Innovation product management Question & Excel

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

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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);

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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

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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)

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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.

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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).

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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

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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

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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.

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• 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

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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 • •

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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

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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

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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.

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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

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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).

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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

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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).

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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

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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

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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.

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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).

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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

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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.

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• 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

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