Deliverable D2.1
Practices, future requirements and building blocks of a new innovation model WP 2
Grant Agreement number:
SEC-2011-285663
Project acronym:
INNOSEC
Project title:
INNOvation Management Models for SECurity Organizations
Funding Scheme:
Collaborative Project
Date of latest version of Annex I against which the assessment will be made:
02.04.2012
Project co-ordinator name, title and organisation:
Ms. Amaia Sopelana TECNALIA R&i
Tel:
+34 946 400 450
Fax: E-mail:
[email protected]
Project website address:
http://www.innosec-project.eu
Start date of the project:
01.02.2012
Duration:
24 months
Responsible of the Document
Tiina Apilo*, Marcin Borowiecki°, Björn Budde°, Andrea Kasztler°, Karl-Heinz Leitner°, Jaakko Paasi*, Pasi Valkokari*, Matthias Weber°, Georg Zahradnik° °AIT - Austrian Institute of Technology *VTT Technical Research Centre of Finland
Due date of deliverable
30/11/2012
Document Ref.:
INNOSEC_D2.1_v100
Version:
100
Issue Date:
30/11/2012
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Dissemination Level PU
Public
X
PP
Restricted to other programme participants (including the Commission Services)
RE
Restricted to a group specified by the consortium (including the Commission Services)
CO
Confidential, only for members of the consortium (including the Commission Services)
Change History
Version
Notes
Date
01
Draft version
30.09.2012
100
Final version
30.11.2012
This document is the property of the INNOSEC Consortium. This document may not be copied, reproduced, or modified in the whole or in the part for any purpose without written permission from the INNOSEC coordinator with acceptance of the Project Consortium. This publication was completed with the support of the European Commission under the 7 th Framework Programme. The contents of this publication do not necessarily reflect the Commission's own position.
© INNOSEC Consortium
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Table of Contents 1
Executive Summary ....................................................................................................... 1 1.1
Objectives and Methods ............................................................................................... 1
1.2
Results ........................................................................................................................... 1
2
Introduction .................................................................................................................. 5
3
Models of Innovation and Innovation Management Methods ........................................ 7 3.1
Overview ....................................................................................................................... 7
3.2
Models of Innovation.................................................................................................... 8
3.2.1 The Product-Process Life Cycle Model (Abernathy and Utterback, 1975; 1978) .........8 3.2.2 Foster’s S Curve (Foster, 1986) ...................................................................................10 3.2.3 Abernathy-Clark Model (Abernathy and Clark, 1985) ................................................12 3.2.4 Architectural Innovation Model (Henderson and Clark, 1990) ..................................13 3.2.5 Absorptive Capacity (Cohen and Levinthal 1990) ......................................................15 3.2.6 Disruptive Technological Change Model (Bower and Christensen, 1995; Christensen, 1997). ..........................................................................................................................17 3.2.7 Innovation value added chain (Afuah and Bahram, 1995) .........................................19 3.2.8 Eco-Innovation Models (Stahel, 1982; Braungart and McDonough, 2006; Lovins, 2008) ...........................................................................................................................20 3.2.9 Social Innovation (Mulgan et al., 2007) ......................................................................21 3.3
Innovation Management Methods............................................................................. 23
3.3.1 Managing innovation: Holistic process view ..............................................................23 3.3.2 Stage-gate innovation process (Cooper, 1979) ..........................................................24 3.3.3 New Concept Development model (Koen et al., 2002) ..............................................25 3.3.4 Innovation-decision process of Rogers (2003) ...........................................................26 3.3.5 Value Innovation (Kim and Malbourgne, 1997; 1999) ...............................................27 3.3.6 Model of continuous corporate renewal (Apilo, 2010) ..............................................29 3.3.7 Knowledge creation process (Nonaka et al., 2000) ....................................................31 3.3.8 Open Innovation (Chesbrough, 2003) ........................................................................33 3.3.9 User Innovation and the Lead User Methode (von Hippel, 1976; 1986) ...................36 3.3.10 Innovation communities (Hippel, 2005; Tuomi 2002) ................................................39 3.3.11 Virtual Customer Methods (Dahan and Hauser, 2005) ..............................................41 3.3.12 Crowdsourcing (Howe, 2006) .....................................................................................43 © INNOSEC Consortium
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3.3.13 Service innovation management ................................................................................44 3.3.14 Scrum and agile development ....................................................................................47 3.3.15 Business model generation (Osterwalder and Pigneur, 2010) ...................................49 3.4
Project Reviews........................................................................................................... 52
3.4.1 ServPPIN – Public-Private Innovation Networks in Services ......................................52 3.4.2 VersO - Collaborative Service Development in Networks ..........................................53 3.4.3 Information Technologies supporting the Execution of Innovation Projects –ITEI....54 3.4.4 FORESEC – Europe‘s evolving security: trends, drivers and scenarios .......................57 3.4.5 Innovation Futures - INFU...........................................................................................57 3.4.6 Vision ERA Net – Policies for Open Innovation...........................................................59 3.4.7 User Integration in Manufacturing – UCIM ................................................................59 3.4.8 Public Sector Innovation – PUBLIN .............................................................................60 3.4.9 Intellectual Property in Open Business Models – IPOB ..............................................61 3.4.10 Innorisk .......................................................................................................................63 3.4.11 SELUSI – Social Entrepreneurs as Lead Users for Service Innovation ........................64 4
Case Studies ................................................................................................................ 65 4.1
Analytical Model InnoSec ........................................................................................... 65
4.2
Selection of Cases ....................................................................................................... 66
4.3
Findings from the Case Studies................................................................................... 69
4.3.1 Organisational and Innovation Strategy .....................................................................69 4.3.2 Innovation Management Practices.............................................................................70 4.3.3 Conclusions: Lessons Learned from the Case Studies ................................................80 4.3.4 Summary .....................................................................................................................91 5
Typology of Advanced Innovation Management Models .............................................. 92
6
Validation Workshop................................................................................................... 99
7
Conclusions: Practices, Future Requirement and Building Blocks of a New Innovation Management Model ................................................................................ 102
8
References ................................................................................................................ 106
Annex A: Innosec validation workshop of WP1&2 – list of participants ............................... 118
© INNOSEC Consortium
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1 1.1
Executive Summary Objectives and Methods
The aim of work package 2 (WP2) of the Innosec project was to provide structured information on various new and promising innovation concepts and practices as a basis for the development of the Innosec innovation model within work package 3. Therefore, within WP2 innovation models and specific innovation methods were identified through reviews of scientific literature and European Projects. The identified innovation approaches were then described, structured, assessed, and the most promising for the security sector were selected. Based on the suggestion of the model of innovation management in security organisations of work package 1 (WP1) (see D1.2 Empirical Study of innovation management practices of users in the security sector) the building blocks of innovation management were introduced and described. Finally, a typology of advanced innovation management models was developed, structuring the selected innovation approaches and methods with regards to their ability to support the innovation process within the various building blocks of the Innosec innovation model. Additionally, an empirical analysis of current innovation practices in non-security sectors was performed. Therefore, innovation practices of fourteen organisations from non-security sectors within Europe were studied through interviews and desktop research. As guiding principles for innovation management from an empirical point of view, lessons learned from each of these case-studies were described. The main results of the work package were discussed at a validation workshop where also the requirements of the Innosec model were further developed.
1.2
Results
Literature review of innovation models and innovation management methods Literature provides a vast and increasing source about how to organize and manage different kinds of innovations. The most important methods suggested in literature used by companies to foster innovation primarily help to manage and structure the innovation process on the firm level and create innovations, increasingly exploiting also external innovation sources. The stage gate model (Cooper, 2001) is probably the most relevant and widely used method for managing the new product development process. In addition, strategic decisions making related to innovation, such as how to manage disruptive innovation or creative new combination, i.e. value innovation (Kim and Malbourgne, 1997; 1999) are relevant concepts. Methods which aim to integrate external agents such as open innovation (Chesbrough, 2003), the lead user method (von Hippel, 1976; 1986) or crowdsourcing (Howe, 2006) have also gained importance recently. Finally, the 1
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management of specific types of innovations, such as service innovation (Tidd and Hull, ed. 2003; Lush and Vargo, ed. 2006) and software innovation (Pikkarainen et al., 2011) are relevant, too. Business model innovation is the most recent topic which is heavily discussed in the literature and hence may become more significant in the future.
Typology of Advanced Innovation Model Considering the structure of innovation management we propose six building blocks for innovation management adopting and further developing the framework of WP 1. These elements are: Innovation strategy: The formulation of an innovation strategy which defines the importance and types of innovation activities deliver the framework for innovation management. The innovation strategy should be alinged with the generic company strategy (organistional strategy) and guides strategic decisions making during the innovation process. Organisational Structure, Culture and Human Resources: Innovation mainly rests on and deploys knowledge-based resources and procedures such as organizational and human capital. Innovation Process: Ideation: The generation of ideas using various sources is the first stage of the innovation process and more and more companies are using specific systems and methods to continuously create ideas from very different sources. Selection: The selection of ideas and of projects during the different stages of the development process is important, particularly for new ideas by users. A number of criteria, assessment tools and methods have been suggested to support the deliberate decision making along the innovation process. Implementation: The implementation of ideas and projects requires to take into account a number of criteria and requirements and needs careful management attention. Internal and external interaction and learning: (e.g. between employees within the organistions but also with users or other external partners) As internal and external interaction becomes more and more important (e.g. open innovation), hence, this element is considered as explicit building block for innovation management. The identified approaches and methods for innovation management proposed in academic literature and (partly) used by case study companies were assessed and structured with regards to their ability to support the management of the described six different elements of innovation management (building blocks) (see Table 4: Typology of innovation management methods).
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Empirical analysis of current innovation practices in non-security sectors (case studies) Summarizing the main findings of the case studies it becomes clear that many different innovation practices have emerged in non-security organisations and that a large amount of methods can be applied. Most of them appear transferable to the security sectors, although in some cases, in particular in case of more open innovation approaches additional challenges emerge within the security sector. Some general examples of identified good practices are for example: Installing innovation management as a distinct process and an own department, team or person being responsible for the innovation process seems to be an important factor. However, environments with a fast technological progress and fierce competition have the need for flexible and dynamic process (esp. smaller companies). Transparency within the process seems to be an important factor. The importance of entrepreneurs for innovations is also a general one. One way to address the “not invented here syndrome” is to involve those who have to further develop the idea very early in the process. Controlled space for experiments is needed especially for radical innovations. Diverse communication channels between R&D, marketing and the customers are useful from the beginning of the process until the implementation of an innovation. Network co-operations, internal as well as external ones, are seen as important factors within the innovation process, but they have to be precisely picked. With regard to the involvement of stakeholders in the innovation process, a more sensitive approach appears to be adequate for security organisations. Whereas stakeholder involvement is probably even more important for certain security organisations, in particular public organisations, these organisations have to take care that of sensitive information which cannot be shared with stakeholders. Although this aspect seems to be specific to security organisations it has to be taken into account, that most if not even all organisations studied have to take care that sensitive information is not distributed otherwise they risk losing their competitive advantage. A broad range of additional innovation practices was identified within the empirical analysis. Especially methods concerning search processes could probably provide a significant benefit when they are applied within security organisations. Examples of such promising tools and methods are systematic trend analyses or the introduction and operation of advanced idea management systems.
Validation of results At the validation workshop the introduced building blocks of the Innosec model were considered sufficient by the participants and the model easily understandable. However, it was mentioned that the following factors should be treated more explicity in the model: “People” and “Bottom-up approach”. The participants’ expectations of the Innosec model were obtained and summarised as follows: The model should go beyond technological innovations and regard also organizational innovation. It should be easy to communicate, hence be transparent, short, and as simple as possible. It should support both top-down and bottom-up approaches. And 3
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it should support security organizations to be more innovative and also capable of adapting innovations.
Conclusions The analysis and interpretation of the results from the literature review and empirical study of WP2 taking into account the operating environment of security organizations as described in WP1 (D1.1 End-user environment), allowed us finally to identify typical challenges and barriers of security organizations. For these challenges and barriers we are able to select certain possible innovation methods (see Table 6: Typical challenges and barriers of end user organizations in the security sector and possible methods addressing them) which can be used within security organizations to promote their innovativeness. The conducted validation workshop ensured the results of the project so far and gave precious inputs for the further development and refinement of the Innosec model within the next work package.
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2
Introduction
This document covers the deliverable D2.1 of the project INNOSEC (Innovation and research within security organisations): “D2.1 Practices, future requirements and building blocks of new innovation model”. WP2 looks at advanced and novel innovation models and innovation management methods and practices in non-security sectors. This will be achieved by a combination of literature review and systematic case-studies from selected non-security sectors. The objective of this document is to describe the most important of the identified recent and novel conceptual and theoretical models that might have a potential to inspire innovation management in security organisations. This document presents on the one hand important findings from innovation research in different scientific disciplines (economics, management, sociology, organisation studies), and on the other hand the latest research projects on new innovation models, practices and tools. The analysis was based on an extensive literature review, both of academic research and on the results of recent EU-funded projects. The document consists of:
Section 1. Executive Summary Section 2. Introduction Section 3. Models of Innovation and Innovation Management Methods Section 4. Case Studies Section 5. Typology of Advanced Innovation Models Section 6. Validation Workshop Section 7. Conclusions: Practices, Future Requirement and Building Blocks of a New Innovation Management Model
After the executive summary and this introduction, in section 3 we will describe the main contents of task 2.1, the literature review. Starting with a general definition of innovation we will describe the range of innovation models from general models of technological change to specific process models. We will define the focus of this review covering those innovation concepts which will be discussed in the following chapters and the ones which are not regarded here. We will describe different innovation approaches having in mind the following categories: main proponent, most important authors/developers, content, level of focus (micro-, mesoor macro level), empirical findings, typical applications, open questions, and transferability to security organisations. We will then discuss innovation models explaining innovation as competition, how innovation happens in different industries and having lessons for innovation management. At last we will put the focus on practical innovation management models, putting focus on the definite processes within organizations which should foster innovation. 5
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Section 4 represents the empirical part of the investigation (task 2.2). We will report on the outcome of the conducted case studies and their analytical framework. Subsequently, Section 5, describes the developed typology for innovation models and the building blocks of the suggested model for the INNOSEC project. Section 6 will summarize the output of the validation workshop of task 2.3 held on Nov. 13 th in Vienna. This workshop aimed at introducing, discussing, and reviewing main results of WP1 and 2 with participants from security- and non-security sectors, respectively. At the end we will present the conclusions of the whole work package (section 7).
