggregates and hybrid technology (Lord et al. 2005, p. 140). This means that a knowledge-based strategy can be asymmetrical with regard to the knowledge of the partners and benefits of the partnership.

• A risk mitigation strategy of innovation in a strategic alliance aims at the development of new, technologically superior, high-quality, knowledge-based products, which perform in a broad range of dif- ferent uses and enable the replacement of older products and ser- vices. Strategic alliances aim to dominate markets with this strategy, but they can also be exposed to high risks when introducing these products and services in the market. In many cases, alliances are focused on specific types of customers who were ignored by previ- ous manufacturers. By developing cooperation with customers and suppliers, diversification of risk is achieved and mutual interests

EBSCOhost – printed on 11/18/2023 5:19 AM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

152   •   innovAtion MAnAgeMent And npd for engineers

can be satisfied (Whitly 2000, pp. 872–3). The partnership between Bayer CropScience and Food Chain was created with the idea in mind that Bayer CropScience would give its clients expert advice and technical support. Bayer CropScience supported breeders, pro- cessors, and sellers in their efforts to offer high-quality product to the end customer at acceptable price. Thus, Bayer CropScience proactively initiated partnerships within the food supply chain. Participation in Food Chain projects was focused on improving reliability of customers, as well as the food industry regarding qual- ity and food security (Lord et al. 2005, p. 145).

It could also be that partners in a strategic alliance seek a multiple of these arrangements. Nevertheless, these different strategies for innova- tion in strategic alliances demonstrate the variety of objectives, benefits, and arrangements that motivate partners to collaborate for achieving innovation.

However, it appears often that the factors power and trust domi- nate the relationships in these types of strategic networks (Das and Teng 2001; Thorelli 1986, p. 38). This is caused by the fact that these strategic alliances come about through strategic objectives of one or more of the partners, which make it necessary to collaborate and which create ten- sions in inter-organizational relationships (whether they are research- or market-oriented [Hagedoorn and Schakenraad 1999, p. 307]). This means that each partner aims to serve its self-interest, which does not necessar- ily align with the espoused objectives of the strategic alliance. There are plenty of examples of strategic alliances that have failed. A case in point is the acquisition of a substantial stake in Japanese manufacturer Suzuki Motor Corporation by German Volkswagen in late 2009. The deal saw VW take 19.9 percent of Suzuki for 1.7 billion Euros and sign an agreement to share technologies and global distribution networks. This would help both firms break into each other’s markets, with VW dominant in Europe, but struggling to enter Asian markets. Part of the arrangement saw VW allow Suzuki to have use of much of its electric and hybrid vehicle technologies, while the Japanese firm offered its German partner its own technologies, as well as access to its lucrative hold of the Indian market. The partnership quickly unraveled in a storm of disagreements. By October 2011, Suzuki claimed VW had breached its contract, particularly in failing to handover the hybrid technology. A month later, the two companies terminated their agreement to work together, and Suzuki demanded VW return its near 20 percent stake: something the German firm refused to do. The dispute eventually went to an international arbitration court. This example shows expected benefits of all partners should be managed through the life cycle of a strategic alliance to avoid failure.

EBSCOhost – printed on 11/18/2023 5:19 AM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

coLLAborAtion for innovAtion   •   153

5.1.2 JoinT venTuReS

Another form of collaboration for innovation is a joint venture. This is a business agreement in which the parties agree to develop, for a finite time, a new entity and new assets by contributing equity. Normally, they exercise control over the newly founded enterprise, and consequently share rev- enues, expenses, and assets. The objectives and related strategies can be similar to those of strategic alliances (see Subsection 5.1.1). An example of what is considered a successful joint venture is the one formed in 2006 by Siemens of Germany and Nokia of Finland, called Nokia Siemens Net- works U.S. It was headquartered in Espoo, Finland. The formation of this joint venture was prompted by the mergers in the industry, such as Alcatel with Lucent. Its need also came about to counter the rise of low-cost Chi- nese manufacturers, such as Huawei Technologies. The joint venture was officially launched in 2007 and has continuously operated since then in 150 countries. In 2011, the company was rated by measure of revenues as the fourth largest manufacturer of telecom equipment. In this respect, it was next only to Ericsson, Huawei Technologies, and Alcatel Lucent. In 2013, Nokia acquired 100 percent of Nokia Siemens Networks, buying all of Sie- mens’ shares. The advantage of this arrangement is that the exposure to risks is limited to the joint venture and the equity put into it by the partners.

These joint ventures that are successful normally develop into dif- ferent forms, as already shown by the example of Nokia Siemens Net- works in the previous paragraph. They become an independent firm, what is sometimes called outsourcing, or they merge with one of the part- ners or another firm; Figure 5.1 depicts this process for joint ventures. For example, IBM decided to divest itself of its Rolm Communications Division in 1989, rather than selling it outright; it spun it off into a 50–50 joint venture with Siemens, which then eventually bought the entire division after assimilating Rolm into a new culture. This means that even successful strategic collaborations are sometimes temporary and subject to competitive market forces.

Figure 5.1. Schematic represen- tation of joint ventures turning into outsourcing and mergers.

Time

Joint Ventures

Outsourcing

Mergers

EBSCOhost – printed on 11/18/2023 5:19 AM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

154   •   innovAtion MAnAgeMent And npd for engineers

5.1.3 SelecTion of mechaniSmS foR collaBoRaTion

Whether aiming for a temporary or long-term collaboration, the nature of the strategic collaboration has to be selected. To this purpose, the classi- fication of Roussel et al. (1991) can be used; see Subsection 3.3.1. Based on its four categories, Omta (2004) presents a matrix for partner selection and forms of collaboration; see Table 5.1. In this matrix, when there is an emerging technology, which may have competitive impact in the future, and if the firm’s technological capability is strong, optimizing the tech- nological capability to reinforce the potential competitive advantage is called for. If the internal technological capability is moderate or weak, catching up may be necessary. However, uncertainty requires for scanning the options for R&D, that is, many partners and flexible relationships, preferably in strategic partnerships and alliances, or via contract research organizations and sponsoring of knowledge institutions. In all cases, ade- quate patent protection strategies need to be considered (see Chapter 7). A pacing technology may have strong competitive impact on the short or medium term. If a firm’s technological capability is relatively strong, the bias should be toward doing the work in-house. Extra investments may be required for research into the application of the technology in new products and markets. If a firm’s technological capability is moderate, sharing the risk by strategic alliances with partner firms makes the most sense. If a firm’s technological capability is weak, acquiring of licenses or joint development may be viable alternatives. Pacing technologies need utmost management care, especially if the technology is maturing rapidly, because these might become essential in the (near) future. It is, therefore, necessary to scan research efforts by competitors and potential technol- ogy sources intensively. Furthermore, the technologies in-house need to be protected carefully. Generally speaking, the company should own key

Competitive impact of technology

Internal technological capability Weak Moderate Strong

Emerging Scan Scan/collaborate Collaborate Pace Collaborate Share risks In-house Key Optimize Optimize In-house Base Outsource Outsource/

exchange Sell/ exchange

Table 5.1. Matrix for partner selection and collaborative modes

EBSCOhost – printed on 11/18/2023 5:19 AM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

coLLAborAtion for innovAtion   •   155

technologies, as being critical to current competitiveness. If a firm’s tech- nological capability is weak or moderate in the technology area at issue, it should acquire extra technological capability for building in-house R&D strength by acquisition or by introduction of a substitute technology. For non-critical base technologies, outsourcing might be the appropriate choice if a firm’s technological capability in the field is weak. If it is mod- erate, it may serve as a means of exchange in a partnership. If it is strong, it either may serve as a means of exchange or may be sold to focus the internal technological capabilities on key technologies.

