MANAGING COLLABORATIVE INNOVATIONIN COMPLEX NETWORKS:
FINDINGS FROM EXPLORATORY INTERVIEWS
Thomas JohnsenCentre for Research in Strategic Purchasing and Supply,School of Management,University of Bath,BATH BA2 7AY.Email: firstname.lastname@example.org.Tel: 01225 323920
David FordSchool of Management,University of Bath,BATH BA2 7AY.Email: email@example.com.Tel: 01225 826726
AbstractThis paper discusses why companies should consider collaboration with customers andsuppliers for innovation and identifies a set of activities that appear to be critical to managingcollaborative innovation. It conceptualises how these activities may be affected whenperformed in complex networks, thus complicating the task of trying to manage themeffectively. The paper reports on findings from a small set of exploratory interviews anddiscusses some possible explanations for apparent cross-case differences. A note onmethodological and theoretical lessons completes the paper.
IntroductionConcepts such as supply chain management, partnerships, and networking are becomingestablished as best practice across a variety of sectors. Whereas these primarily concern howcompanies should manage their operations in some form of partnership along the supplychain they also have profound effects on the way in which companies innovate; conceptssuch as early supplier involvement in product development and innovation networks arethe latest buzz words.
The majority of these concepts, however, adopt a rather isolated view of partnerships, largelyignoring the embeddedness of such dyadic relationships in complex networks. As discussedby IMP (e.g. Hkansson 1987; Hkansson and Snehota 1995) any relationship, and thusinnovation performed within relationships, is heavily dependent on developments in a largerange of both direct and indirect relationships. On the one hand this dependency means thatinnovation performed in individual partnerships is constrained by what happens elsewhere inthe network. On the other hand the very same network may also permit companies to gainaccess to and deploy technologies located in the network. Whereas IMP have traditionallydescribed why this may be the case, little attention has been paid to developing proactive
ways of how to better cope with the problems of networks whilst at the same time exploreand exploit the pool of technologies potentially available in the network.
Collaborative InnovationInnovation is increasingly recognised as being the result of the combination of differentknowledge and expertise that exist within different organisations i.e. relationships may haveinteractive and complementary effects on technological innovation. Hence, it is not surprisingthat there has been a strong upsurge of various forms of inter-organisational collaborativeventures for innovation (Freeman 1991; Hagedoorn 1995; Hagedoorn and Schakenraad1990).
Our primary focus is on vertical collaboration that takes place within buyer-supplierrelationships, but which in reality is affected by a myriad of what can only simplistically beconceived as vertical and horizontal relationships. The following section briefly examinesthe literature of customer and supplier collaboration, explaining the reasons why companiesshould collaborate and identifying the key activities of managing these two forms ofcollaboration.
Manufacturer-Customer CollaborationMarketing focuses on the needs and demands of the customer. Thus analysis of customerrequirements has been the natural starting point of new product development in marketing.Such analysis traditionally includes initial identification of customer needs, evaluation ofproduct potential, and eventual testing of products (using for example Quality FunctionDeployment techniques). However, when companies seek to develop novel or complexproducts and technologies and to market these into markets that are either not well defined ordo not exist, traditional marketing tools are of limited use (Tidd et al 1997). Moreover, inbusiness markets companies are less likely to conduct large scale surveys of customer needs;collaboration with individual customers - or users - is often a way to increase the chances ofdeveloping successful new products and technologies.
Von Hippels seminal research on user-initiated (novel) innovation from the 1970s pointedout the dominant role of users in idea generation (1988), and his studies are now supported bya large number of empirical studies (e.g. Foxall and Tierney 1984; Shaw 1985; Biemans1989; Voss 1985; Parkinson 1982; Gemnden et al 1996). These studies also contributed toan extension and refinement of Von Hippels early concept of CAP, extending the role ofusers to include not only idea generation, but in some cases all stages of product innovation.Also Hkanssons research on supplier-customer interaction during technologicaldevelopment (1987;1989) has conceptualised and provided further empirical evidence for thisstream of research.