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3 3.1
Models of Innovation and Innovation Management Methods Overview
The following review presents important theoretical concepts for explaining the innovation competition and process on the firm and industry level and describes significant methods for managing innovation which have gained popularity in the industrial practice. In general, the innovation literature is vast and hence the models and methods have been selected having in mind that they have a potential for explaining and managing the innovation process in security end organisations (but have not taken into account to a full extent the empirical findings of the case study). We have some focus on technological innovations, product innovations and process innovations, however, other forms of innovation cannot be neglected as technological innovations also require organisational, strategic and social adaptations and hence are discussed as well. We start by presenting important models which have been developed by scholars with the aim to explain technological change, the nature of the innovation process and the role of innovation in the economy (chapter 3.2 “Innovation models”). Models such as the well know product-process innovation life cycle by Abernathy and Utterback or the concept of Architectural Innovation by Henderson and Clark are presented. All these models explain on a more generic level the nature of the innovation process and explain innovation competition. Although they deliver some lessons for innovation management they usually cannot be considered as specific models, concepts or techniques for innovation management. In addition, we introduced some new forms of innovation such as social innovation or eco-innovation. Other new forms of innovation such as open innovation or user innovation which have more specific lessons for innovation management or describe some normative strategies to manage innovation, such as the call to integrate users in the product development process, are described in the subsequent subchapter. However, the border between concepts and models describing and exploring the process of innovation (e.g. disruptive innovation as proposed by Christensen) and its management (how to overcome the innovators dilemma by Christensen) are overlapping and fuzzy or two faces of the same coin. However, we deal not with models and approaches to explain innovation on the national or macro level such as most parts of the innovation systems literature. The most important methods suggested in the literature and used by companies to management innovation are presented in chapter 3.3 entitled “Innovation Management Methods”. We firstly present methods which primarily help the management and structure the innovation process on the firm level and create innovations with a strong internal focus. The stage gate mode is the most prominent example. In addition, we deal with strategic decisions making related to innovation such as how to manage disruptive innovation or creative new combination, i.e. value innovation. We move then to methods which aim to integrate external agents and present methods and strategies such as open innovation, the lead user method or crowdsourcing. Finally, we deal with the management in specific areas and deals for instance with service innovation and software innovation. Business model innovation is the most recent topic which is heavily discussed in the literature and hence introduced as well.
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Besides presenting findings from leading scholars we present briefly some research programs, mainly funded by the European Commission, which have dealt with new forms of innovation and its management. Amongst others we present FORESEC, a project which dealt with security, and introduce ServPPIN and PULIN which both deals with innovations in the public sectors. The latter two projects are insofar of interest as security end organisations are often public organisations.
3.2
Models of Innovation
In this chapter we describe various approaches of innovation models as described in academic literature and in European projects, respectively. Each concept is briefly explained, important empirical findings on its use and diffusion are given. Additionally, the level of focus and some open questions are mentioned. Most of these concepts are associated with (a) specific author(s) or publication, which is disclosed accordingly. All references are listed at the end of the report. We have selected the most important concepts treated in academic literature (although certainly a large number of other interesting concepts have been discussed in recent years). These rather broad concepts overlap to some extent and a number of other notions and models have been proposed in the literature which are referred to as well within our eleven concepts, e.g. as a variant, synonymous term, etc. For instance, swarm intelligence can be considered as a form or element of crowdsourcing. However, so far, no framework or taxonomy has been proposed in the literature to classify the various concepts. The following concepts, strategies, and paradigms of changing innovation patterns (with their most important proponents) have been intensively discussed in the academic literature for various industrial sectors and the public and social domains in the last years.
3.2.1 The Product-Process Life Cycle Model (Abernathy and Utterback, 1975; 1978) Main proponent Abernathy and Utterback (1975; 1978) were the first to apply the concept of productprocess life cycles in innovation management (for an overview, see Utterback (1994)). The fundamental idea of different stages of product and process innovations to explain technological change has been used subsequently by several authors (see, among others, Ettlie 1995; Damanpour and Gopoalakrishnan 1999). Content The model explains technological change as a result of industrial competition. Thereby, technological change is characterised by different stages with firms engaging either in product or in process innovation activities (see Figure 1). At the initial fluid stage of a technology, the firms compete based upon product differentiation. The market and the technology are characterised by uncertainties, such that the firm has no idea whether and when to invest in the technology. At this stage, the firm’s core capability is its product
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innovation competence, with product innovations making up almost all innovative efforts (custom design, crude technology development, etc.). Figure 1: Model of Abernathy and Utterback (1975)
Innovation rate
product innovation process innovation
Stage 1: Fluid Exploration Uncertainty Flexibility
Stage 2: Transitional Dominant design
Stage 3: Fluid Standardisation Integration
Time
Source: own depiction following Abernathy and Utterback (1975).
At the transitional stage the rate of product innovations decreases, while the emphasis is put on process innovations (see dotted line in Figure 1). The firms adapt to specific customer needs through customer interaction, product experimentation and the standardisation of components. At this stage, a dominant design is supposed to emerge, which is the critical point in the life of a technology, insofar as it reduces the uncertainty to the firm. The dominant design is characterised by major components and underlying core concepts that do not vary from one product model to another. Examples include the QWERTY keyboard, the VHS video standard and the IBM PC. As the market matures and customer needs become more pronounced, the technology enters a specific stage. The firms shift their strategy to competing on cost and economies of scale with investments being rather done in manufacturing and other processes in order to make the existing operations more specialised and efficient. However, the model emphasises the repeating nature of a product-process life cycles. As new technology emerges, competitors from outside the established industry might enter with new products rendering the old technology uncompetitive. This critical point of technological discontinuity is considered essential to the firm’s survival. In between moments of technological discontinuities industries evolve relatively predictably from one phase to another. 9
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The model’s focus is on the industrial level, with technological innovations being at the heart of industrial competition. In this regard, it is a general model of technological change. Empirical findings The product-process life cycle model does not apply to all industries. Evidence has been found for manufacturing industries with emerging dominant designs and product standards, where competition is based on cost and economies of scale (Utterback 1994). Tushman and Anderson (1986) report findings supporting the importance of a dominant design during the transitional stage. They show that technological discontinuities interrupt the transitional stage, which may lead to a complete new start of the product-process cycle. Further, a shift from a strategic focus on product innovations to process innovations during later stages was shown to affect firm survival (Suarez and Utterback 1995). In this line, a successful transition from product to process innovations requires firms to adapt their organisational structure and their capabilities to the changing market demands and the dominant technologies (Abernathy and Utterback 1978). Recently, several studies have pointed out the role of services for the product-process life cycle (see, among others, Quinn 1992). Others have looked at the differences between service and manufacturing firms (e.g. Heskett et al. 1997). Applications, relevance for security organisations and open questions The model lays special emphasis on industrial innovation processes. It is applied for the analysis of dynamic processes within relatively stable industries. The insights are used to predict the transition from one stage to the other of a technology. The model’s focus on industrial evolution enables a firm to analyse the development path of an existing technology. However, the assumption of cycles impedes the model’s application to products and technologies that do not follow the assumed trajectory. Service industries, for instance, might exhibit different development patterns than their manufacturing counterparts. Moreover, in line with the model, a firm cannot predict the moment of technological discontinuity to arrive, which is important for the decision as to whether or when to engage in a certain technology or not. 3.2.2 Foster’s S Curve (Foster, 1986) Main proponent and content Foster (1986) developed a model to predict a technological discontinuity, the moment when a technology is rendered obsolete by a new one. Some authors have applied similar models using knowledge of the physical limit of a technology in order to foresee technological discontinuities (see, among others, Sahal 1985). Foster’ model (1986) states that a firm is able to foresee the physical limit of its technology by observing diminishing returns on R&D investment. The rate of technological change is modelled as a function of the effort invested into a technology, such as R&D expenditures. This function follows an S-curve (see Figure 2), which indicates a firm whether or when to adapt innovation activities. In detail, the potential of a technology increases with increased R&D expenditures, where technological progress starts slowly at the beginning due to a 10
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poor understanding of the technology’s fundamentals. As the technology matures its performance rapidly increases with the firm’s accumulated R&D expenditures, since firms put their effort in those activities that reward the greatest improvement per unit of investment. However, the potential of a technology eventually hits an upper limit, where further technological improvements are not possible or too expensive. As the physical limit of a technology is approached, the firm enters a phase of diminishing returns on investment. In order to achieve a higher performance, a change to a new technology is necessary, which in turns follows its own S-curve (see Figure below). Figure 2: Foster’s S-curve (1986)
Potential of technology (benefits)
Finish
Region of maximum progress
Start
Accumulated R&D expenditures
Source: own depiction following Foster (1986)
Foster’s S-curve model is applied at both the industry as well as the firm level. However, it does not focus on a firm’s processes but rather on technological change in general. Empirical findings At the industrial level, some authors report empirical findings for the replacement of existing technologies by new ones as a technological physical limit is reached (see, among others, Afuah and Utterback 1991). Likewise, S-curves have been well documented in a wide range of technologies, including disk drives, automobiles, sailing ships, semiconductors, vacuum tubes, steam engines, and more (see, among others, Foster 1986; Twiss 1992; Christensen 1993; Ayres, 1994). Christensen (1992a; 1992b) explored the limits of the technology S-curve, such as the performance trajectory, and found it to be a firm specific rather than a uniform industry phenomenon.
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Applications, relevance for security organisations and open questions The model is applied to predict the arrival of a technological discontinuity at the industrial as well as at the firm level. However, in line with the Abernathy-Utterback model (1975), it focuses rather on manufacturing sectors.
3.2.3 Abernathy-Clark Model (Abernathy and Clark, 1985) Main proponent and content The model was developed by Abernathy and Clark (1985). In contrast to the cyclic models of Abernathy and Utterback (1975) and Foster (1985), the Abernathy-Clark model (1985) is competence-based. In this, it differentiates between technical and market knowledge in order to explain the observed phenomenon that some incumbents perform better than new entrants at radical technological innovations. Figure 3: Abernathy-Clark model (1985)
Market Capabilities (and relationships) destroyed
Niche Innovation
Architectural Innovation
Regular Innovation
Revolutionary Innovation
preserved
preserved
destroyed
Technological Capabilities
Source: own depiction following Abernathy and Clark (1985)
The significance of an innovation for competition depends on its capacity to influence the firm’s existing resources, skills and knowledge (Afuah 2003). Abernathy and Clark (1985) introduced a terminology for innovations based on their impact on either the firm’s technical or market knowledge (see Figure 3). First and foremost, they distinguish between regular and architectural innovations. A regular innovation builds on and deepens the firm’s existing market and technological capabilities, while an architectural innovation destroys both types of capabilities. Regarding the architectural innovation, it departs from established systems of production and leads to a new framework for the firm within which competition will develop. In this sense, an 12
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architectural innovation defines basic configurations of products and processes as much as it establishes technical and market standards which will guide future developments for the firm. A niche innovation leads to the firm’s technological capabilities being preserved, while its market capabilities are rendered obsolete. A firm enters or creates a market niche with its existing technological knowledge. Revolutionary innovations, on the contrary, destroy technological capabilities while they underpin the importance of market capabilities, which are difficult to acquire for new entrants. In such a manner, an incumbent whose technological capabilities have been rendered obsolete by a revolutionary innovation can still use its market capabilities to its advantage over an entrant. The model is a general model of technological change with a focus on the firm’s organisation of knowledge. Empirical findings The importance of market and technological knowledge for firms’ competitiveness was studied for a number of technologies and sectors, such as fashion apparel or consumer electronics products. For revolutionary innovations, Mitchell (1992), among others, looked at the medical diagnostics equipment sector with findings supporting the importance of market capabilities of incumbents for a successful firm expansion. Further, Abernathy and Clark (1985) list Ford and General Motors in the late 1920s and early 1930s as case studies for firms adapting successfully to revolutionary innovations. Applications, relevance for security organisations and open questions The model has been applied mostly for the study of revolutionary innovations in manufacturing sectors in order to analyse an incumbent’s capability to open new market opportunities through the use of existing technologies. On the contrary to dynamic models of innovation, the Abernathy-Clark model takes only a cross-sectional view of a firm. Consequently, it leaves open the question as to what happens with an innovation following its adaption. Moreover, it emphasises the innovation’s impact on the manufacturer, while it leaves out of consideration its impact on suppliers, customers, competitors or related service firms.