5.2  coLLAborAting With suppLiers

One of the external sources for innovation is collaboration with suppli- ers (see Subsection 4.3.1); if managed successfully, collaborative sup- plier innovation can contribute to new product and services via improved differentiation, time-to-market, and lowered costs. According to Johnsen (2010, p. 188), the interest in collaborating with suppliers is rooted in how the Japanese automotive industry managed to shape this involve- ment across all stages from new product development to manufacturing; he notes that these practices have now become common ground in other countries and other industries (ibid., p. 193). It requires companies to pay attention to supplier selection, supplier involvement, and supplier devel- opment, which are the topics of the next subsections.

5.2.1 SelecTing SuPPlieRS

For the collaboration with suppliers, the selection process is critical, and for this reason, the assessment of the capabilities of suppliers (Hartley et al. 1997, p. 67) should be incorporated in decision making. An example is the method proposed by Handfield et al. (1999, p. 65); see Figure 5.2 for an adapted version of this model. In this approach, setting out of a technology strategy forms the starting point of identifying potential sup- pliers. Such a strategy can be based on strategic tools for innovation and technology management (see Section 3.5). Further insight can be derived from the matrix for partner selection and collaborative modes (Table 5.1). The technology strategy intersects with the need for supplier selection in specific projects for new product and service development. Particularly, the selection of suppliers with so-called critical technologies is of inter- est; according to the classification of Roussel et al. (1991), these are the emerging and pacing technologies (see Subsection 5.1.3). The suppliers of

EBSCOhost – printed on 11/18/2023 5:19 AM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

156   •   innovAtion MAnAgeMent And npd for engineers

interest should be evaluated on whether they have the capability and capac- ity to contribute with critical technology to new product development and how such should be integrated in the development of new products and services. In the case that suppliers have a critical technology but do not have the capability, yet, supplier development should be considered (see Subsection 5.2.3). Furthermore, the integration into new product and ser- vice development depends on the whether the technology strategy of the supplier is aligned with the firm, the degree of technological change, and the expertise in product design and engineering. The lesser the alignment, the less the supplier will be integrated into new product and service devel- opment. Therefore, the capabilities of a supplier in terms of being able to integrate a pacing or emerging technology into a new product or service determines when and how it will be integrated in its actual development.

Figure 5.2. Supplier selection and involvement for new product and service development.

Technology strategy, e.g. • Portfolio analysis • Technology roadmaps • Collaboration matrix

New product development • Customer requirements • Technical specifications • Internal capabilities • Performance targets

Identification potential suppliers

Risk assessment (supplier integration) • Technological capability • Capacity • Performance criteria

Pre-qualify

No Evaluation • Acceptable history • Prior experience • Industry reputation • Pre-qualification

Develop supplierCritical technology? Technology roadmap supplier aligned?

High degree of technological change?

High degree of supplier design expertise?

Integrate supplier in later stages of NPD

Consider following options • Collaborate for current NPD • Improvement program • Other long-term sources

Integrate supplier when appropriate

Fully integrate supplier early in NPD

R ev

ie w

o f s

up pl

ie r’

s ca

pa bi

lit ie

s

Yes

Yes

No YesNo

YesNo

YesNo

YesNo

Feedback to supplier

EBSCOhost – printed on 11/18/2023 5:19 AM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

coLLAborAtion for innovAtion   •   157

A related type of decision making is whether an activity should be outsourced; this is particularly of interest for manufacturing. Such decisions often have far-reaching consequences for manufacturing in terms of performance criteria. However, these decisions are also subject to progressive insight about the new product and service, and incomplete and inaccurate information. To deal with these characteristics of deci- sion making during new product development, Shishank and Dekkers (2013, p. 325) have proposed an iterative method; see Figure 5.3. This framework consists of four quadrants. The first quadrant A contains pro- cesses for decision making on outsourcing related to the manufacturing strategy of a firm. Similar to the framework for supplier selection in the previous paragraph, pre-selection of suppliers takes place, and the actual performance of existing suppliers is also evaluated. The manufac- turing strategy and capabilities of suppliers determine mostly whether a component or part should be produced in-house or outsourced. These decisions are integrated in the processes for new product and service development (Quadrant B). The actual decision-making processes and methods should also be considered (Quadrant C), because they deter- mine how these decisions are underpinned (see also Section 2.4). Finally, the expected performance of the decision to produce in-house or externally is evaluated in Quadrant D. This evaluation if not satisfactory may lead to starting the cycle of decision making again. This framework for outsourcing, as was also the case for supplier selection, depends on evaluation and assessment to ensure that external capabilities match with (future) expectations of performance by the supplier, and with the technology and manufacturing strategies.

The decision to outsource can also be extend to R&D itself. Howells et al. (2008) investigate outsourcing in the U.K. pharmaceutical indus- try. They find that most companies, whether small or large, engage in external sourcing of processes and activities. These activities range from basic research to services, such as clinical trials. However, these exter- nal activities need to be set off against internal capabilities. Grimpe and Kaiser’s (2010, p. 1502) research demonstrates that joint R&D projects with a variety of external partners can be used to complement R&D out- sourcing in that diverse collaboration leads to a higher diversity of the accessed knowledge resources. However, firms should be aware that R&D outsourcing can become disadvantageous if firms rely heavily on external knowledge; deterioration of integrative capabilities and high demands on governance by management are the most notable of these disadvantages. Thus, gains from R&D outsourcing need to be balanced against the pains that stem from a dilution of firm-specific resources.

EBSCOhost – printed on 11/18/2023 5:19 AM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

158   •   innovAtion MAnAgeMent And npd for engineers

Fi gu

re 5

.3 .

D ec

is io

n- m

ak in

g on

o ut

so ur

ci ng

d ur

in g

pr od

uc t d

es ig

n an

d en

gi ne

er in

g.