Von Hippels research has led to one particularly influential framework: the concept of leadusers (1986). These were defined as those users who a) face needs that will be general in amarketplace, but do so months or years before the bulk of the market and b) are positioned tobenefit significantly by obtaining a solution to those needs. The research on manufacturer-customer interaction in innovation by Von Hippel and his peers, which started in the mid1970s and continued into the 1980s, was seminal in that it blurred the picture of the initiatorof innovation. It explored how the source of innovation can vary between industries and
specific cases, but that one important source in many industries was the customer, or user,who took an active part in the whole innovation process.
In the 1990s various attempts have been made to try to provide some form of guidelines forindustry on how to manage interaction with customers. Biemans (1995) has identified a seriesof potential disadvantages of collaborative product development that are often ignored. Theseinclude increased dependency, increased cost of co-ordination, requirements of newmanagement skills (most notably the boundary spanner), changed management of personnel(need to ensure co-operative behaviours), access to confidential information and proprietaryskills, dominance by the partner, lack of commitment and loss of critical knowledge andskills. Biemans, however, asserted that a successful co-operation strategy can minimise mostof these disadvantages, consisting of four key activities: - partner selection, identifying andmotivating the right person(s), formulating clear-cut agreements, and managing the on-goingrelationship.145 Biemans focus within these activities is on similarity of the parties involvedbalanced by complementarity to ensure compatibility. He also promoted the explicitclarification of the basis of the collaboration, including division of tasks, link withresponsibilities, reasons for entering the partnership, goals, project life, contributions,divisions of costs and benefits etc.. Clear communication appeared to be Biemans mainsuccess factor.
Apart from Von Hippels very specific concept and Biemans work, which tended togeneralise on industry and situation specific findings, the research on manufacturer-userinnovation to date has been largely descriptive. The presumed advantage of collaboratingwith customers for innovation relates to the generation of product ideas, information aboutuser requirements, comments on new product concepts, assistance on development andtesting of prototypes, and assistance in diffusion (Biemans 1989). However, it is not well-established whether and when those advantages pay off.
Manufacturer-Supplier CollaborationManufacturers are increasingly seeking to involve their suppliers in product and processdevelopment in an attempt to reduce development cost and time and increase product qualityand value (Wynstra 1998). Development costs may be reduced by manufacturers pushingcost and responsibility towards the suppliers and, perhaps more importantly, by suppliershaving superior knowledge of the components they supply i.e. specialised product andprocess technologies (Birou and Fawcett 1993). A range of studies have also shown how this(along with concurrent engineering (ONeal 1993)) may explain shorter development timesand also improved quality (see for example Womack et al 1990; Clark et al 1987; Clark andFujimoto 1991).
Whereas the potential benefits are therefore plentiful it has been suggested and shown thatinvolvement of suppliers in innovation may not always be advantageous (Birou 1994;Wynstra 1998). This indicates that whereas there are potential benefits of involving suppliersin innovation, companies are also likely to encounter problems.
Hkansson and Eriksson (1993) (partly based on Hkansson 1989) presented four key issuesin getting innovations out of supplier networks, relating to combining and integrating
145 It is not entirely clear whether these four activities relate to customer relationships only or whether there arealso relevant for managing relationships with other parties such as suppliers and universities.
different supplier relationships: Prioritising, Synchronising, Timing, and Mobilising. Wynstra(1998) later examined the same set of issues, translated them into purchasing activities, andadded another key process: Informing. The problem of timing has been the subject ofBonaccorsi and Lipparinis work on strategic partnerships in new product development(1994). Their work indicated that different activities may be performed differently at differentstages of the innovation project. However, the assumptions that the earlier the better isquestionable; timely involvement may be more appropriate (Wynstra 1998).