3.2.4 Architectural Innovation Model (Henderson and Clark, 1990) Main proponents and content The model was developed by Henderson and Clark (1990) in response to the view that innovations are either incremental or radical. The model is based on the observation – which the incremental-radical dichotomy cannot explain - that incumbents often have difficulties in dealing with incremental innovations to their existing products. In a similar was as Abernathy and Clark (1985), Henderson and Clark (1990) put emphasis on the firm’s competences in explaining competition and innovation. They argue that a firm’s product can be conceived of as a system that consists of components (the physically distinct parts of a product) and design concepts. The architecture of the product describes how the 13
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components and design concepts are linked together to enable the product to function as a whole. Accordingly, a product requires two kinds of knowledge, notably knowledge of components and design concepts as well as knowledge of the linkages between these components (architectural knowledge). An innovation impacts either one type of knowledge or both, each with different consequences for the firm (see taxonomy in Figure 4). Figure 4: Henderson-Clark model (1985)
Linkages Between Core Concepts and Components unchanged
Incremental Innovation
Modular Innovation
Architectural Innovation
Radical Innovation
changed
reinforced
overturned
Core Concepts
Source: own depiction following Henderson and Clark (1985)
Incremental innovations are characterised by modest changes to existing products with design concepts being refined and improved. While some components are altered, the architecture is left largely unchanged. Radical innovations, on the contrary, involve a complete new set of design concepts embodied in new components, which are linked together using a new architecture. A modular innovation contains new components that are based on novel design concepts rather than simple improvements on established design concepts. However, the architecture remains largely unchanged. An architectural innovation is a reconfiguration of an established system to link together existing components in a new way (Henderson and Clark 1990). The core design concepts that underpin the components in the system remain unchanged. It is rather the change to the product’s architecture that characterises architectural innovation. Incumbents fail at architectural innovations since they mistake them for incremental innovations. The model’s novelty behind the model lies in the concept of architectural knowledge, which is required to understand (i) how the components and design concepts embodied in the product are linked together and (ii) how the components and linkages (architecture) combine to influence the way of how the product system functions and behaves in different
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environments (Baldwin and Clark 2000). Any change to the components or architecture induced trough an innovation involves the acquisition of new knowledge and the development of procedures and routines to implement them. This, in turn, requires the firm to think rather systemically, considering its competences, policies, its organisational structure and culture (Kaine et al. 2006). Empirical findings Incremental innovations have been found to increase the product value through small-scale, continuous improvements in the product’s performance, safety, quality and cost (Olofsson 2003). Christensen and Overdorf (2000) suggest that incremental innovations require organisational processes and priorities to be adapted, which also includes the organisation’s culture. Modular innovation act either competence enhancing or destroying, which depends on the firm’s specific history (Gatignon et al. 2002). Some successful firms purchase the expertise needed to deal with the demands for new knowledge and skills externally (Kaine and Higson 2006). Architectural innovations have been shown to create serious disruptions in firms since parts of their skills and competencies are rendered obsolete, even though much component knowledge remains useful. Empirical findings suggest that this type of innovation requires the acquisition of new skills and competencies, but also changes in the operating procedures, processes and structures of the firm (Henderson and Clark 1990; Kaine and Higson 2006). Radical innovations lead to a drastically lowered value of existing technologies, production systems and organisational structures (Henderson and Clark 1990; Gatignon et al. 2002; Kaine and Higson 2006). Smith (2000) points out that in order to remain competitive, firms must acquire completely new component and architectural knowledge. Accordingly, firms that adapt to radical innovations with new organisational processes, procedures and structures are more successful (Smith 2000). Applications, relevance for InnoSec and open questions As opposed to the Abernathy-Clark model, the Henderson-Clark model considers the effects of innovations on the firm’s environment, such as its customers, suppliers and competitors. This makes it a suitable model for the analysis of not only manufacturing firms with technological innovations, but also of service firms with a focus on technical and market changes.
3.2.5 Absorptive Capacity (Cohen and Levinthal 1990) Main proponents and content The concept of absorptive capacity was introduced by Cohen and Levinthal (1990) in order to describe the firm’s “ability to recognise the value of external information, assimilate it and apply it to commercial ends”. Absorptive capacity as organisational absorptive capacity includes i) its individual members’ absorptive capacities as well as ii) those aspects which
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are distinctly organisational, in particular the ability to transfer knowledge across environmental boundaries and across sub-units. Cohen and Levinthal (1990) were the first to identify absorptive capacity a crucial determinant in the firm’s decision whether to invest in R&D or not. They assume absorptive capacity to be cumulative, meaning that investing in absorptive capacity in one period will permit its more efficient accumulation in the next period. Likewise, the firm needs prior related knowledge in order to assimilate and learn new knowledge effectively. It is distinguished between two determinants of absorptive capacity, notably i) the structure of communication between the firm’s external environment and the firm as well as among its subunits, and ii) the characteristics and distribution of expertise within the firm. Regarding the characteristics of expertise, gatekeepers are experts who help transfer knowledge from the firm’s environment (the gatekeeper’s interface function). The distribution of expertise may be either centralised (one or just some central gatekeepers) or diffused across more individuals. However, Cohen and Levinthal (1990) show that in turbulent environments, e.g. induced by technical change, a centralised interface function does not provide an effective link to the environment. This is due to the appearance of new knowledge that cannot be assimilated effectively by the gatekeeper anymore because of the lack of prior related knowledge. Then, a decentralised interface function as reflected by a broad range of gatekeepers with diverse knowledge bases can increase the reception of new ideas. In this context, Cohen and Levinthal (1990) stress the importance of the diversity of a firm’s knowledge base which allows individuals to make new associations and linkages across different knowledge fields, increasing the organisational absorptive capacity. In Cohen and Levinthal’s model, firms purposefully invest in R&D to generate profit and take into account R&D’s dual role in both i) directly generating new knowledge as well as ii) contributing to the firm’s absorptive capacity. However, the question if R&D investment will contribute to a firm’s absorptive capacity depends firstly on the characteristics of the ‘learning environment’, in which the firm operates. The more difficult the learning environment, such as characterised by technological change, the higher the expected return on absorptive capacity of R&D investments and hence the higher the incentive for the firm to invest. Secondly, the quantity of new knowledge determines the firm’s incentive to invest in its absorptive capacity. The bigger the quantity of knowledge to be assimilated and exploited the higher the incentive to invest in R&D. Empirical findings Early studies on innovation processes found the ability to exploit external knowledge to be a critical component to innovative capabilities, both at the firm level (March and Simon 1958) as well as the industrial level (see, e.g., Block 1975 for computer industries and Peck 1962 for aluminium industries). The role of absorptive capacity has been studied, among others, for human resources (Freel 2005), R&D (Stock et al. 2001; Harhoff et al. 2003), knowledge management (Lagerström and Andersson 2003; Corso et al. 2006), organisational structures (van den Bosch 1999; Caloghirou et al. 2004; King and Lenox 2004) and the firm’s relations with suppliers and customers (Albino et al. 1998; Johnsen and Ford 2006; Schiele 2006).
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Others centred their attention on different dimensions of absorptive capacity, notably the acquisition of knowledge (see, e.g., Boynton, Zmud and Jacobs 1994; Keller 1996), the assimilation of knowledge (see, e.g., Dodgson 1993; Fichman and Kemerer 1999), the transformation of knowledge (see, e.g., Kim 1997, 1998; Fichman and Kemerer 1999; Smith and Di Gregorio 2002) and the exploitation of knowledge (see, e.g., Dodgson, 1993; Kim 1998; van den Bosch, Volberda and de Boer 1999). Based on these findings, Zahra and George (2002) extended the concept of absorptive capacity introduced by Cohen and Levinthal (1990) and further distinguished between potential and realised absorptive capacity. Potential absorptive capacity refers to knowledge acquisition and assimilation capabilities, whereas realised absorptive capacity describes a firm’s exploitation and transformation capabilities. Applications, relevance for security organisations and open questions The Cohen and Levinthal’s model has been applied at the sectoral as well as at the firm level. The absorptive capability concept is relevant for security organisations, insofar as it stresses the importance of the diversity of a firm’s knowledge base. Security organisations potentially face uncertain conditions – such as technical change – that are not fully predictable; this is, there is uncertainty about which knowledge domains are going to be important sources of relevant future knowledge. In this context, Cohen and Levinthal’s (1990) advocate to invest in a diverse knowledge base in order to strengthen the firm’s absorptive capacity, since it increases the probability that future external knowledge will rather relate to what the firm already knows. However, absorptive capacity is most likely developed and maintained as a by-product of routine activities in domains that are closely related to the firm’s current knowledge base. In the long-run, this attitude towards investment into knowledge may lead to underinvestment in absorptive capacity. In order to avoid this tendency, a firm needs to put effort in the creation of absorptive capacities that are not a mere by-product of routine activities. However, further research is needed to understand the decision process behind the firm’s decision to invest in its absorption capacity.
3.2.6 Disruptive Technological Change Model (Bower and Christensen, 1995; Christensen, 1997) Proponents and content The model is based on the works of Bower and Christensen (1995) and Christensen (1997). The disruptive technological change model is a market-niche model which focuses on the incumbent’s failure to exploit disruptive technologies in market niches. In contrast to the architectural innovation model and incremental-radical models, the disruptive technological change model states that the firm’s attention is drawn too narrowly on mainstream consumer markets, while niche markets are neglected. However, these market niches do have the potential to grow in the future. A disruptive technology is embodied in new products or services designed for a new set of customers. The product or service based on this new technology consists of off-the-shelf components put together to an architecture that is simpler than prior approaches. Initially, 17
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this technology opens new market niches, while mainstream customers value its attributes less along their performance metric. These emerging markets have only tight profit margins and are too small to provide a sufficient growth rate for established firms. Bigger firms, even though responsive to customer needs, ignore the market niches initially. As R&D investments are made and the technology matures, the disruptive technology’s performance improves to a point where it also can satisfy the requirements of the mainstream market. At this stage, incumbents who have mostly ignored the disruptive technology do have difficulties catching up with the lead of the entrants. Eventually, the incumbents are replaced by the entrants due to an initial incorrect market appreciation (Christensen 1997). However, incumbent firms are capable of engaging in radical technology as long as the technology provides value to the existing customer. Christensen (1997) calls this type of technologies sustaining technologies. Empirical findings Christensen (1997) shows empirically that large companies have often less incentives to invest in small market niches, in which the development of new radical technologies takes place. In line with his findings, prior research has pointed out that innovations that ultimately transform an industry often do not originate from the industry’s leaders (e.g., Cooper and Schendel 1976; Foster 1986; Henderson and Clark 1990; Utterback 1994). On the contrary, McKendrick, Doner, and Haggard (2000) observed that a number of big firms in the hard-disk industry did not fail despite often lagging behind in the introduction of disruptive technologies. Similarly, King and Tucci’s (2002) contradict Christansen’s (1997) findings, stating that experienced incumbents in disk drives markets are more likely to enter new market niches. Hence, the empirical findings are contradictory. Kodak and Fuji, for instance, were among the first to embrace digital imaging technology despite being market incumbents in technologically similar market segments. Polaroid, on the other hand, faltered in the introduction of a digital camera (Tripsas and Gavetti 2000). Methé et al. (1997) found that industry incumbents as well as diversifying entrants introduced major innovations in the telecommunications and medical device industries. Chandy and Tellis (2000) neglect the importance of the incumbent’s curse in the case of product innovations in office products and consumer durables. They found that incumbents were responsible for the introduction of the majority (75 percent) of radical product innovations. Applications, relevance for security organisations and open questions The disruptive technological change model is applied for case studies at the industry-level. Most of these case studies deal with manufacturing firms. The model’s ability to predict promising market niches is limited due to the difficult task to identify disruptive technologies. Accordingly, open questions include: What makes a technology disruptive? And what are the exact criteria for identifying a disruptive technology? Doering and Parayre (2000) note that it is not clear which technologies will succeed ex-ante. Moreover, the model does not give a clear answer as to at what point in time a technology becomes disruptive. Christensen (2000) suggested graphing the trajectories of performance improvement demanded in the market versus the performance 18
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improvement supplied by the technology. Still, it remains to determine the factors responsible for an incumbent’s failure or success in the face of disruptive technologies. Future research needs to address the characteristics of incumbents that do not fail.
3.2.7 Innovation value added chain (Afuah and Bahram, 1995) Main proponents and content Afuah and Bahram (1995) propagated the idea of an innovation value added chain, which has to be distinguished from Porter’s (1985) value chain. The model shifts focus away from the innovation’s impact on the firm’s competences, products and investment decisions towards its impact on customers, suppliers and other complementary innovators. Thus, the model draws attention to what the innovation does to the competitiveness and capabilities of a firm’s innovation value-added chain. This innovation value-added chain comprises suppliers, customers and other competitors or complementary entities1 who add value to a manufacturer’s innovation. Afuah and Bahram (1995) introduced the term “hypercube of innovation” in order to describe the various effects of an innovation (e.g. radical vs. incremental) at different stages of the innovation value-added chain. For instance, an innovation that is incremental to a manufacturing firm might be seen as radical to the firm’s customers and complementary innovators. Accordingly, an incumbent for whom a new technology is competence destroying may still do well if the technology is competence enhancing to its value chain. This is due to the importance of relationships between the firm and its value-added chain, which in turn are difficult to establish for an entrant. In this sense, an incumbent can outperform new entrants at radical innovations, while failing at incremental innovations. The model implies that it is crucial to analyse what an innovation does to the competences of its innovation value-added chain of suppliers, customers and complementary innovators. The model focuses on innovation competition and technological change at the industrial level as opposed to models of innovation processes at the firm level. Empirical findings Afuah and Bahram (1995) introduced the innovation value-added chain framework based on their empirical observations in the semiconductor microchips and supercomputer industries. On the one hand, they suggest that an innovating entity should pursue innovations which reinforce competences along its innovation value-added chain. On the other hand, the firm should be aware of inertia of established complementary innovators and seek to take advantage of newer innovators. The importance of the innovation value-added chain is derived from the concept of positive network externalities, which basically states that a product’s value to its owner increase as more people own it (David 1985; Katz and Shapiro 1985; Baum, Korn and Kotha 1995). In 1
A complementary innovator is a firm that provides complementary products and/or technologies for the manufacturing firm’s products and/or technologies (see Afuah 2003, p. 44).