Pr od

uc t A

ss em

bl y

2 A

ss em

bl y

1

Su b-

A ss

y C om

po ne

nt

Pa rt

A gg

re ga

te d

at a

fo r

de sig

n

D et

ai le

d da

ta fo

r en

gi ne

er in

g

D ef

in in

g m

an uf

ac tu

ri ng

st ra

te gy

a nd

st ra

te gi

c de

ci sio

n- m

ak in

g on

o ut

so ur

ci ng

Ta ct

ic al

d ec

isi on

-m ak

in g

on o

ut so

ur ci

ng

D es

ig n

En gi

ne er

in g

Pr od

uc tio

n pl

an ni

ng

Pu rc

ha sin

g &

co nt

ra ct

in g

Evaluation of manufacturing processes

Pre-selection of suppliers

Pr e-

de sig

n

Su pp

lie rs

Pr od

uc tio

n an

d as

se m

bl y

C om

po ne

nt 0

1- 03

Pr oc

es s A

Pr oc

es s B

Pr od

uc t

Pr oc

es s

T ec

hn ol

og ic

al c

ri te

ri a

Pe rf

or m

an ce

c ri

te ri

a Q

ua lit

y

1) M

ill in

g cr

iti ca

l:

a cc

ur ac

y: .0

00 1

m m

2) M

ou nt

in g

on ly

p os

si bl

e

w ith

to ol

− + 15

-5 00

++ +

1- 20

3 w

ee ks

4 w

ee ks

1) M

ill in

g cr

iti ca

l:

a cc

ur ac

y: .0

00 1

m m

2) M

ou nt

in g

on p

re ss

FO R

EC A

ST IN

G

D . P

R O

C ES

S M

A PP

IN G

A . C

O N

TI N

U O

U S

D EC

IS IO

N -M

A K

IN G

C . A

V A

IL A

BL E

D A

TA A

N D

D EC

IS IO

N -M

A K

IN G

B. P

R O

D U

C T

D EV

EL O

PM EN

T ST

A G

ES

Pr od

uc tio

n pl

an ni

ng

En gi

ne er

in g

Pr od

uc t

de sig

n

R es

ea rc

h

Ev al

ua tio

n ec

he lo

n 1

co nt

in uo

us

im pr

ov em

en t

Ev al

ua tio

n ec

he lo

n 2

de sig

n co

m po

ne nt

s, p

ar ts

In str

uc tio

ns fo

r m

an uf

ac tu

rin g

an d

su pp

ly Fe

ed ba

ck fr

om m

an uf

ac tu

rin g

an d

su pp

ly

Te ch

no lo

gi ca

l de

ve lo

pm en

ts

A pp

lic at

io ns

M ar

ke t

de m

an d

Cu sto

m er

re qu

ire m

en ts

Pr od

uc t c

on fig

ur at

io n

Sp ec

ifi ca

tio ns

co m

po ne

nt s,

p ar

ts

La te

nt m

ar ke

t de

m an

d

Pr op

os al

s f or

co nt

in uo

us im

pr ov

em en

t

Pr op

os al

s f or

re de

sig n

of co

m po

ne nt

s, pa

rts

Pr op

os al

s f or

re

de sig

n of

p ro

du ct

s

Pr op

os al

s f or

o pt

im iz

at io

n of

te ch

no lo

gy

Te ch

no lo

gi ca

l ca

pa bi

lit ie

s M

ar ke

t in

fo rm

at io

n

Pr oc

es s i

nf or

m at

io n

co m

po ne

nt s,

pa rts

Pe rfo

rm an

ce in

fo rm

at io

n co

m po

ne nt

s, pa

rts

Pe rfo

rm an

ce in

fo rm

at io

n pr

od uc

t

Ca pa

bi lit

ie s t

ec hn

ol og

y

Elicitation of Customersʼ Requirements and Market Demand

Ev al

ua tio

n ec

he lo

n 4

tec hn

ol og

y

Ev al

ua tio

n ec

he lo

n 3

pr od

uc t c

on fig

ur at

io n

Cr ea

tin g

va lu

e

El im

in at

in g

w as

te

L ea

d tim

e C

os t

Se ri

es

Le ss

d et

ai l

kn ow

n

M or

e de

ta il

kn ow

n

Pr e-

de sig

n

D es

ig n

En gi

ne er

in g

M an

uf ac

tu ri

ng en

gi ne

er in

g

D at

a D

ec isi

on -m

ak in

g pr

oc es

se s

D ec

isi on

-m ak

in g

m et

ho ds

D ec

isi on

-m ak

in g

pr oc

es se

s D

ec isi

on -m

ak in

g m

et ho

ds

St an

da rd

Ev al

ua tio

n

D et

ai le

d

O ve

rl ap

pi ng

o f d

at a

so ur

ce s f

or d

ec isi

on m

ak in

g

EBSCOhost – printed on 11/18/2023 5:19 AM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

coLLAborAtion for innovAtion   •   159

5.2.2 eaRly SuPPlieR involvemenT

So far, the methods and model have covered whether to engage with suppliers during new product and service development; another matter when such a decision is taken is how to involve a supplier. That supplier involvement has a positive effect is indicated by Kanapathy et al. (2014, p. 9) when they state that 28 percent of the variance in performance of new product development is related to supplier involvement. For this involve- ment, a matrix by Le Dain et al. (2010, p. 79) can serve as starting point; see Figure 5.4. This supplier involvement matrix is based on distinctions made by Clark and Fujimoto (1991), Bortolazzi et al. (1996, pp. 37–8), and Handfield et al. (1999, p. 67) for design and engineering activities by suppliers:

• In the case of white box design and engineering, there is no or only a low level of involvement during product design and engineering. The supplier will follow mostly the specifications set by the firm (buyer); thus, the information exchange is limited to informal con- sultation when appropriate. This approach is also called informal supplier integration.

• When there is blackbox design and engineering, the design of the component is led by the supplier according to the buyer’s perfor- mance specifications. This is possible when the (internal) design of the component or part is independent from the design of other components and parts of the product; the product configuration (see Subsection 1.1.2.2) should allow this to happen, meaning that this

Figure 5.4. Matrix for supplier involvement, incorporating white, gray, and blackbox approaches.

Subcontracting Co-ordinated development

Devolved design and engineering

Strategic co-design

Critical co-design

Development risk

D eg

re e

of su

pp lie

r’ s a

ut on

om y

W hi

te b

ox Bl

ac k

bo x

G re

y bo

x

EBSCOhost – printed on 11/18/2023 5:19 AM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

160   •   innovAtion MAnAgeMent And npd for engineers

is typically associated with a modular structure for a product. • In the case of gray box design and engineering, there is joint devel-

opment with formalized integration. Characteristic for this type of supplier involvement is that the interaction between the suppliers and buyers leads to the design of the component or part. This also means that the supplier may become part of the project team for the new product.

The choice how to involve a supplier also depends on the capabilities of the supplier and the strategic alignment; see Figure 5.2. Le Dain et al. (2010, p. 79) add that the risks associated with the development also play a role; these risks may cover the degree of novelty, product configura- tion, technological complexity of the component or part, contribution of component or part to market differentiation of the product, position of the component or part on the timeline of the project, and relative cost of the component or part compared with the product. Using this elaborate assessment of the development matrix, there are five modes for supplier involvement during new product development:

• Subcontracting (white box). In this mode, the supplier follows the specifications of the firm developing the product; this also means that there is hardly any interaction with regard to specifications and technology. However, it is still important to assess the capabilities of the supplier to provide the component or part.