Takeuchi and Nonaka (1986) and Imai et al (1985) elaborated on the challenge of learningbut also indicated that some (mainly Japanese) companies co-ordinate and manage a largegroup of both first and second tier supplier during the development process; they argue thatsuppliers need to be run like a rugby team, maintaining cohesiveness and balance (like theinternal development team). Their findings also highlighted the importance of informationsharing (similar to Wynstras findings 1998), but seemed to place greater emphasis on therole of lateral/horizontal information and knowledge exchange. The findings from the IMVP(Womack et al 1990), concerned many of the same issues as the earlier studies by Takeuchiand Nonaka (1986) and Imai et al (1985). Their findings emphasised the role and importanceof assignment of teams of (suppliers) resident design engineers to car development teams.Their work also showed the significance of establishing a basic contract to ensure the long-term commitment of the parties and to establish ground rules for determining prices andquality assurance, order and delivery, proprietary rights and materials supply; making theparties work together to mutual benefit, and enabling sensitive information and knowledge tobe exchanged. Thus three key activities emerged from the IMVP and the studies by Takeuchiand Nonaka (1986) and Imai et al (1985). Firstly the importance of mutual and extensivesharing of information; secondly sharing of knowledge related to both commercial andtechnical details; thirdly the assignment of guest engineers to development teams; what couldbe broadly described as exchange of (technical) human resources.
More recently Oliver et al (1999) examined a set of key processes of managing multi-partyalliances, including buyer-supplier relationships and horizontal relationships e.g. acrossindustries, aiming to develop new products or technologies. These processes includednetwork creation (i.e. partner selection/assembly and the original raison dtre of thenetwork), decision making, conflict resolution, information processing, knowledge capture,integration (alignment of objectives and co-ordination of activities), risk and benefit sharing,and motivation. Their findings suggested that a variety of contingencies shape how activitiesare discharged, but their findings seemed to complement the earlier findings discussed in thissection.
As an overall observation on the issue of upstream collaboration for innovation, it seems thatalthough some research findings are contradictory, a variety of managerial models has beensuggested to potentially reduce costs, increase product quality and value and reduce time tomarket by involving supplies in product and technology development.
Key Activities of Managing Collaborative Technological InnovationThe examination of some of the main contributions and frameworks that have been providedwithin the areas of (vertical) collaboration reveals a range of different activities that wouldseem to be critical to the management of collaborative innovation. None of the existingframeworks, however, are totally comprehensive; the various IMP-related projects capturesome of the main activities and have done so from an interaction rather than a static focal
firm action and partner re-action perspective This interactive emphasis is useful, as it doesnot assume that one party (the customer) performs activities independent of other actors. Thisalso makes it possible to assume that the same activities apply for the management ofupstream as well as downstream actors, as these are essentially the same form of relationshipi.e. buyer-supplier relationships, albeit viewed from different perspectives. However, theIMP-related work does not include some of the activities emphasised by the body of workthat has examined advanced Japanese practices, which (at least partially) explains the abilityof many Japanese companies to develop new products and technologies faster, in a betterquality, and at lower cost. These activities can be conceptualised as: exchanging knowledge,and exchanging human resources. Thus, we provisionally identify the following activities ascritical to the management of collaborative innovation: identifying/selecting, mobilising,timing, assigning (human resources), informing, synchronising, and co-ordinating.
Network Implication on Managing Collaborative InnovationThe examination of the literature in the previous section revealed a range of activities thatcompanies, who seek to innovate in partnership with suppliers and customers, may beadvised to apply to manage their relationships effectively. The problem with the majority ofthe existing frameworks, however, is that, at the specific level, they seem to fail to fullyunderstand the implications of networks on the performance of specific collaborationactivities. The IMP group has devoted a great deal of effort to the study of buyer-supplierrelationships (e.g. Hkansson ed. 1982) and the embeddedness of these in networks (e.g.Hkansson and Snehota 1995). Core to the IMP work is the actor-activity-resources model ofnetworks (Hkansson 1987) which conceptualised the connectedness of individual actorsand their ac...