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this line, several studies confirm the importance of the value-added chain for the innovating firm. Complementary innovators were found to be a source of innovation at the firm-level (von Hippel 1988; Freeman 1991; Haagedorn and Schakenraad 1994) as well as a source for new ideas regarding the commercialisation of the innovation (Allen 1984). Conversely, a firm’s new products and/or technologies were shown to have an impact on complementary innovator’s capabilities (see, among others, Singh and Mitchell 1996; Galaskiewicz and Zaheer 1999). For many manufacturing sectors, some authors showed the importance of tight links with suppliers for the manufacturing firm’s success (Clark 1989; Cusumano and Takeishi 1991; Dyer and Nobeoka 2000). Others point out the importance of customers as a source of competitive advantage (e.g., Langlois 1992). However, Christensen and Bower (1996) found for the disk drives industry that technological change can result in a product that does not fit in the firm’s existing customers’ applications. Likewise, technological change can fit in existing customers’ value networks but still be competence destroying. Then, customers may not want the new technology or it may decrease their performance (Henderson and Clark 1990). Applications, relevance for security organisations and open questions The model is applied at the industrial level for the analysis of the competences of a firm’s ecosystem in order to address not only technological uncertainties, but also organisational and commercial ones. Despite the model’s focus on the firm’s value-added chain, the conceptual framework is being criticised to provide little advice on how to deal with radical innovations that may also introduce new undesirable social and environmental side effects. The proposed framework by Afuah and Bahram (1995) may be applied to deal with organisational, commercial and technological uncertainties. Nevertheless, developers of new technologies must resolve as well social uncertainties, which may result from conflicting or difficult-to-resolve concerns of stakeholders (for the agricultural biotechnology industry, see Hall and Martin 2005).
3.2.8 Eco-Innovation Models (Stahel, 1982; Braungart and McDonough, 2006; Lovins, 2008) Eco-innovations are product, process and system innovations that reduce energy and resource consumption at any stage of the product lifecycle (Bleischwitz et al 2009). Ecoinnovation has become a prominent policy concept to integrate measures from environmental, industrial and innovation policy which promote sustainable production and consumption patterns. Pursuing eco-innovation requires a sound understanding of the environmental impact of material flows and a sophisticated set of metrics such as the measurement of material input per unit of service. Innovation that focuses on the strict application of these metrics could be interpreted as a new innovation mode as it requires distinctly different solutioning and design approaches. Some authors have suggested that effective eco-innovation needs to be based on radically different innovation models. One type of new model aims to ensure the consistency of material flows affected by an innovation with resource flows in the eco-sphere. One of these concepts that has become quite prominent recently is the “cradle to cradle” approach 20
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(Braungart and 2006, Stahel 1982), which implies a radical “upcycling” approach to innovation and design: “Cradle to Cradle: A model of industrial systems in which material flows cyclically in appropriate, continuous biological or technical nutrient cycles. All waste materials are productively re-incorporated into new production and use phases, i.e. "waste equals food."” The cradle to cradle design concept is intended to develop highly profitable products, whose components are able to circulate in biological and technical loops with positive effects on the environment and health. Accordingly, efficient remanufacturing and cradle to cradle concept products have to be designed taking the whole life cycle into account, starting from their development through their use and right up to their reuse or disposal. Furthermore, flexible and adaptable tools and production facilities as well as product-accompanying information systems are necessary to provide data about the product status (Seliger 2007). Another concept from the context of eco-innovation that indicates a potential novel innovation pattern is “biomimicry” i.e. the emulation of processes and functions found in nature (Lovins 2008). Finally, a number of authors suggest a paradigm shift towards innovation models that focus on the provision of performance, functions, use-value or services rather than products. One example is the “performance economy” described by Walter Stahel (Stahel 2006). In Stahel’s framework, a cascade of innovation models is introduced. Depending on the need to be addressed, the most beneficial model is applied. Applications, relevance for security organisations and open questions It is unclear under which conditions these new innovation models yield higher sustainability benefits than more classical eco-innovation approaches focussing on resource and energy efficiency or “green” design concepts. 3.2.9 Social Innovation (Mulgan et al., 2007) Main proponents and content Over the last couple of years there has been a growing interest in the notion of “social innovation” both in academic and policy debates. Numerous articles have been published in recent years, however, the term ‘social innovation’ has still not been specified. Eduardo Poll and Simon Ville (2009) outlined, for instance, that “The term ‘social innovation’ has entered the discourse of social scientists with particular speed, but there is no consensus regarding its relevance or specific meaning in the social sciences and humanities.” Some authors have defined social innovation by its target which comprises social needs rather than unlocking market opportunities. For instance, the authors of a NESTA report on social innovation (Mulgan et al. 2007) argue: “We define social innovation as the development and implementation of new ideas (products, services and models) to meet social needs”. Another strand in the academic literature discusses social innovation as a different mode of innovation characterised by a hybrid profit/non-profit structure. These authors emphasise the crucial role of the non-profit sector of the economy in social innovation. However, in
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contrast to classical voluntary non-profit activities such as charity or the work of NGOs, social innovation is situated on a continuum between the non-profit sector on the one hand and the public and private sector on the other (Ridley-Duff et al 2008). This applies to different phenomena such as the use of business approaches in voluntary work, as well as the adoption of a social orientation by actors in the business sector. It is argued that the introduction of business practices in the public sector (new public management) on the one hand and the emergence of social orientation within business (corporate social responsibility) have caused a blurring of the boundaries between these economic sectors. As a result, the “social enterprise” has been emerging as the core “social innovator” that transcends the traditional boundaries between the private and the voluntary sector. RidleyDuff et al. (2008, 4) define the social enterprise in the following way: “The social enterprise is a complex discourse, embracing the language, concepts and practices created by:
Enterprises that bridge the boundaries between the private and voluntary sectors (e.g. trading charities and mutual societies).
Enterprises that bridge the boundaries between the private and government sectors (e.g. housing associations and partnerships in the Health Sector).
Enterprises that bridge the boundaries between government and voluntary sectors (e.g. enterprise / employment support services provided under contract).
Enterprises that internalise a social orientation, democratic governance and entrepreneurial trading (e.g. co-operatives / employee-owned / co-owned businesses)”
A further line of debate focuses on social innovation as a change in behaviour and relationships rather than the introduction of new products and technologies. In this context, Manzini (2008, p.) offers the following definition: “Social innovations: changes in the way individuals or communities act to get a result (i.e. to solve a problem or to generate new opportunities). These innovations are driven by behaviours changes (more than by technology or market) and they emerge from bottom-up processes (more than from topdown ones).” For Manzini, the collaborative provision of services by groups of citizens, such as co-housing or childcare initiatives, is the most relevant format of social innovation. In the same way as the social enterprise, these innovations cannot be conceptualised using established economic terms. On the one hand, they involve voluntary work but, on the other, they fulfil societal functions that are otherwise provided via market mechanisms or public services such as childcare and healthcare. The notion of “relational innovation” (Cipolla 2008) has been proposed to emphasise the fact that a change in human relationships lies at the core of this type of social innovation. However, in contrast to classical “organisational innovation” that involves organisational changes rather than technological ones, relational innovations are situated outside the firm. Another concept that can be linked to this understanding of social innovation as a newly emerging pattern is the recognition of sharing as an important aspect of value creation (Benkler 2004). Benkler argues that sharing as a mode of value creation has always played an important role, but is increasingly entering market arenas with the advent of the internet-based knowledge economy. 22
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Applications, relevance for security organisations and open questions The concept of social innovation is still evolving in the academic debate. A number of diverse aspects are being discussed under the headings: The emergence of innovation actors and innovation activities that cross the boundaries between voluntary work and the provision of products and services through public/private sectors. A standard comprehension of the term ‘social innovation’ has not yet been established. It seems politically relevant to adopt a broad and inclusive concept of the social enterprise to avoid the exclusion of relevant aspects at an early stage, in particular when resources are allocated to the sector (e.g. Ridley-Duff 2008). The application of private or public sector rules may not be appropriate for social innovation. Standards and norms enabling the hybrid form of economic activity may be needed (OECD). So far, the challenges social innovation will pose to legislation are too little understood (e.g. OECD 2009). If social innovation has indeed the potential to provide an increasing share of solutions, enabling institutions and platforms need to be developed.
3.3
Innovation Management Methods
3.3.1 Managing innovation: Holistic process view Tidd and Bessant (2009) have collected into their textbook a broad coverage of innovation literature and case descriptions from European point of view. An example of similar textbook having American perspective is by Ettlies (2006). Furthermore, Goffin and Mitchell (2010) introduced an innovation pentathlon framework in their book Innovation management – strategy and implementation using the pentathlon framework, which is used as text book in MBA programs. The fourth well known innovation management book used as textbook at universities is Miller & Morris (1999) Fourth generation R&D. The three first mentioned books describe elements of innovation management best practices. Instead, Miller and Morris constructed a coherent innovation management – R&D – system with roles and organisation structures. In their innovation business process framework are three levels: operations for product and market development, improvement1 for platform development, and improvement2 for architecture and capability development. All these books define innovation as manageable business process. Tidd and Bessant (2009):" "innovation is a process of turning opportunity into new ideas and putting these into widely used practice". Miller and Morris:" innovation is the process of transforming an invention into something that is commercially useful and valuable." Furthermore, Tidd and Bessant describe
innovation management as creating conditions & building and developing effective routines. In these frameworks an innovator is not an individual but innovator is an organisation and its innovation network and partly also customers.
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Tidd and Bessant present a four staged simplified model of innovation process - search, select, implement and capture. In search phase an organisation should find answer to question how it can find opportunities for innovation. In select phase main question is what an organisation is going to do and why. In implement phase an organisation must find a way how it is going to make innovation happen. Finally, in capture phase an organisation have to find its solution to how it is going to get benefit from what it is developed. Tidd and Bessant recognised core abilities of an innovation organisation: recognizing, aligning, acquiring, generating, choosing, executing, implementing, learning, developing the organization . They listed components of innovative organization as following: shares vision, leadership and the will to innovate, appropriate structure, key individuals, effective team working, high-involvement innovation, creative climate, external focus . Goffin and Mitchell argue that good performance in all five areas of their innovation pentathlon is essential. Their identified elements are: ideas (raw material for innovation), prioritization (an efficient process), implementation (phase of new product development), innovation strategy and also people and organization (HR issues). Applications, relevance for security organisations and open questions The holistic process view of innovative organisation (Tidd and Bessant (2009), Goffin and Mitchell, 2010) is most applicable in firms having own product and service development functions. General innovative organizational characteristics can be taken account as best practice also in other kind of firms as some kind of check list – which elements will be considered. However, Tidd and Bessant present various frameworks, best practices etc. but give little support on how a single company can utilize the information in their change process into more innovative company? The practical innovation pentathlon framework by Goffin and Mitchell (2010) which has a focus on the micro level has potential to be used as an illustration of general innovation framework also in security organizations. From Innosec innovation model point of view the most interesting and useful concept of Miller and Morris is improvement, how to operationalize architecture and capability development.
3.3.2 Stage-gate innovation process (Cooper, 1979) Main proponents and content Cooper (eg. 1979, 1983, 1993, 1999, 2001, 2008 and with Kleinschmidt 1996) developed the stage-gate process approach based on their research of success factors in product development. The original stage gate process has five stages. In the model there is a go/kill decision point after each stage. Cooper (2008) has further developed his stage gate processes, so, now there are separate processes for moderate risk (Xpres) and minor changes (Lite) projects (see Figure 5).
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Figure 5: The three version of stage-gate models (Cooper, 2008)
Source: Cooper
Applications, relevance for security organisations and open questions The stage gate model is the most widely applied product development management process model in industrial companies. A target of criticism has been a bureaucratic approach of process model and practical difficulties to execute cross-functional gate reviews in tight project schedule. The new, lighter versions of the model are Cooper's answers to faster and more flexible process need. The state gate approach is so established in industry that one may question whether it is anymore possible to change the approach in the product development practices of firms? Or is there any need for a change at all? If yes, what would be the next best practice for product and service development? The security organization must at least understand the stage-gate model, because their technology suppliers have some kind of stage-gate model (the most probably).
3.3.3 New Concept Development model (Koen et al., 2002) Main proponents and content Koen et al. (2002) in the PDMA Toolbook presents a new concept development model aiming to identify and manage fuzzy front end activities of innovation process, i.e. the innovation work that takes place before the formal new product development phase of innovation. Koen et al. identified five elements in the front end of innovation: opportunity identification, opportunity analysis, idea generation & enrichment, idea selection, concept definition. The process starts either at idea generation or opportunity identification but after that it will not continue as a linear process. The new concept development model is better a relationship model. After the concept is ready, the work will continue to new product development phase applying some other model.
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Empirical findings There are not much findings reported in the literature on structured front end activities of innovation. The front end seems to be fuzzy although firms would like to have more control on activities that took place before the formal new product development or stage gate process. Applications, relevance for security organisations and open questions The new concept development model would create value for most organizations, but the major challenge is that it addresses to actions that are not under daily practices of most firms. Therefore, the implementation of the model into processed and routines of firms may require big cultural changes. The potential of the new concept development model for InnoSec is potentially high because it is practical and it is suitable for organizations that don’t have own R&D department to carry on new product development phase of innovation.