• Co-ordinated development (white box). This type of involvement happens when the product design is carried out in-house and the process design performed by a supplier. The aim of this coordina- tion is to effectively integrate both activities (product design and process design), while keeping the supplier informed of modifica- tions related to the iterative nature of new product development. The supplier may be consulted during the product design phase to provide tacit knowledge about its manufacturing process.

• Devolved design and engineering (blackbox). In this case, the sup- plier is fully responsible for the design and development of the component or part. The buyer supplies functional specifications and the interface with other components and parts in the product configuration. This may involve also testing whether these func- tional specifications have been met.

• Strategic partnership (blackbox). Also in this case, the supplier takes on the responsibility for the design and engineering of the component or part. Nevertheless, this type of collaboration requires intense communication with the supplier in order to clarify requirements and monitor changes occurring throughout the project.

EBSCOhost – printed on 11/18/2023 5:19 AM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

coLLAborAtion for innovAtion   •   161

• Critical co-design (gray box). Neither the customer nor the supplier possesses the knowledge or the ability to completely execute the design of the component or part in-house. The higher the development risk, the more the buyer will try to promote and manage collaboration between its own project team and the supplier’s team.

According to the level of supplier autonomy, a position in the supplier involvement matrix can be associated with white box configurations that will require a decision to perform the design in-house, whereas a position associated with gray or black box configurations will require a decision to buy the design.

5.2.3 SuPPlieR DeveloPmenT

Sometimes, the selection process of suppliers, see Figure 5.2, may lead to considering supplier development. This means that the firm that is collaborating with the supplier supports its development of (technologi- cal) capabilities (Lawson et al. 2015, pp. 788–9). Supplier development should lead to improvements in the total added value from the supplier in question in terms of product or service offering, business processes and performance, improvements in lead times, and so on. There are different ways of doing this, but no universal approach. Joint value engineering (see Subsection 2.3.2) is one possibility in supplier development projects. Another approach to supplier development is reverse marketing; one example of which is where a buying organization encourages a suppli- er(s) to enter a new market. This might involve the supplier developing its operation or introducing a new range of products. Another example of supplier development is positioning an engineer at the supplier to provide technical support and informal knowledge exchange. This means that the supplier development aims at improving technological capabilities so that (strategic) suppliers can be more effectively involved during new product and service development.

5.3   LooseLy-connected innovAtion  netWorKs

Another way of how companies can collaborate is in so-called innova- tion networks; to this purpose, it is necessary first to look at what type of networks can be distinguished. A typology is provided by Robertson and Langlois (1995, p. 548); see Figure 5.5. The typology has two dimensions.

EBSCOhost – printed on 11/18/2023 5:19 AM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

162   •   innovAtion MAnAgeMent And npd for engineers

The first dimension is the one of coordination integration. This means to what extent companies and other agencies, such as economic development agencies, are working together and coordinating their individual actions. The second dimension is that of ownership integration, which means that one or more companies in these networks own shares of other companies in the network. Based on these two dimensions, six types of networks can be distinguished. The first type of network is that of so-called Marshallian districts. This terminology refers to the Marshall aid that was provided by the United States after the Second World War to nations and regions in Europe to recover from the damage to industry. Even though regions and nations were the target of this aid, the actual collaboration was accidental, and also, the companies involved in these networks did not own shares in each other’s companies (remember that Europe was poor at that point in time). The second type of network is that of venture capital networks. These networks are loosely connected and exist because of a financier or a group of actors providing capital for development of companies. In return for these investments, these venture capital funds share expertise across their network. The third type of network is that of keiretsu networks, also called kaisha networks and in South Korea, chaebol networks. As the name implies, these are organized around a single firm, which is usually a large assembler. The satellite firms supply intermediate inputs to the focal firm, which effectively coordinates the network as a whole (for example, Toyota as described in Dyer and Nobeoka [2000] and Rolls-Royce Areo Engines in Prencipe [1997]). A fourth type is the regional network labeled Third Italy by Biggiero (1999) and Robertson and Langlois (1995, p. 549). The

Figure 5.5. Archetypes of industrial networks mapped on ownership and integration. Source: Robertson and Langlois (1995, p. 548).

Degree of coordination integration

D eg

re e

of o

w ne

rs hi

p in

te gr

at io

n

Holding company

Chandlerian firm

Japanese kaisha network

Venture capital network

Marshallian district

‘Third italian’ district

EBSCOhost – printed on 11/18/2023 5:19 AM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

coLLAborAtion for innovAtion   •   163

fifth and sixth types are forms of single firms looked at from a network perspective. In the case of a holding company, sometimes also called a conglomerate, the degree of common ownership is high, but the constitu- ent companies hardly work together or share information. The Chandlerian networks are generally large companies where they own companies or divisions from the supply of materials to the distribution of products. Think about some traditional companies such as in the automotive industry and the electronics industry (for example, Siemens in the 1960s and 1970s). All these networks have different characteristics, but generally, we do experi- ence a move toward more loosely connected entities (Dekkers and Bennett 2010; Nobelius 2004), adding to the possible ways, industrial firms might collaborate for innovation and new product and service development.

The repositioning toward loosely connected entities in networks implies complex interaction as particularly found in the fifth-generation (and sixth-generation) processes for innovation (see Section 3.4). The shift toward more loosely connected entities collaborating for innova- tion are now enabled by possibilities offered by information and com- munication technology and the need to find novel solutions sources from a wide variety of sources. These developments encourage companies to concentrate on core competencies, even given the flaws and pitfalls of this approach (for the latter see Barthélemy 2003). Consequently, companies have transformed from centralized, vertically integrated, single-site facili- ties to geographically dispersed networks of resources (Dekkers and Ben- nett 2010, pp. 22–3). These simultaneous developments foster the specific characteristics of (international) networks, which require adaptations by companies to fit these characteristics. This also raises questions to what extent these networks are orchestrated by a focal firm or hub, the thinking of Dhanaraj and Parkhe (2006), or really consist of autonomous agents, as Rycroft and Kash (2004) advocate. If these networks are orchestrated, then there is at least some degree of coordination (see Figure 5.5) and possibly some degree of ownership. These thoughts also lead to views whether the emergence of these networks are a result of globalization, which allows companies to source further afield, or interaction between companies, in which serendipitously connections are formed (even though these may be stimulated through networking events, etc.).

Examples of these loosely connected networks are Swiss Microtech Enterprise Network and Virtuelle Fabrik. The collaborative enterprise network Swiss MicroTech consists of small and medium-sized enter- prises (Cheikhrouhou et al. 2012). Originally, it was founded as a group of four enterprises belonging to the same professional association, as an outcome of an applied research project aiming to define a strategic indus- trial network. The network was founded in 2001; its aim was improving

EBSCOhost – printed on 11/18/2023 5:19 AM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

164   •   innovAtion MAnAgeMent And npd for engineers

the position of its members on the market and addressing weaknesses of smaller firms with regard to commercial services for larger customers in the automotive, electronics, and medical industries. In 2018, it consists of eight members, which specialize in machining, thermal treatments, metallic treatments, and quadratic parts. Together, they cannot only offer services to other, mostly large companies, but they also create innovative solutions. Innovation would have been more difficult, because none of the members has on its own the resources to reach out to large customers and create novel solutions. A similar example, but larger in its constituency, is Virtuelle Fabrik (Katzy and Crowston 2008). It started as a virtual organi- zation in 1996 of manufacturing companies with idle machine capacity; akin Swiss Microtech Enterprise Network, it was part of a network devel- opment project (a cooperation between the network members and univer- sity researchers) in two adjacent regions of Lake Constance and the Swiss Midlands. These networks are still operating as two separate ongoing collaborative enterprises. Their members range from small and medium enterprises to production divisions of large multinationals. Over the years, Virtuelle Fabrik has cooperatively produced dozens of products, from simple parts of a complex module for a letter-sorting machine to entire products like the litter shark, a city dustbin for which the Swiss Midlands network was awarded the prestigious Swiss innovation award Idea Swiss in 2004 (ibid., p. 681). This shows that these collaborative networks can be very successful in innovation, even if they started out as collaboration in manufacturing networks with the purpose of using idle capacity.

5.4   Actors in processes of innovAtion  netWorKs

Collaborative efforts are not only seen as an approach to decrease manu- facturing cost; cooperation between networked companies is increasingly seen as a means for lowering development costs, accelerating product and process development, and maximizing commercialization opportu- nities in innovation projects. The capability of building and maintaining inter- organizational networks, such as joint ventures, license agreements, co -development (between suppliers and customers), and strategic alliances, has led to more product and process innovations (Ritter and Gemünden 2003). This also covers the extension of capabilities, with manufacturing services as a newly emerging trend, and the capabilities embedded in man- ufacturing services partly answering the demand for customization. These collaborations can be modeled as displayed in Figure 5.6 (adapted from

EBSCOhost – printed on 11/18/2023 5:19 AM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

coLLAborAtion for innovAtion   •   165

Dekkers [2005, p. 330]); this carries some resemblance to the coupling model in Figure 3.13. The figure shows that companies can collaborate in two modes. The first mode for collaboration is based on complemen- tary assets, which is commonly called vertical collaboration. This means that each of the actors in the value chain possesses knowledge, skills, and assets that are necessary to create a product (or service). It also implies that each of these sets of knowledge, skills, and assets is necessary to produce a product or service. Through vertical collaboration, companies insure value innovation spanning the entire value chain and the inte- gration of skills and knowledge for meeting performance requirements. Vertical collaboration provides the chance for improving processes by learning, if learning cycles are present. The second mode of collaboration is called horizontal collaboration and is based on supplementary assets. Because these supplementary assets have similar knowledge, skills, and capabilities for the value chain, this means principally achieving econo- mies of scale through collaboration. In terms of innovation, by horizontal collaboration, firms will increase the chances of finding substitutes for products or their components. Both vertical and horizontal collaboration allow companies to deploy effective resources for innovation albeit with different outcomes.

Both horizontal and vertical collaboration require managing the rela- tionships between actors in the network. Burt (1992) and Uzzi (1997) have

Figure 5.6. Collaboration model for the value chain and innovation networks.

Materials

Products

Market

Resources

Skills, knowledge

Exchange relationships

Su pp

le m

en ta

ry as

se ts

Actors Actors Actors Actors

Actors

Skills, knowledge

Resources

Complementary assets

Ex ch

an ge

re la

tio ns

hi ps

Actors

Skills, knowledge

DistributionProductionSupply

Innovation and new

product dev.

Instructions

EBSCOhost – printed on 11/18/2023 5:19 AM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

166   •   innovAtion MAnAgeMent And npd for engineers

demonstrated the general mechanisms by which relationships between firms in supply chains and networks can be explained. As starting point, they use two different aspects of networks, namely, the positioning of firms in the structure of the network and the nature of the mutual relation- ships. Burt’s reasoning implies that the chance of achieving completely radical innovations may decrease if companies establish strong mutual contractual links, such as in supply chains. Links with other companies in the supply chain might be so strong that they prevent a company from suc- cessfully implementing an innovation, even if it is in a strategic position to do so. Typically, a successful collaboration strategy consists of three basic elements, that is, selection of a suitable partner, formulation of clear-cut agreements (getting the project underway), and management of the ongo- ing relationship. Carefully selecting future cooperation partners can pre- vent many problems, and according to Hagedoorn (1990), the aim should be similarity balanced by complementarity, with similarity referring to the firm’s size, resources, and performance. However, of more importance are the required complementarities offered by the cooperation partner, that is, the combination of complementary activities, knowledge, and skills to realize the desired synergy. The literature on strategic partnerships offers many models to evaluate potential cooperation partners (e.g., Souder and Nassar 1990). Based on a study of 70 U.K.-based firms in different indus- try sectors, Bailey et al. (1996) even concluded that selecting partners based on their track record in previous collaborations turns out to be a poor basis for future collaboration. These signals indicate that how collab- orations can be exploited effectively has not yet been settled.

5.5  Absorptive cApAcity

For how companies can benefit from collaboration for innovation, the concept of absorptive capacity plays a key role according to academic literature. By the originators of this concept, Cohen and Levinthal (1990, p. 128), it has been defined as “a firm’s ability to recognize the value of new information, assimilate it, and apply it to commercial ends”, with the focus of their study being R&D investment. This process of assessing and inte- gration new information can be used for new markets, new products, and services at individual, group (or department), and firm levels. Antecedents for absorptive capacity are prior-based knowledge (knowledge stocks and knowledge flows in a firm) and communication, both internal and exter- nal. Prior knowledge ranges from skills and knowledge at the individ- ual level to scientific or technological developments in a domain. Cohen

EBSCOhost – printed on 11/18/2023 5:19 AM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

coLLAborAtion for innovAtion   •   167

and Levinthal (ibid., pp. 129–31) derive their thinking from psychology and conceptualizations of learning. Particularly, this learning through the assimilation takes place at individual and organizational level; the latter as a result of how internal communication is structured. An example of the opposite is General Motors in the 1960s, 1970s, and 1980s. Whereas Toyota developed its production system into what later became to be known as lean production (Womack et al. 1991), General Motors was a bureaucratic and inward-looking organization, so much that it did not advance its production system and fell back in competitiveness. Even later, when it recognized that potential impact of lean production, it strug- gled to adopt this concept and integrate it in its organization. This example shows how important it is to identify and assimilate external knowledge in order to be competitive; it has been said that, in order to be innovative, an organization should develop its absorptive capacity.