3.3.4 Innovation-decision process of Rogers (2003) Main proponents and content Rogers’ innovation-adaptation process (2003, 1962 1. ed) is very well known. The main elements that influence of diffusion of new idea are an innovation, communication channels, time (innovation-decision period) and a social system. Rogers (2003) described diffusion as communication process, and more, as social change. Rogers use the term diffusion to both the planned and spontaneous spread of new ideas. Some other researchers use term dissemination for diffusion that is directed and managed. Roger's innovation-decision process, in which knowledge of the existence of an innovation create motivation to learn more about it and finally to adopt it, has five stages. In the first knowledge stage individual or group becomes aware of an innovation's existence, how and why it works. At the persuasion stage the individual or group forms attitude towards the innovation. At the decision stage the individual or group adopts or rejects the innovation. At the implementation stage behaviour changes are needed when the new idea is decided to put into practice. At the last, confirmations stage the individual or group seeks reinforcement for their decision. Roger defines five attributes of innovations to predict an innovation's rate of adoption. Relative advantage describes how much better an innovation is over the previous generation. The level of compatibility depicts how well an innovation is fitted with adopters' existing values, past experiences and needs. Complexity describes the degree how difficult the innovation is to understand and use. Trialability measure how easily an innovation may be experimented. The last, observability explains how visible an innovation is to others.
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Figure 6: Five stages in the innovation process in organizations (Rogers, 2003)
Source: Rogers 2003
Applications, relevance for security organisations and open questions “The innovation process in an organization” has potential to serve as one base of the InnoSec model.
3.3.5 Value Innovation (Kim and Malbourgne, 1997; 1999) Main proponents and content The notion of value innovation was introduced by Kim and Mauborgne (1997, 1999) who stress that innovations which create a true sustainable competitive advantage have to generate a leap in value for the customers. Value innovation is more than just being a technology leader or market pioneer, it is about creating new values which allow to open up new and uncontested market space. Value innovation occurs when innovation is aligned with buyer utility, price and cost positions in a new unique way. Such a strategy goes beyond what traditional strategic thinking would suggest (e.g. Porter 1985) but often combines differentiation and low cost simultaneously. The process of opening up and creating such new market spaces have been defined later as “Blue Ocean Strategy”. Kim and Mauborgne published in 2005 their best-selling book on “Blue Ocean Strategy” where value innovation is considered as cornerstone of their proposed strategic framework which became widely discussed and popular in strategic management. They argue that in blue oceans competition is “irrelevant” because the rules of the game are not defined yet. Blue ocean is the contrasted with red oceans, which represent all the existing industries today where industry boundaries are defined and
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competitive rules are well known. Kim and Mauborgne argue that companies in nowadays economy need to go beyond competing, they have to create blue oceans with new product and growth opportunities. Based on illustrative cases such as the invention of the “Cirque du Soleil”, the entertainment show which combines theatre and circus, they illustrate that such companies or entrepreneurs didn’t use the existing competition as their benchmark. Value innovation is created in the area where an innovation affects both its cost structure and its value proposition to buyers what they call the simultaneous pursuit of differentiation and low cost. Kim and Mauborgne have unequivocally a strategic management perspective on innovation assuming that top-management can design and control the innovation process to a large extent, their concept is thus a counter-trend to many other new innovation approaches which displace the dominant role of management to control innovation but rest on innovation communities and user networks to govern innovations. Kim and Mauborgne (2005, 17) define that value innovation “is about strategy that embraces the entire system of a company’s activities”. Value innovation is based on the view that firms enact their environment and that the industry structure can be “reconstructed by the actions and beliefs of industry players”. They call their strategic perspective accordingly a reconstructionist view on strategy, opposed to the traditional structuralized or marketbased view on strategy dominated by the Industrial Organization (IO) economics literature. The work of Kim and Mauborgne is also related to the work of Markides (1997) and others who argue that companies can strategically innovate and thereby break established rules of competition and businesses, innovations which are initiated, steered and even invented to actively by the top-management. This perspective on innovation does not advocate to involve actively the potential customers but has rather a analytical view how to discover new customer needs and markets. Markides (1997), for instance, argues in that respect: “New ideas merge more easily if mangers can escape their mechanistic way of thinking and look at an issue form different perspectives … for example, instead of thinking “This is our customer, this is what he or she wand, and this is how we can offer is,” start by asking, “What are our unique capabilities, what specific needs can we satisfy, and who will be the right customer to approach?””. Companies like Apple, Dell, Southwest Airlines or Swatch are typically taken as illustration of such an approach. Applications, relevance for security organisations and open questions The term value innovation and blue ocean strategy have been discussed heavily in the strategic management literature, consultancy, and business schools and have inspired management thinking in many (often large) corporations. Although many successful examples are well known there exist also many cases where market pioneers have failed. An interesting question is to what extent established corporations will be able to create new markets and industries and thereby re-invent themselves. Only a very few companies may probably be able to realise indeed such strategically managed innovations which often requires organisational and cultural change, too.
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3.3.6 Model of continuous corporate renewal (Apilo, 2010) Main proponents and content The dual ambidextrous model of corporate renewal is based on action research and its theoretical starting point for a study is in four areas: strategy, innovation, organizational learning and change management. The model try to take into account needs for an exploitation and exploration perspectives at the front end, an efficient innovation process, an utilisation of resources and capabilities not only from a company but also from its innovation network. The model stresses the importance of the continuous updating of strategic intent. Figure 7: Model of continuous corporate renewal (Apilo, 2010)
Source: Apilo (2010)
The innovation strategy framework (Fig. 7) is divided to two different approaches as illustration of both exploitation and exploration of company's resources, competences, and knowledge. Opportunities are new competition factors with which the company can differentiate itself. Identifying needs for change refers to activities where company compares its target state with present state.
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Figure 8: Tools in the innovation strategy framework (Apilo, 2010)
Source: Apilo (2010) Furthermore, one practical contribution from this study (Apilo, 2010) is a self-assessment tool for innovation management, which has potential to be tailored also for as an element of InnoSec model. Table 3 list the innovation management practices in four areas. Organisations should self-assess (1= hardly at all, 5= extremely well) their own practices to understand the next development objectives of their innovation management system. On the other hand, these practices illustrate the characteristics of the innovative organisation. Table 1: Self-assessment tool for innovation management (Apilo, 2010) Innovation process The innovation process is understood in the same way everywhere in the organisation and innovation network Everyone has a role in innovation process The innovation process covers idea generation, idea evaluation, concept design and implementation Efficiency is sought through routines and practices at the implementation stage Capacity and space for experimentation and radical experiments Cross-functional teams implement projects in the innovation process The innovation process is continuously evaluated and developed
Innovation culture and structure Renewal through innovation is a corporate value Employees are encouraged to come up with new ideas and approaches to help customers by offering better solution Overlapping and conflicting information is produced, tolerated and leveraged Unnecessary rush and routines will be eliminated Failures are seen as learning opportunities for the organisation Flat, team based and flexible process organisation Incentives for innovations are conducive to group work
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Innovation strategy Innovation strategy steer corporate renewal Means for renewal are sought by identifying change needs and opportunities simultaneously The innovation strategy and business strategy are updated continuously, in dialectic learning process Portfolio management is used to allocate development needs and resources and programmes are used to collect strategic development projects into larger entities Roadmaps are used to chart the future Foresight activities, scenario work and small-scale experiments are conducted to outline the future The innovation strategy determines the means and the innovativeness level of the company
Innovation resources and capabilities Employees are encouraged to continuous learning and personnel development The organisation is an active member of the innovation network (including research partners, suppliers, users, customers) Innovation network is seen as a risk minimiser and a facilitator Innovation capabilities are developed all the time Project and solution knowledge is compiled and leveraged The aim is to recruit employees with diverse training and experience A wide variety of funding sources is employed
Applications, relevance for security organisations and open questions How applicable the dual front end of the innovation process is in practical company cases? How to corporate renewal model can be broadened to include the innovation network in more concrete way? The innovation strategy framework, with its change opportunities and need for change dimensions, has potential to be used as a practical guidance also for innovation strategy approach in security organizations.
3.3.7 Knowledge creation process (Nonaka et al., 2000) Main proponents and content Nonaka (1991) distinguished between two types of knowledge: tacit (Polanyi 1966) and explicit. Nonaka & Takeuchi (1995) described the spiral of knowledge (SEGI) - the generating of tacit and explicit knowledge in an organisation. Later some authors have added other types of knowledge, for instance, Choo (1998) added cultural knowledge. Knowledge creation spiral (SECI) is based on Nonaka (1991) and Nonaka & Takeuchi (1995) works. The SECI is the process of knowledge creation through conversion between tacit and explicit knowledge (In socialisation mode tacit knowledge is transferred in individual level through face-to-face or through experiences (eg. apprenticeship). In externalisation mode tacit knowledge is articulated to explicit through concepts, images or documents. In combination phase explicit knowledge will be organising and integrating to different types of other explicit knowledge for example trough database, prototype building. Explicit knowledge to tacit by internationalisation enclosed SECI process by an individual level, when
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explicit knowledge becomes part of an individual's knowledge (making sense, training, books). Nonaka et al (2000) described further three elements of knowledge-creation process in which SECI is one part. The other elements are Ba and knowledge assets. They define Ba as "the shared context for knowledge creation" and knowledge assets as "the inputs, outputs, and moderator of the knowledge-creating process". Figure 9: The SECI process (Nonaka & Takeuchi, 1995)
Source: Nonaka & Takeuchi, (1995)
Nonaka et al. (2002) described the knowledge-creating process "as the dynamic interaction between organisational members, and between organisational members and the environment". Figure x. illustrates the process in organisational level.
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Figure 10: A knowledge-creating process (Nonaka et al. 2000)
Source: Nonaka et al. (2000)
Applications, relevance for security organisations and open questions The SECI process is widely used in academic literature. From practical point of view, the model highlights at first the important difference between information and knowledge and further gives concrete model how to increase conversion between tacit and explicit knowledge and how to energize Ba in every organization. The extensive knowledge-creation process of Nonaka et al. (2000) points out three important issues in any kind of organization (and network): organizational learning process, knowledge assets and organizational climate which support learning and innovativeness. In the InnoSec innovation model these three points should also be taken account.
3.3.8 Open Innovation (Chesbrough, 2003) Main proponent and content Henry Chesbrough’s book “Open Innovation: The New Imperative for Creating and Profiting from Technology” has been one of the most hotly debated works in the last few years. Shortly after the book was published in 2003, scholars started to investigate the open innovation concept theoretically and empirically. What is open innovation? Chesbrough (2003) defines open innovation as “a paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology” (Chesbrough 2003, xxiv). Chesbrough describes the 33
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open innovation model as a contrast to the closed innovation model, which is defined as deep vertical integration, an environment which promotes the idea that companies are only able to rely on their own R&D which tends to be conducted in rather isolated organisational units. Chesbrough argues that companies have to combine the knowledge generated inside their company with compatible outside knowledge from institutions and other companies in order to exploit all the technological possibilities within and without the firm. Firms therefore have to constantly identify, understand, select from, and connect to the wealth of available external knowledge. Figure 11: Open innovation (Chesbrough, 2003)
Source: Chesbrough The open innovation paradigm addresses a key challenge of R&D-driven companies, that is to raise the efficiency of the traditional innovation funnel. Generally, only a small fraction of the ideas, prototypes, research results and technological solutions generated by the R&D department of a company will successfully pass through all the stages of the innovation chain. Open innovation aims to overcome the problems associated with the traditional stage-gate approach for managing innovation which is widely used in industry at present. Clearly, realising open innovation strategies also requires an adaptation of the current business models. Chesbrough (2003) suggests a number of alternative strategies to transfer a company’s own R&D investments into successful innovations. These include the creation of spin-off companies, licensing of patents, and the co-development of innovations. The established venture capital market, the large number of patents held by companies, the mobility of researchers and the manifold possibilities to co-operate with different partners have made these strategic options more feasible than in the past. Gassmann and Enkel (2004) have labelled this strategy the ‘inside-out’ strategy, in contrast to the ‘outside-in’ strategy where primarily external ideas are used within the firm, e.g. by the acquisition of companies or licensing-in of technologies. With respect to ‘outside-in strategies’, Chesbrough argues that 34
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not only the small number of researchers, engineers and product managers but also other organisational members and external partners should be involved in the search activities, who all contribute to the innovation process and provide their own ideas and competencies. Although the paradigm itself is broad speaking about the transfer of ideas, early open innovation literature (including the works of Chesbrough) focused on the transaction of intellectual property in and out of firm boundaries. On the other hand, if considering the flow of only ideas in and out of firm boundaries, one may argue that the open innovation is essentially the same as the concept of absorptive capacity by Cohen and Levinthal (1990). Empirical Findings Is there evidence that the innovation process is becoming more open and that companies are adopting open innovation strategies? Empirical studies have shown that the various forms of co-operations such as joint ventures, strategic alliances and international cooperations have indeed increased over the past two decades (e.g. Hagedorn 2002, OECD 2008). Moreover, recent studies based on the Community Innovation Survey (CIS) (e.g. Dachs and Leitner 2009) showed that companies co-operate more frequently and use the various external information sources more intensively compared to the mid 1990s. In addition, the number of patents and the amount of licensing have increased in the past few years (e.g. The Economist 2005). There is less evidence on the extent to which companies use the various forms of inside-out strategies aiming to systematically and deliberately foster the external commercialisation of innovations. Van der Meer (2007) examined 28 highly innovative Dutch companies with respect to whether they had adapted their innovation culture, organisational structures, and business models towards an open innovation strategy. He found that most companies have not adapted their business model. Moreover, he shows that only 54% of the companies realised at least one of the three external commercialisation strategies, spin-off generation, licensing and co-development. 74% of the companies mainly support an outside-in strategy by organising workshops with customers, acquiring companies, and interacting with universities. In another study based on German companies, Ernst et al. (2005) found that the goals associated with the creation of spin-offs are very heterogeneous and that they are rarely managed explicitly and systematically. Applications, relevance for security organisations and open questions Henry Chesbrough’s work is based mainly on case studies of US firms in some high-tech sectors. He defines open innovation as a “new paradigm” for managing R&D which accordingly should have a good potential for many types of companies and sectors. Chesbrough et al. (2006) claim that all industrial innovation activities will become more open and interactive. However, to what extent this model can be used, adapted and transferred to other industries, technologies, and countries is an open question. In addition, certain framework conditions such as a well-functioning venture capital market, IPR regimes, sectoral cooperation culture, structural inertia etc. may foster or hinder the use of open innovation strategies. Furthermore, specific problems and challenges may arise such as the “not-sold here syndrome” which can influence the diffusion of this new strategy.