The original study on absorptive capacity by Cohen and Levinthal (1990) focused a lot on investments in R&D, but other investigations showed that several other areas could be explored to develop a firm’s absorptive capacity; this led to a review of the concept by Zahra and George (2002) and Todovora and Durisin (2007) and a reformulation that further defined it as being made of potential absorptive capacity and realized absorptive capacity; potential absorptive capacity is a firm’s receptiveness to external knowledge, and realized absorptive capacity reflects a firm’s capability to leverage absorbed knowledge and transform it into innovation outcome. This distinction is relevant because it delineates how firms interact with the environment and how they communicate internally. Thus, the combination of the external interaction and internal communication can only lead to new or modified business models, new or modified products and services, and new or modified processes. Then the external interaction, as part of potential absorptive capacity, is knowledge acquisition that “refers to a firm’s capa- bility to identify and acquire externally generated knowledge that is critical to its operations” (Zahra and George 2002, p. 189); critical in this process is understanding the value of this information (Todovora and Durisin 2007, p. 777). A second component of potential absorptive capacity is the capability for assimilation that “refers to the firm’s routines and processes that allow it to analyze, process, interpret and understand the information obtained from external sources” (ibid. p. 189). In this perspective, poten- tial absorptive capacity can also be viewed as sensing information from the environment (see Dekkers [2017, p. 22] for the definition of environment in systems theories). The concept of realized absorptive capacity constitutes the capability “to develop and refine the routines that facilitate combining existing knowledge and the newly acquired and assimilated knowledge”

EBSCOhost – printed on 11/18/2023 5:19 AM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

168   •   innovAtion MAnAgeMent And npd for engineers

(Zahra and George 2002, p. 190). In addition, the realized absorptive capac- ity concerns the capability of a firm to apply the newly acquired knowledge in product or services that it can get benefits from; this is called the exploita- tion capability. These capabilities based on processes in a firm—sensing the environment to acquire relevant information, assimilation of information to contextualize information, transformation of information into concepts for products and services, and exploitation of products and services—constitute absorptive capacity of a firm.

However, it should be noted that absorptive capacity is an academic term used mostly in innovation management. Omidvar (2013) recognizes this and adds a practice-based perspective, which includes meaning, par- ticipation, identity transformations, and agency. However, even with these extensions, the concept of absorptive capacity is elusive for practice. For example, Andersén (2012, p. 442) speaks about protective capacity as being the “capacity to sustain, or to reduce the speed of depreciation of knowledge-based resources by preventing knowledge from being iden- tified, imitated or acquired by direct or indirect competitors.” This is inversely related to absorptive capacity. The need for companies to pro- tect themselves may outweigh to interact with the environment in an open and transparent manner. This means that, in practice, companies limitedly share information with others.

5.6  gLobAL reseArch netWorKs

The advent of collaboration has also led to the emergence of so-called global research networks. These networks can be formed as part of a cor- poration or based on partnerships between firms. Particularly for firms, the conventional wisdom said that strategy formation and R&D had to be kept in close geographical proximity (Kuemmerle 1997). Because strategic decisions about new markets, products, and services were centralized and made primarily at corporate headquarters, the thinking went, R&D facil- ities should be closely located. A case in point was the renowned Philips Natuurkundig Laboratorium that was located in Eindhoven and later in the 1960s in Waalre, a village next to Eindhoven; Philips’ headquarters were located in Eindhoven until 2001 when they were moved to Amsterdam. At the same time, the Philips Natuurkundig Laboratorium was transformed into High Tech Campus Eindhoven, which is open to researchers from many different companies. Philips Research, the remnant of the Philips Natuurkundig Laboratorium, is still one of the largest campus tenants, although not with anything like the number of people employed in its hey- days. Nowadays, Philips Research has branches in China, Germany, India,

EBSCOhost – printed on 11/18/2023 5:19 AM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

coLLAborAtion for innovAtion   •   169

the United Kingdom, and the United States of America; the non-Dutch parts of Philips Research account for about half the research work done by Philips. There are two main reasons why companies have relocated and expanded their research base across the globe (Howells 1990, pp. 496–7). The first reason is that, as more and more sources of potentially relevant knowledge emerge across the globe, companies must establish a presence at an increasing number of locations to access new knowledge, to attract talent, and to absorb outcomes of research by universities. Also, proxim- ity to research and development by (foreign) competitors may instigate such establishment of global research networks. The second reason is that R&D is treated as a tool that firms use to defend and develop their market presence across national boundaries. Particularly, multinationals seek to extend their control of a market by foreign direct investment, and one element in strategy is technology. Thus, to extend market presence and control in new and existing foreign markets, multinationals set up research laboratories to support product differentiation through product innovation and development. Because of these reasons, large firms often have multi- ple R&D locations across national boundaries, with some of these located such so that access to markets is facilitated.

5.7  suppLy chAin MAnAgeMent

In terms of collaboration in networks, the integration of supply chain man- agement into processes for innovation of processes, products, and services is of paramount importance. Not getting it right may lead to substantial loss of revenue, loss of reputation, and increased cost. This was demonstrated during the 2000s when smartphones were introduced. All smartphone makers, including Apple and Samsung, experienced considerable troubles when their products were more popular than expected, and consequently, the supply of components and materials lagged behind; this was a serious concern, because for some components and parts, such as micro-proces- sors and displays, considerable investments are required coming along with relatively long lead-times to build facilities for production. This example of smartphones shows that having a supply chain that can ade- quately respond to increases in demand (or lesser demand) than expected is crucial to successful introduction of new products and services.

Particularly, the design of supply chain should be characterized by responsiveness. In this respect, the model for the supply chain strategy by Fisher (1997) is often referred to; see Figure 5.7. In this model, a distinc- tion is made between efficient supply chains and responsive supply chains. Efficient supply chains are suitable for functional products, such as basic

EBSCOhost – printed on 11/18/2023 5:19 AM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

170   •   innovAtion MAnAgeMent And npd for engineers

foods and cleaning agents, for which demand is predictable. These sup- ply chains should offer lowest costs and a high rate of turnover to lower costs associated with inventory. Also, the design of products should aim at maximizing performance and minimizing cost, akin value engineering (Subsection 2.3.2). For innovative products, responsive supply chains are required because demand can be volatile and unpredictable. Decisions in these supply chains are not aiming at minimizing cost, but at utilizing production capacity for availability of products and positioning products in the right places for maximizing sales to hedge against unpredictable demand. Also, the design of innovative products could facilitate if they are based on modular designs; see Subsection 2.6.3. In this strategy, for the supply chain speed of delivery and flexibility dominate, with cost playing a lesser role. Therefore, the approach to the supply chain strategy is very different for innovative products and functional products.

5.8  Key points

• Not only for being a source of innovation (see Chapter 4), but also for providing knowledge during new product and service devel- opment collaboration with strategic partners is seen as key to an effective innovation strategy. This type of collaborations can take the form of strategic alliances and joint ventures. A strategic alli- ance for innovation is when partners cooperate to combine their knowledge, skills, and technologies in order to jointly come to new ideas and plans that can be converted into a good or service; these alliances are most based on complementary assets, skills, and knowledge. A joint venture includes the forming of a new entity for expansion, development of new products and services, or moving into new markets, particularly overseas.

Figure 5.7. Fisher’s matrix for design of supply chain.