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3.3.9 User Innovation and the Lead User Methode (von Hippel, 1976; 1986) Main Proponents and Content Already in the 1970s and 1980s some researchers started to point out the role that users and customers play in successful innovations. In 1976, von Hippel was one of the first scholars to identify the role of users for innovations in the scientific instrument industry. He revealed that many users provided product ideas and even created product innovations themselves by adapting products to their own specific needs (Von Hippel 1976). In 1978, von Hippel was already distinguishing the “Manufacturing-active” and “Customer-active” paradigms (von Hippel 1978). Von Hippel (1988) found that a specific small group of customers, so-called ‘lead users’, anticipate market needs at a very early stage and are willing to either provide ideas for the development of new products, or even develop new or modify existing products themselves. Lead users represent a highly specialized type of user, who can improve the approximation of product attributes to heterogeneous users’ needs. Significantly, these lead users often share their information with the entire sector, a phenomenon which was called “free revealing”. A few studies investigated the incentives and motivations for companies or individuals to actively engage in the innovation process and showed that user innovations are promoted by particularly high heterogeneous market needs. Despite fine segmentation of the market, user needs are often not entirely fulfilled by the products offered by manufacturers. Moreover, studies have also found that users are often willing to pay much higher prices for products representing a closer fit to their requirements than for other developments because they contrast the higher costs of obtaining that product with the imminent costs should the product not fit. However, some toolkits provide rather small solution spaces which only allow users to “superficially” design their own products. These falls under the category of “co-design” and such toolkits are considered to be instruments for masscustomization (Piller and Reichwald 2006). In the 1990s, the term “user innovation” emerged to describe the phenomenon of users innovating by themselves. Expressions such as customers-as-innovators or user-driven innovations have also been used. In this context, many studies have found that user innovators often have lead user characteristics. The lead user method (von Hippel, 1986, 1988, 2005) was proposed to support user innovations as was the development of products using (web-based) user toolkits (Dahan and Hauser 2001). While the lead user concept proposes the physical integration of customers in the development process at the leading edge of the target market, user toolkits enable users to design their own products supported by tools within a certain solution space. Toolkits have an advantage over the lead user concept in that neither market appeal, nor management priorities have to be tested by the manufacturers at the end of a user-design phase. Lead users face needs that will be general in a marketplace, but they face them months or years before the bulk of that marketplace encounters them, and lead users are positioned to benefit significantly by obtaining a solution to those needs.
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Von Hippel (2000) argues the need of lead user toolkit as following: "if a manufacturer does not supply users with a toolkit and instead seeks to understand user need, that manufacturer must invest anew to acquire novel information from users for each custom development project undertaken". Objectives to lead user tool kit are: 1. it will enable users to carry out complete cycles of trial-and-error learning 2. it will offer solution space that they need 3. users will be able to operate with their customary skills 4. it will contain libraries of commonly used modules and also it will be suited for design of unique modules 5. products and services designed by users are directly ready for production (without revision by manufacturer-based engineers) User innovation therefore goes beyond the traditional customer orientation as propagated by marketing and market research, e.g. by optimizing already developed products and validating product concepts. In this sense, product development is “outsourced” to the customer, who creates his own products, while the manufacturer provides the tools necessary for the customer to develop and adapt products. It is even no longer necessary to understand what the customer wants. Instead of trying to understand users’ needs, those parts of the process where costly information on needs is usually integrated are managed by the user. The existence of user innovation is also a key argument against the linear innovation model. Figure 12: Experimentations process (Thomke, 2003)
Source: Thomke (2003)
Thomke & von Hippel (2002) and Thomke (2003) have developed the concept of experimentations with customer based on the earlier works (lead user, user involvement). Thomke & von Hippel (2002) argue: "at the heart of every company's ability to innovate lies
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a process of experimentation that enables the organization to create and evaluate new ideas and concepts for products, services, business models, or strategies." Thomke & von Hippel outline an innovation in this approach as learning process by rapid iterative experimentations. The process has an iterative design, build, run and analyse phases (see Figure 12). Empirical findings There is a large amount of literature studying the various roles of customers within the innovation process and their impact on innovation performance. Studies have delivered rich empirical evidence for different forms of user involvement, e.g. the lead user approach and the use of user innovation toolkits (for an overview, see, for instance, von Hippel 2005). Most studies corroborate that user innovations have a higher success rate on the market. While the literature on this subject is vast, studies of the actual application of the user innovation theory often focused on specific industries. Studies vary between extreme sports industries, such as mountain biking (Lüthje et al. 2002), kite surfing (von Hippel, 2005, pp. 103) or kayaking (Hienerth, 2006), software development (Morrison et al., 2002, Franke and von Hippel, 2003), and high-tech industries like the semiconductor and electronic subassembly manufacturing equipment producers (Urban and von Hippel, 1988). Herstatt and von Hippel (1992) reported the application of the lead user method at Hilti AG, the 3M case study conducted by Lilien et al. (2002). However, it seems that low-tech industries, e.g. general engineering, have not been evaluated that often. More general, empirical studies based on CIS data have shown that customers are the most import external information source and that the share of companies co-operating with customers has increased in the last decade (OECD 2008). Laursen and Salter (2006) are amongst those authors who delivered evidence that the use of customer information is positively related to the innovation performance. However, Laursen and Salter (2006) found no evidence for the link between the extent to which customer information is used and innovativeness. The question of whether user-driven innovation leads to more radical innovations is still controversially debated with mixed empirical evidence (Lettl et al. 2006). While some claim that particularly lead users are able to create radically new innovations, others argue that radical innovations are still more the result of technology push innovations. Applications, relevance for security organisations and open questions User innovation has become successful in specific industries such as scientific instruments, software development, manufacturing process equipment or extreme sport products. However, it is difficult to foresee to what extent user innovations may be feasible for different industries and product markets. Moreover, it is not always clear when innovations are “user innovations” and whether having a product idea already counts as a user innovation. Innovation in the traditional Schumpeterian sense means introducing an invention into the market. In that sense, user innovations may often be better described as inventions.
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Although the individualisation of society and customer demands have enabled the emergence of user innovations, it is still open how this development will evolve: Hippel (2005), for instance, argues that with democratising innovation he means that users “are increasingly able to innovate for themselves”. But is this really the case in that many industries and product markets? And to what extent are individual consumers and companies willing to innovate and what are their motivations? Realising user innovation strategies has to overcome specific barriers. Implementing user innovation strategies is associated with costs and risks and may require new business models. Obviously, the powerful and established marketing departments will be against such a radical change in the management mindset in many cases. In how large scale the lead users can take responsibilities to design of products and services instead of brand owner company? (Radically new etc.?) Are they really new products, services, and solutions, if company have all modules already designed? And if some modules are unique, how users can design it better than crossfunctional design team? Lead user toolkit idea can be a useful approach in framing of InnoSec innovation model from the user centric innovation point of view. The idea of Thomke's experimentations process can be considered in InnoSec model as a basis for iterative developing practices to how InnoSec companies can co-develop simultaneously with their technology suppliers and with their own (lead) customers.
3.3.10 Innovation communities (Hippel, 2005; Tuomi 2002) Main Proponents and Content The concept of innovation communities is closely related to user innovation. Innovation develops out of communities, such as the open source community at MIT started in the 1980s, where users are willing to freely share their developments in order to utilize a larger number of researchers and developers and therefore improve their products (Hippel 2005). Hippel (2005) defines an innovation community as a subset of an information community. Innovation communities consist of individuals or firms interconnected by information transfer links which may involve face-to-face, electronic or other means of communication. Innovation communities can consist of users and producers; if they involve users, they are often referred to as user communities, too. In this case, they are closely related to the concept of user innovations; indeed, many studies have shown that in industries where user innovations are a major source of innovation, e.g. in some sport industries, users frequently form a physical or virtual community to share their ideas. Tuomi’s (2002) work on “Networks of Innovation” is another interesting contribution in this field. Innovations are adopted when users integrate them in meaningful ways into existing social practices. Histories of major technological innovations show that the creative initiative of users and user communities often became the determining factor in the
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evolution of particular innovations. Tuomi argues that innovation is about creating meaning; that it is inherently social; and is grounded in existing social practices. Open Source Software (OSS) development is one form of a community-based innovation. Linux, the Apache web server and computer games are the most well known examples of this type of innovation. In 1984, Richard Stallman set up the “Free Software Foundation” and the GNU “General Public License” initiative, which defines the rules for co-operation within the community. However, it has to be mentioned that, in many cases, individual software developers (e.g. Linus Tovalds) initiated the projects which then quickly became accepted by a community. Research has also stressed that self-organisational processes are an important feature of such communities, i.e. innovations are not the output of managerial or organisational strategies or management decision. Empirical findings A few studies have investigated the motivation of open source software developers (e.g. Gosh et al. 2002; Lakhani et al. 2002; Franke und von Hippel 2003). These studies found that most developers worked on the development in their leisure time, although some of them worked on it during their job in the community. As most software developers have some freedom and leeway in their working day, it is possible to exploit this time for open software development. Interestingly, the formal rules within the community are less strict; for instance, developers do not do have to plan a project, apply for funds, report about the progress, or set incentives to carry out riskier, softer projects (Gosh et al. 2002). By sharing the work in open source communities, for instance, users are further motivated, albeit extrinsically, as they share results and receive help from or provide help to other users within the community. Gratification comes mainly through the recognition from other developers. Lakhani et al. (2002) categorised the software developers with respect to their motivation into four groups: learning and fun (29%), hobbyists (27%), professionals (25%) and community believers (19%). Building up a reputation, which can support a developer’s personal career is also part of their motivation. Companies aim to use communities to enhance their innovativeness, which, however may require them to change their business model. For instance, IT firms can make money by data mining, real-time distribution, customer-specific adaptations, advertising and training. In addition, community innovations and open source software development have also been interpreted as a reaction to increasing innovation pressure and the strategy of firms to externalise innovation risks (Holtgrewe 2004). Traditional physical networks are another form of innovation community. The already mentioned case of extreme sports can be referred to again. However, there are other examples of interest. In Austria, for instance, in the 1980s, farmers and private individuals who build their own homes formed a network to develop solar collectors for their own use (Ornetzeder and Rohracher 2006). This small group has since grown and became the driving force for a movement which enabled the diffusion of this technology. Within this community, individuals improved the existing technologies and some companies adopted developments and launched commercial products. The community also founded the Society for Renewable Energy, organised workshops and co-ordinated research projects.
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Ornetzeder and Rohracher (2006) have labelled the development of the various members as “peripherally, decentralised development departments.” Applications, relevance for security organisations and open questions Innovation and user communities have attracted the most attention in software development. The open communication via the internet and the transparent source code permits co-operation and learning to span the globe. However, in other industries, the diffusion of this idea may be more difficult. 3.3.11 Virtual Customer Methods (Dahan and Hauser, 2005) Main proponents and content According to Dahan and Hauser (2005), the product development process itself “is transforming into an activity that is dispersed and global with cross- functional PD [product development] team members spread across multiple locations and time zones and interconnected through a services marketplace.” Technologies such as the Internet via broadband connections support the involvement of users and become a business strategy in themselves. Virtual Customer methods represent a new way of recording the “voice of the customer” and achieve this with the help of new information and communication technologies (Piller 2006). Dahan and Hauser (2005) suggest six strategies to involve the user in the development process. However, these methods do not actually actively integrate customers in the same way as user toolkits, which provide a solution space, but instead use modern information and communication tools to simplify the process of gathering information. These six strategies are: 1. Web-Based Conjoint Analysis: In a conjoint analysis study, products or product concepts are evaluated by customers according to set features. Each feature is represented by two or more designs and customers do not have the option of altering designs. In principal, they are asked to choose between different designs, whether by rating them according to preference, selecting one of a paired design, or hybrids of these two methods. 2. Fast Polyhedral Adaptive Conjoint Estimation: In principal, this method consists of similar paired-comparison questions, which are found by heuristic algorithms that run efficiently and can approximate complex computational problems. These features facilitate the early new product development (NPD) process as researchers try to identify the most important features of products. Depending on the specific problem, this method can even make the usually important step of self-explication obsolete. The ultimate goal is an adaptive survey that uses customers’ answers in order to generate the next product features but does so with fewer questions and a greater degree of accuracy. Dahan et al. (2003) suggest using this method for larger numbers of product features. 3. User Design:
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User design via web-based toolkits is an option when the focus is not on testing different fixed designs, but rather identifying the most important features for customers. Such toolkits, which may or may not require certain advanced skills on the part of customers, especially address the problem of customer fatigue. Participants in the design process can quickly become tired depending on the number of features and option levels for each of the fixed designs provided. User design corresponds best with the strategy to foster user innovation via so-called user toolkits. Dahan and Hauser (2002) argue that this method is not only appropriate for lead users, but also for “normal” users once they have been briefed (via the net) on the solution space and potential benefit of the product. 4. Virtual Concept Testing: Virtual concept testing (VCT) is a method that complements those mentioned above and aims at providing insights into the likelihood of customers buying fully developed concepts at varying prices. 5. Securities Trading of Concepts: This concept utilizes not only customers’ own opinions but also their reflection of other participants’ opinions by trading “securities” which are actually product features in groups of fifteen or more participants at a time. The aim for each contestant is to maximize their own portfolio of concepts and therefore receive higher awards. The securities traded in this virtual market consist of a product description, a depiction, features and performance ratings. The traders may buy or sell from each other, which means that not only their own assessment, but also the rating of their opponents will determine the value of a security. In order to efficiently conduct these transactions, each member of the stock market logs into a secure website where sell or buy decisions are entered into an interface, which also provides an oversight of all transactions and the portfolio etc. 6. The Information Pump: This last concept does not focus on idea generation, even though it is placed at the beginning of the NPD process, but rather on understanding customer perceptions of a newly created concept. It is a tool that develops customer-to-customer interaction to enhance the quality with which they evaluate the concepts presented to them by three different characters at various information levels. Product developers can rely on truthful information from customers and learn the vocabulary and descriptions that they use.
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3.3.12 Crowdsourcing (Howe, 2006) Main Proponents and Content Crowdsourcing is a distributed, problem-solving and production model. The term was first coined by the journalist Jeff Howe (2006). Problems are broadcast to an unknown group of solvers in the form of an open call for solutions. Contributors - also known as ‘the crowd’ typically form into online communities, and submit solutions. The crowd also sorts through the solutions, finding the best ones. These best solutions are then owned by the entity that broadcast the problem in the first place - the crowdsourcer- and the winning individuals in the crowd are sometimes rewarded. In some cases, this labor is well compensated, either financially, with prizes, or with recognition. In other cases, the only rewards may be kudos or intellectual satisfaction. Crowdsourcing may produce solutions from amateurs or volunteers working in their spare time, or from experts or small businesses which were unknown to the initiating organization. The difference between crowdsourcing and open source knowledge creation is that open source production is a cooperative activity, initiated and voluntarily undertaken by members of the public. In crowdsourcing, the activity is deliberately initiated by a client. Any products or solutions generated by the crowd become the property of the client (Brabham 2008 b). Furthermore, in contrast to open source collaboration, in crowdsourcing, the work may be undertaken on an individual as well as a group basis. Crowdsourcing has been applied to research and design tasks, but also operational activities, such as advertising, product configuration or the analysis of large amounts of data. It has been suggested that there may be a potential for applying crowdsourcing in the public domain, e.g. in urban planning. Crowdsourcing has been criticised as a new form of labour exploitation as the monetary prizes paid are usually well below the wages for similar tasks performed by regular employees. At the same time, the benefits of reconnecting workers to the productive process and providing an outlet for creative potential have been stressed (Braham 2009). Crowdsourcing can be interpreted as a way of applying the open source concept to physical products that do not lend themselves well to the open source type of peer production in the current economic framework conditions. Viitamäki (2008, 2010, continues updating), for instance, have developed a concrete model, FLIRT, for crowdsourcing: FLIRT (Viitamäki) – framework for planning, designing and managing an open goal-oriented collaboration with broad audiences. The FLIRT model views the phenomenon from the perspective of a company considering closer collaboration with customers and online customer communities. It suggests a set of five main elements – focus, language, incentives, rules and tools and their sub elements (see Fehler! Verweisquelle konnte nicht gefunden werden.).
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Figure 13: FLIRT elements (http://www.samiviitamaki.com/?page_id=329)
Empirical findings The current research on crowdsourcing is focussing on the motivation of people to participate in the crowd and the identification of success factors for crowdsourcing applications, in particular those related to the composition of the crowd (Brabham 2008b). Proponents of crowdsourcing often refer to the notion of “Wise crowds” (Surowiecki 2004) meaning that, under certain circumstances, groups can be smarter than the smartest of their individual members and to the concept of collective intelligence (Levy 1999). Applications, relevance for security organisations and open questions Braham (2008a, p 86) offers a full “agenda for crowdsourcing research” on the basis of his extensive empirical and theoretical work on crowdsourcing. However, there are also some open issues, for instance the question what kind of diversity is needed for “wise crowds” and (how) can it be achieved? Another one is: What are the barriers to participation? The FLIRT-model can applicable in some scale as a checklist, if on-line communities are seen an important source of ideas and/or testing partners for security organizations.
3.3.13 Service innovation management Main proponents and content Tidd & Hull (ed. 2003) presented rather wide review of service innovation frameworks and approaches. Another remarkable review of service innovation is made by Lush & Vargo (ed. 2006) from the perspective of service dominant logic. Vargo & Lush presented their servicedominant logic as new thinking way of marketing (2004). Below there are some insights to service innovation processes and service innovation management. Service characteristics are following (e.g. Vermeulen & van der Aa, 2003)
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intangibility, simultaneous production and consumption, heterogeneity, and perishability. Because of intangibility creation of shared understanding between service provider and customer is very important. Further, during service development and production phase close involvement of front and back office is needed due to second mentioned characteristics - simultaneous production and consumption of services. Vermeulen & van der Aa (2003) consider two types of organizational innovations that are specific for the service innovation: • "Replication" o Organizational structure that balances control and learning (plural form) o Mutual learning between chain organization and independent entrepreneurs o Teams dedicated to setting up new sites and diffusing learning experiences • "New customer roles" o Involvement of customer in innovation process o Commitment of demanding customer Vandermerwe (2003) divided service innovation in two tracks: 1) not alone service or product innovation, 2) involves new ways of doing things for and with customers. She presented innovation process for the "track 2" as following:
defining the market space driving customer lock-on loop (customer lock-on – customers want the enterprise as
their first or sole choice) defining the opportunities to add value creating win-win for all levering from existing infrastructure and skills managing customer contact o personalization o multiple channels building an extended delivery network o choosing partner o managing service quality o owing the brand
Figure 14 based of idea of Gann and Salter (2003) illustrates the types of actors, activities and knowledge flows in project-based, service-enhanced production.
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Figure 14: Knowledge, information flows and actors in project-based processes (Gann & Salter, 2003)
Source: Gann & Salter (2003) In the service dominant logic approach marketing is seen as a continuous learning process. The steps of the learning process are the following: identify o develop core competences, the fundamental knowledge and skills of an economic entity that represent potential competitive advantage identify other entities (potential customer) that could benefit from these competences cultivate relationship that involves the customers in developing customized, competitively compelling value propositions to meet specific needs gauge market place feedback by analysing financial performance from exchange to learn how to improve the firm's offering to customers and improve firms performance The main issues in service dominant logic thinking are: Primary unit of exchange: People exchange to acquire the benefits of specialized competences (knowledge and skills), or services. Knowledge and skills are operant resources. Role of goods: Goods are transmitters of operant resources (embedded knowledge); they are intermediate "products" that are used by other operant resources (customers) as appliances in value-creation processes. Determination and meaning of value: Value is perceived and determined by the consumer on the basis of "value in use". Value results from the beneficial application
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of operant resources sometimes transmitted through operand resources. Firms can only make value propositions. Firm-customer interaction: The customer is primarily an operant resource. Customers are active participants in relational exchanges and co-production Day (2006) have depicted that process of achieving advantage through service dominant logic (SDL) is not linear but cyclic, where value proposition, performance outcomes and value creating system alternates. In value proposition price value, performance value and relational value need be considered. Performance outcomes are comprised of satisfaction, retention, share and profitability. The key success factors are generated in value creation system, which include assets, capabilities and controls. Berthon and John (2006) have dealt specifically with the role of the service use and consumption process. The elements of value creating interactions before consumption, during consumption and after consumption are varying based on the nature of marketing change. In the phase before consumption service provider and customer influences offering selection decision process, co-design, co-produces, co-market and co-deliver the service. During consumption service provider and customer monitor, direct and take part to consumption. After consumption it is emphasized to learn from the monitored customerexperienced quality and to manage past and future experiences and customer termination. Gröönroos (2006) reflected what service dominant logic can offer the marketing of goods following: o goods value, (value support) o goods are platform for services o goods are one resource among others in the process of supporting customers' value generation processes Applications, relevance for security organisations and open questions Do the companies need separate innovation process for products and services? Understanding the characteristics of service business and service development compared with traditional product centric insight play an important role in the construction of innovation model for security organization.
3.3.14 Scrum and agile development Main proponents and content Jeff Sutherlandia and Ken Schwaber have developed the Scrum framework. It is a process framework that has been used to manage complex product development since the early 1990s (Schwaber and Sutherland first co-presented the Scrum at the OOPSLA conference in 1995). Sutherland & Schwaber (2011) keep updated version of the Scrum Guide in following url: http://www.scrum.org/storage/scrumguides/Scrum_Guide.pdf. Furthermore, Schwaber and Beedle (2001) have written a book about the agile software development with Scrum. Nonaka (1986) was the pioneer in introducing the cross-
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functional team idea, which is in a major role also in the Scrum approach. Abrahamsson et al (2002) have reviewed the scrum and other agile development methods in their widely cited book. They found the following agile software methods in addition to Scrum: extreme programming, crystal family of methodologies, feature driven development, the rational unified process, dynamic systems development method, adaptive software development, open source software development, agile modelling, and pragmatic programming. The main Scrum terms/practices are: Scrum events (regular time-boxed meetings) Sprints (max. 1 month ) (sprint planning meeting, daily scrum (15 min), development work, sprint review, sprint retrospective) Product backlog (prioritized feature list) Sprint backlog (plan for daily work) Increment ( the sum of all product backlog items completed during a sprint and all previous sprints)
There are three different kinds of Scrum (team) roles. The product owner is responsible for maximizing the value of the product and the work of the development team and managing the product backlog. In Scrum approach there is only one cross-functional development team without sub-teams. Scrum master ensure that Scrum is understood and enacted in the organization. Abrahamsson et al. (2002) have illustrated scrum process, which include also pregame and postgame phase in addition of development phase.
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Figure 15: Scrum process (Abrahamsson et al. 2002)
Source: Abrahamsson
Applications, relevance for security organisations and open questions Scrum framework could be applicable also in the other areas than software development, especially there is potential in service development with its rather short and iterative development cycles.
3.3.15 Business model generation (Osterwalder and Pigneur, 2010) Main proponents and content Osterwalder and Pigneur have written the book Business model generation with 470 practitioners. Other practical business model frameworks include, for example, the strategy diamond by Hambrick & Fredrickson (2001) and the blue ocean strategy by Kim & Mauborgne (2005). Osterwalder and Pigneur (2010) describe that business model is like a blueprint for a strategy to be implemented through organizational structures, processes, and systems. Their model for the business model generation is based on research of many authors, e.g. the framework of three core business types by Hagel & Singer (1999) and also Osterwalder's own PhD thesis work (2004), but the book is very practical workbook with step by step advice how to model new business model by development team of the organization. The model consists of the nine building blocks: customer segments (CS), value propositions (VP), channels (CH), customer relationships (CR), revenue streams (R$), key resources (KR), key 49
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activities (KA), key partnership (KP), cost structure (C$). The blocks are places on the canvas of business model (Fig. x), and the canvas is to tool for modelling process. The process is following: mobilize - setting the stage prepare for a successful business model design project understand - immersion research and analyse elements needed for the business model design effort design - inquiry generate and test viable business model options, and select the best implement - execution implement the business model prototype in the field manage - evolution adapt and modify the business model in response to market reaction Figure 16: Business model canvas (Osterwalder & Pigneur, 2010)
Source: Osterwalder and Pigneur (2010)
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Applications, relevance for security organisations and open questions Many companies have shown their interest to the Osterwalder's model. Osterwalder's business model canvas is a concrete and practical tool for business model developing and so it is one potential method for security organizations to make business modelling of new services.