Innovative productsFunctional products

Ef fic

ie nt

su pp

ly c

ha in

s R

es po

ns iv

e su

pp ly

c ha

in s

Mismatch

Mismatch

• Predictable demand • At lowest cost • High rate of inventory turnover • Product design: maximize performance and minimize cost

• Unpredictable demand • Respond swiftly to minimize stockouts, forced markdowns and obsolete inventory • Excess buffer capacity • Use modular design

EBSCOhost – printed on 11/18/2023 5:19 AM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

coLLAborAtion for innovAtion   •   171

• Collaboration with suppliers is seen as beneficial to innovation. It requires companies to pay attention to supplier selection, (early) supplier involvement, and design of supply chains:  One dominant aspect is that the selection of suppliers should be

based on their technological capabilities. Sometimes, supplier development to enhance their technological capabilities may be worthwhile, especially when there is strategic alignment between the buying firm and a supplier.

 Furthermore, early supplier involvement is a form of vertical col- laboration between supply chain partners, in which a firm involves suppliers at an early stage of the product development process. For this involvement, a distinction is made between white box (the supplier will follow mostly the specifications set by the buying firm), gray box (joint development with formalized integration in NPD), and blackbox (led by the supplier according to the buying firm’s performance specifications) design and engineering.

 For innovative products, the design of supply chains should be responsive. Typically, this means that not cost considerations do prevail, but the availability of products in new or emerging markets determines the position and the level of inventory. In addition, if possible, short lead-times should be achieved.

• Collaboration does not only extend to companies working together in supply chains or for access to market, but also happens in loose- ly-connected networks; two notable forms are:  Regional networks. In regional networks, firms participate

and complement each other’s capabilities with the aim to offer products and services that otherwise could not be achieved by the individual entities and to utilize resources better.

 Venture capital networks. Firms in venture capital networks are able to make use each other’s capabilities and knowledge. This also depends on how a venture capital fund has built its portfolio.

• Global research networks can be established as part of a corpora- tion or based on partnerships between firms. They consist of R&D centers at multiple locations. The decision for locations is informed by access to expertise, talent, and proximity to markets.

• The innovative capabilities of a firm are determined by its capability to recognize the value of new, external information (for example, about technologies), assimilate it, and apply it to commercial ends; this is called absorptive capacity.

• Trust and power are important factors in maintaining relationships for collaborations. These issues emerge in strategic networks and

EBSCOhost – printed on 11/18/2023 5:19 AM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

172   •   innovAtion MAnAgeMent And npd for engineers

collaborative networks, particularly when one actor tries to take advantage of another without reciprocation.

5.9  references

Bailey, W.J., R. Masson, and R. Raeside. October 15–18, 1996. “Choosing Suc- cessful Technology Development Partners: A Best Practice Model.” Paper pre- sented at the 6th International Forum on Technology Management, Amsterdam.

Barthélemy, J. 2003. “The Seven Deadly Sins of Outsourcing.” Academy of Management Executive 17, no. 2, 87–100. doi:10.5465/AME.2003.10025203

Biggiero, L. 1999. “Market, Hierarchies, Networks, Districts: A Cybernetic Approach.” Human Systems Management 18, no. 2, pp. 71–86.

Bortolazzi, J., T. Hirth, and T. Raith. 1996. “Specification and Design of Electronic Control Units.” Paper presented at the Conference on European Design Automation, Geneva.

Bowonder, B., A. Dambal, S. Kumar, and A. Shirodkar. 2010. “Innovation Strat- egies for Creating Competitive Advantage.” Research-Technology Manage- ment 53, no. 3, 19–32. doi:10.1080/08956308.2010.11657628

Burt, R.S. 1992. Structural Holes: The Social Structure of Competition. Cambridge, MA: Harvard University Press.

Camagni, R. 1988. “Functional Integration and Locational Shifts in the New Tech- nology Industry.” In High-technology Industry and Innovative Environments: The European Experience, eds. P. Aydalot and D. Keeble, 48–64. London: Routledge.

Camagni, R. 1993. “Inter-Firm Industrial Networks.” Journal of Industry Studies 1, no. 1, 1–15. doi:10.1080/13662719300000001

Cheikhrouhou, N., M. Pouly, C. Huber, and J. Beeler. 2012. “Lessons Learned From the Lifecycle Management of Collaborative Enterprises Networks: The Case of Swiss Microtech.” Journal of Manufacturing Technology Manage- ment 23, no. 8, 1129–150. doi:10.1108/17410381211276907

Clark, K.B., and T. Fujimoto. 1991. Product Development Performance: Strat- egy, Organization, and Management in the World Auto Industry. Boston, MA: Harvard Business School Press.

Cohen, W.M., and D.A. Levinthal. 1990. “Absorptive Capacity: A New Perspec- tive on Learning and Innovation.” Administrative Science Quarterly 35, no. 1, pp. 128–52.

Das, T.K., and B.S. Teng. 2001. “Trust, Control, and Risk in Strategic Alli- ances: An Integrated Framework.” Organization Studies 22, no. 2, 251–83. doi:10.1177/0170840601222004

Deeds, D.L., and C.W. Hill. 1996. “Strategic Alliances and the Rate of New Prod- uct Development: An Empirical Study of Entrepreneurial Biotechnology Firms.” Journal of Business Venturing 11, no. 1, 41–55. doi:10.1016/0883- 9026(95)00087-9

EBSCOhost – printed on 11/18/2023 5:19 AM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

coLLAborAtion for innovAtion   •   173

Dekkers, R. 2005. (R)Evolution, Organizations and the Dynamics of the Environ- ment. New York, NY: Springer.

Dekkers, R. 2017. Applied Systems Theory, 2nd ed. Cham: Springer. Dekkers, R., and D. Bennett. 2010. “A Review of Research and Practice for Indus-

trial Networks of the Future.” In Enterprise Networks and Logistics for Agile Manufacturing, eds. L. Wang and S.C.L. Koh, 11–38. Heidelberg: Springer.

Dhanaraj, C., and A. Parkhe. 2006. “Orchestrating Innovation Networks.” Academy of Management Review 31, no. 3, 659–69. doi:10.5465/AMR.2006.21318923

Dyer, J.H., and K. Nobeoka. 2000. “Creating and Managing a High-Performance Knowledge-Sharing Network: The Toyota Case.” Strategic Management Jour- nal 21, no. 3, 345–67. doi:10.1002/(SICI)1097-0266(200003)21:3<345::AID- SMJ96>3.0.CO;2-N

Fisher, M.L. 1997. “What Is the Right Supply Chain for Your Product?” Harvard Business Review 75, no. 2, pp. 105–17.

Freiling, J. 1998. “Kompetenzorientierte Strategische Allianzen.” Management Zeitschrift Industrielle Organisation 67, no. 6, pp. 23–29.

Grimpe, C., and U. Kaiser. 2010. “Balancing Internal and External Knowl- edge Acquisition: The Gains and Pains from R&D Outsourcing.” Journal of Management Studies 47, no. 8, 1483–509. doi:10.1111/j.1467- 6486.2010.00946.x

Hagedoorn, J. 1990. “Organizational Modes of Inter-firm Co-operation and Technology Transfer.” Technovation 10, no. 1, 17–30. doi:10.1016/0166- 4972(90)90039-M

Hagedoorn, J., and J. Schakenraad. 1994. “The Effect of Strategic Technology Alliances on Company Performance.” Strategic Management Journal 15, no. 4, 291–309. doi:10.1002/smj.4250150404

Håkansson, H. 1990. “Technological Collaboration in Industrial Networks.” European Management Journal 8, no. 3, 371–79. doi:10.1016/0263- 2373(90)90016-Y

Handfield, R.B., G.L. Ragatz, J.K. Petersen, and R.M. Monczka. 1999. “Involving Suppliers in New Product Development?” California Management Review 42, no. 1, 59–82. doi:10.2307/41166019

Hartley, J.L., B.J. Zirger, and R.R. Kamath. 1997. “Managing the Buyer-Supplier Interface for on-Time Performance in Product Development.” Journal of Oper- ations Management 15, no. 1, 57–70. doi:10.1016/S0272-6963(96)00089-7

Howells, J. 1990. “The Internationalization of R&D and the Development of Global Research Networks.” Regional Studies 24, no. 6, 495–512. doi:10.10 80/00343409012331346174

Howells, J., D. Gagliardi, and K. Malik. 2008. “The Growth and Management of R&D Outsourcing: Evidence from UK Pharmaceuticals.” R&D Management 38, no. 2, 205–19. doi:10.1111/j.1467-9310.2008.00508.x

Ireland, R.D., M.A. Hitt, and D. Vaidyanath. 2002. “Alliance Management as a Source of Competitive Advantage.” Journal of Management 28, no. 3, 413–46. doi:10.1177/014920630202800308

EBSCOhost – printed on 11/18/2023 5:19 AM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

174   •   innovAtion MAnAgeMent And npd for engineers

Jarillo, J.C. 1988. “On Strategic Networks.” Strategic Management Journal 9, no. 1, 31–41. doi:10.1002/smj.4250090104

Johnsen, T.E. 1999. “Supplier Involvement in New Product Development and Innovation: Taking Stock and Looking to the Future.” Journal of Purchasing and Supply Management 15, no. 3, 187–97. doi:10.1016/j.pursup.2009.03.008

Kanapathy, K., K.W. Khong, and R. Dekkers. 2014. “New Product Development in an Emerging Economy: Analysing the Role of Supplier Involvement Prac- tices by Using Bayesian Markov Chain Monte Carlo Technique.” Journal of Applied Mathematics 2014, no. 12. doi:10.1155/2014/542606

Katzy, B., and K. Crowston. 2008. “Competency Rallying for Technical Innova- tion—The Case of the Virtuelle Fabrik.” Technovation 28, no. 10, 679–92. doi:10.1016/j.technovation.2007.11.003

Kuemmerle, W. 1997. “Building Effective R&D Capabilities Abroad.” Harvard Business Review 75, no. 2, pp. 61–70.

Lawson, B., D. Krause, and A. Potter. 2015. “Improving Supplier New Product Development Performance: The Role of Supplier Development.” Journal of Product Innovation Management 32, no. 5, 777–92. doi:10.1111/jpim.12231

Le Dain, M.A., R. Calvi, and S. Cheriti. 2010. “Developing an Approach for Design-or-buy-Design Decision-Making.” Journal of Purchasing and Supply Management 16, no. 2, 77–87. doi:10.1016/j.pursup.2010.03.010

Lord, M.D., J.D. DeBethizy, and J. Wager. 2005. Innovation that Fits: Moving Beyond the Fads to Choose the Right Innovation Strategy for Your Business. New Jersey: Pearson Prentice Hall.

Meyer, M.H., and J.M. Utterback. 1993. “The Product Family and the Dynamics of Core Capability.” Sloan Management Review 34, no. 3, pp. 29–47.

Nobelius, D. 2004. “Towards the Sixth Generation of R&D Management.” Inter- national Journal of Project Management 22, no. 5, 369–75. doi:10.1016/j. ijproman.2003.10.002

Omta, S.W.F. 2004. “Increasing the Innovative Potential in Chains and Net- works.” Journal on Chain and Network Science 4, no. 2, 75–81. doi:10.3920/ JCNS2004.x043

Prencipe, A. 1997. “Technological Competencies and Product’s Evolutionary Dynamics: A Case Study from the Aero-Engine Industry.” Research Policy 25, no. 8, 1261–76. doi:10.1016/S0048-7333(96)00900-6

Ritter, T., and H.G. Gemünden. 2003. “Network Competence: Its Impact on Inno- vation Success and its Antecedents.” Journal of Business Research 56, no. 9, 745–55. doi:10.1016/S0148-2963(01)00259-4

Robertson, P.L., and R.N. Langlois. 1995. “Innovation, Networks, and Virtual Integration.” Research Policy 24, no. 4, 543–62. doi:10.1016/S0048- 7333(94)00786-1

Roussel, P.A., K.A. Saad, and T.J. Erickson. 1991. Third Generation R&D: Man- aging the Link to Corporate Strategy. Boston: Harvard Business School Press.

Rycroft, R.W., and D.E. Kash, 2004. “Self-Organizing Innovation Networks: Implications for Globalization.” Technovation 24, no. 3, 187–97. doi:10.1016/ S0166-4972(03)00092-0

EBSCOhost – printed on 11/18/2023 5:19 AM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

coLLAborAtion for innovAtion   •   175

Shishank, S., and R. Dekkers. 2013. “Outsourcing: Decision-Making Methods and Criteria During Design and Engineering.” Production Planning & Control: The Management of Operations 24, nos. 4–5, 318–36. doi:10.1080/0953728 7.2011.648544

Souder, W.E., and S. Nassar. 1990. “Choosing an R&D Consortium.” Research-Technology Management 33, no. 2, 35–41. doi:10.1080/08956308 .1990.11670649

Stefanović, S., and A. Dukić. 2011. “Strategic Alliances and Innovation Strategy.” Facta Universitas/Series: Economics and Organization 8, no. 1, pp. 57–67.

Todorova, G., and B. Durisin. 2007. “Absorptive Capacity: Valuing a Recon- ceptualization.” The Academy of Management Review 32, no. 3, 774–86. doi:10.2307/20159334

Uzzi, B. 1997. “Social Structure and Competition in Interfirm Networks: The Par- adox of Embeddedness.” Administrative Science Quarterly 42, no. 1, 35–67. doi:10.2307/2393808

Whitley, R. 2000. The Institutional Structuring of Innovation Strategies: Business Systems, Firm Types and Patterns of Technical Change in Different Market Economies. Manchester: Business School/University of Manchester.

Womack, J.P., D.T. Jones, and D. Roos. 1991. The Machine That Changed the World: The Story of Lean Production. New York, NY: Free Press.

Zahra, S.A., and G. George. 2002. “Absorptive Capacity: A Review, Reconcep- tualization, and Extension.” Academy of Management Review 27, no. 2, 185–203. doi:10.5465/AMR.2002.6587995

EBSCOhost – printed on 11/18/2023 5:19 AM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use

EBSCOhost – printed on 11/18/2023 5:19 AM via TRINE UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use