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3.4
Project Reviews
3.4.1 ServPPIN – Public-Private Innovation Networks in Services http://www.servppin.com/ SERVPPIN is a Collaborative Research Project co-financed by the EU 7th Framework Programme, under the topic: The implications of developments in the service economy for the European economy. The full title of the project is “The Contribution of Public and Private Services to European Growth and Welfare, and the Role of Public-Private Innovation Networks SERVPPIN”. The project is carried out by a consortium, including the Austrian Institute for Technology (AIT, Vienna), KOPINT-TÁRKI Economic Research Institute Ltd. (KOP, Budapest), the University of Alcalá de Henares (UAH, Department of Applied Economy), the University of Bremen (Uni-HB, Department of Economics), the University Complutense of Madrid (UCM, Department of Applied Economics II), the University of Hohenheim (Uni HO, Institute of Economics), the University of Science and Technology of Lille (CLERSE, Lille Center for Economic and Sociologic Research), the Lillehammer University College (CPPI, Centre for Public Policy Innovation), the University of Ljubljana (UL, Faculty of Social Sciences), the Manchester Metropolitan University (CIBI, Centre for International Business and Innovation), the Nottingham University Business School (ICCSR, International Centre for Corporate Social Responsibility at the Strategy Division) and the Utrecht University (URU, Urban and Regional research centre Utrecht at the Faculty of Geosciences). ServPPIN focuses on the role of public and private services on growth and welfare and the particular role of public-private innovation networks (PPIN). Public-private innovation networks are considered as an organizational device in which public and private services can perform complementarities and synergies in many ways. In particular, the objectives of the project are to investigate i) the linkages between services, economic and social growth, and ii) the way how public-private sector interactions function and how they can be better managed by private and public sector policy-makers in order to increase performance and welfare. Further, the project aims to gain deeper insights into the iii) characteristics of public-private service networks. An analytical framework was developed in order to study multi-institutional networks. The methods used involved cross-country and cross-sector empirical analysis. In detail, the empirical research includes i) a large-scale statistical analysis of public and private services in growth and welfare at the macroeconomic level, ii) a statistical analysis of the contributions of service innovation and service public-private innovation networks (ServPPINs) to performance, growth and welfare at the meso and sectoral level, as well as iii) case studies covering major services types, notably health, transport and knowledge intensive services. New techniques were applied for impact analysis of both public and private services, where the impacts on performance (productivity, competitiveness) and welfare (employment, service quality, ‘universal’ access to services) were compared. The main results reveal that there are several factors responsible for the growth of service activities, the most important being income increase, productivity differentials relative to manufacturing activities, flexibilisation of productive systems, new technologies, human 52
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capital, goods-services integration, outsourcing, globalisation, governmental regulations and social changes. Services (in particular the knowledge-based ones, which include computer and related activities, R&D and legal, technical and advertising) are very active and dynamic in terms of innovation in all developed countries. But innovation in services cannot be reduced to technological innovation alone. On the contrary, the empirical data indicates that there is relatively more non-technological innovation in services than in manufacturing across all countries under study. In services, innovation may be intangible and may consist of methods, actions and movements of each individual involved in the provision. However, invisible (non-technological) innovation also plays an important role in manufacturing industries as well. Moreover, organisational innovation increases progressively with the size of enterprises. Even if small firms are less engaged in organisational innovation, in relative terms, their role and impact can be higher in terms of driving innovation outputs. The insight that service innovations have important non-technological aspects may be of great value for security organisations. Since most of these organisations do not produce technologies themselves, but focus rather on services, the potential use of ServPPIN’s results for InnoSec is promising. In this, security organisations can benefit from service innovations by focusing on non-technological and organisational aspects of the innovation process, putting emphasis on methods, actions and movements of each individual involved.
3.4.2 VersO - Collaborative Service Development in Networks http://www.vtt.fi/sites/verso/?lang=en The project is carried out by VTT Technical Research Centre of Finland and Turku School of Economics. Other partners include HAMK University of Applied Sciences, SME Foundation, and international research partners such as The Service Research Center at Karlstad University and Manchester Business School. Companies participating in the project include Empower Oy, Machinery Oy, Ramboll Finland Oy and Salomaa Yhtiöt Oy. Service development within business networks are a recent topic within the literature on service development. The VersO-project investigates collaborative service development in business networks. The focus is on innovative, knowledge-based service concepts in trade, industrial services and KIBS-companies. The aim of the study is to indicate factors that facilitate collaborative service developments in networks and identify challenges related to these. The project contributes to the service innovation research by increasing the understanding of the nature of networked service development in B-to-B networks. Regarding the methods applied, the project applies a network approach to the study of new service development. Practical development projects in participating companies provide a basis for case studies. In detail, a multiple case study methodology of collaborative service development projects was applied. Thereby, two case-study companies were chosen which represent large conglomerates that have expanded through acquisitions. Data is collected through extensive qualitative interviews and participant observation. The research questions are:
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How can B-to-B networks contribute to developing new knowledge intensive business services? How are information and knowledge created, shared and used in networks when creating new innovative services? Which factors facilitate collaborative service development in networks? What kind of obstacles are there to tackle? What kind of resources and knowledge are needed when developing services in B-to-B networks? What kind of collaboration models and methods can be used to organise and manage new service development in networks? How to systemise and enhance the emergence of new ideas? The results reveal that both the factors enhancing as well as the challenges of collaborative service development are convergent and divergent. On the one hand, a convergent and important challenge is the data transfer and the knowledge sharing within the networks. Further challenges include, among others, the intransparency of the development processes, the excessive protection of a firm’s developments within the network, a limited innovativeness, thin resources devoted to service development, and the time management. On the other hand, a convergent factor enhancing the service development is the combination of resources. Moreover, enhancing factors comprise customer orientation, a wide range of expertise within the companies and the opportunities to join them, and the will to develop services. The knowledge, skills and capabilities within the network are supposed to enhance service development, but the uneven knowledge transfer seems to be a barrier. Another divergence between the previous research and the project’s results is customer orientation: If customers are taken into consideration by the companies, the development process is seen as a clear enhancer. The VersO results offer potential use for InnoSec, insofar as the project develops models and methods for collaborative service development across organisational boundaries. Security organisations may benefit from the new knowledge regarding the networking methods that can be used to organise and manage the development of service concepts, and to renew business practices. Further, the study identifies potential development paths for new service concepts in different kinds of B-to-B networks.
3.4.3 Information Technologies supporting the Execution of Innovation Projects –ITEI http://www.itei-itea2.org/; http://www.itea2.org/itei_innovation_report Jose Antonio Heredia Alvaro (Project Manager) The ITEI Project consortium consists of companies and research institutes from Spain, Finland and Belgium: Belgium: Indie Group, Mentis, Sirris, Spikes, Steria Finland: Inno_W, Metso Automation, Movial CT, Nokia Siemens Networks, TSG-TestSolutions, University of
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Oulu, VTT Spain: Answare, Auraportal, Carsa, DS2, Estrategia y Direccion (ED), ESI, Innovalia, Integranova, Keraben, Robotiker, Sisteplant, Trimek, Universitat Jaume I (UJI), UPV The major goal of the ITEI project is the realization of a concept of a Cyber Space for Product Innovation and Innovative Software Development. Its sub-goals are: ◦To assist software intensive product builders in selecting and tailoring the most appropriate innovation strategy depending on their context. We envision an approach by which each organization can define or select a suitable strategy, considering parameters such as type of innovation, partnership models, product complexity, available expertise, degree of maturity&hdots; ◦To assist software intensive product builders to better manage the execution of its innovation projects in a swiftly changing development environment, monitoring and updating the status and progress of the projects and obtaining the necessary and sufficient knowledge to enable quick response and decision making concerning the project performance and business goals. ◦To assist builders to understand the new business opportunities offered by open innovation and web 2.0 technologies for their products. ◦To include appropriate facilities, support and tools for product innovation, innovative project management and continuous improvement of the company-specific cyber rooms. Supporting the goals, the technological objective is to develop a software environment (Cyber Room), through which the connected applications (existing workflows, groupware, business intelligence, innovation fostering games, project management tools, etc.) will be able to exchange and synchronize management models and performance data. Software innovation is multifaceted and the approaches used by companies can be very different. The ITEI project took the assumption that there is no such thing as a universal software engineering process or innovation process. ITEI partners developed seven new tools to support the approach, some of which are already being commercialised. These tools either support different aspects of innovation, such as advancing idea management, or take a more comprehensive approach to cover all the innovation processes: company strategy, managing all the people involved in innovation and commercialisation. Concrete examples of the ITEA project’s results include: The AuraPortal web-based innovation process management system – a software platform offering fully integrated enterprise-essential applications; The Inno-W Innovation Hub system which provides a single navigation point for data related to innovation management; and The Indie Group CogniStreamer collaborative tool which supports network-centric innovation based on Web 2.0 social software tools and technology.
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Open innovation portal: An on-line portal has been established for product innovation and innovative software development going beyond the ITEI project. SinnoBok.Org will be used to disseminate the practices towards the broader industry. It is important for European companies to adopt these insights to have a real impact. ITEI partners are already transferring their knowledge to other companies through training, presentations and webinars. Moreover, while the focus was on software, the partners are now thinking how to extend this approach to other industrial sectors including services. Moreover, the tools developed are already being used in other sectors. The book “The art of software innovation” (Pikkarainen et al. ed., 2011) is based on research made in the Itea2 program. Pikkarainen et al. (2011) put together their framework of software innovation from eight practise areas: optimizing, openness, crafting smart products, idea harvesting, idea valuation, focusing, innovation incubation, and innovation stimulation. Linkages of these are illustrated in the figure below. Figure 17: Linkages of the practice areas of the art of software innovation (Pikkarainen et al. 2011)
Source: Pikkarainen et al (2011)
The model of software innovation introduced in the book is a state-of-the-art model of innovation. It includes elements that are not included in the innovation models developed in the last century. Although the model is developed for software innovation, it may include novel elements that would be valuable also for other kinds of innovations. Software innovations are relevant also in the field of security. Furthermore, because of the novelty, the model may offer valuable insights also for the management of innovation in general.Leveraging the use of ICT to foster the creativity and productivity of software intensive product builders and service providers.
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3.4.4 FORESEC – Europe‘s evolving security: trends, drivers and scenarios http://www.foresec.eu/wp3_docs/Foresec_report.pdf
Project lead: Crisis Management Initiative (CMI, Helsinki) The consortium consists of six research organizations: Lead: Crisis Management Initiative (CMI, Helsinki) Partners: Austrian Institute for Technology (AIT , Vienna), Centre for Liberal Strategies (CLS, Sofia), International Institute for Strategic Studies (II SS, London), Joint Research Centres (Ispra, Italy) and Swedish Defence Research Agency (FOI, Stockholm) The FORESEC project is a European wide participatory foresight project on Europe’s evolving security landscape. engaged in this effort with the main objective to tie together multiple threads of existing work on the future of European Security. FORESEC tried to identify security responses in which there is particular added-value and shared interest to work at the EU-level and thereby help foster a societal debate on European security and security research and nurture an emerging EU security culture.
3.4.5 Innovation Futures - INFU http://www.innovation-futures.org/
The INFU project addresses newly emerging innovation patterns. Several new ways of organising innovation activities such as “open innovation” or “community innovation” are currently emerging in economy and society. While these have been discussed intensively in recent years, there is little systematic exploration of their potential for different sectors and areas and the implications for economy and society. For the first time, a foresight project has been conducted to analyse and discuss the emergence and diffusion of new innovation patterns and their implications for European policy. The INFU project is a foresight project employing various methods such as scanning signals, organising expert panels, conducting interviews, and building and visualising scenarios in order to construct plausible, relevant long-term scenarios of future innovation landscapes. Foresight activities emphasize the systematic exploration of future dynamics and the importance of interaction between actors from different constituencies in the respective innovation system. Foresight is a method of prospective analysis and informed decisionmaking that includes long- to mid-term considerations of likely, possible, or even just conceivable futures (Miles, 2008). Foresight hence does not want to prescribe the future, but aims to initiate a critical debate about possible future developments. The main research questions of the project were:
What are the most likely patterns for how innovation will be organised in the future?
What are the implications of new innovation patterns for the economy, society, and the environment?
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How do major socio-economic factors such as demographic changes, environmental threats, and urbanisation affect the likely development of the European innovation landscape?
What are the implications for frameworks conditions (such as Intellectual Property Rights)?
How could policy makers, interest groups, and companies exploit the potential and reduce the risk associated with new innovation patterns?
The INFU project started by identifying emerging signals of change in current innovation patterns. These signals were identified through a review of academic literature on innovation and by scanning various media such as newspapers, magazines and the Internet. The aim was to identify newly emerging apparent and visible innovation patterns that have not yet reached the mainstream and may have disruptive impacts for industry, the economy, and society in the future. The resulting collection of ‘signals of change’ are innovative examples of how private and public organisations organise and manage innovation in Europe and around the globe. Based on the collection of ‘signals of change’, we developed 20 visions of new innovation patterns (“innovation visions”). Each vision describes how one or several similar signals could indicate a change in the process of creating, developing, and disseminating innovations in the future. These visions were derived from the signals by means of “signal amplification”. This was a creative process, often involving the combination of multiple signals to develop coherent and sometimes provocative pictures of possible future innovation practices. Thereby, the team transferred an idea already applied to other sectors or generalized a signal considered to become a mainstream innovation practice. To provoke discussion, some visions were brought to an extreme. In addition, the team conducted interviews with experts from industry and academia and organised an online-survey to discuss and assess the innovation visions. On the base of the assessments, eight consolidated visions (“nodes of change”), which are clusters of similar visions, were elaborated in mini-panels by self-organised expert groups. Experts and stakeholders across Europe were gathered in small focus groups to create visions of future innovation patterns around these critical aspects of change and debate relevant drivers and barriers of these visions (see also map for the location of panels). These consolidated visions were then confronted with different possible socio-economic framework conditions and global mega-trends in order to finally synthesize consistent scenarios which integrate micro, meso and macro elements of possible innovation futures with particular emphasis on changes in the nature and content of research. New innovation patterns may have diverse impacts which include, amongst others, new innovation schemes for production patterns (distribution and location of production), ii) environmental impact of new innovation patterns, and iii) implications of new innovation forms for regulatory framework conditions. Based on moderated group discussions implications with respect to key societal challenges and policy goals are discussed. Some of the above mentioned reviews of new forms of innovation are based on the INFU work and particularly Jegou et al. (2010). 58
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3.4.6 Vision ERA Net – Policies for Open Innovation This project studies policies for open innovation funded by the Era-Net Programme (de Jong et al., 2008). The study analyses a number of strategies in some selected European countries to support open innovation. The report for instance, recommends to support collaboration, networking, and corporate entrepreneurship to foster open innovation. These elements are then further elaborated by defining 21 guidelines. These cover issues such as the promotion of user innovations, the provision of a high-quality IP system, enabling the creation of venture capital markets, fostering entrepreneurship education, the promotion of spin-offs, the support of open innovation processes in government procurement, but also the ongoing promotion for conducting R&D by companies via traditional financial incentives (e.g. tax credits). 3.4.7 User Integration in Manufacturing – UCIM We address this issue by providing results from an international research project funded by the European Commission within the 6th Framework of Research Funding: UCIM (User centered and manufacturing). Departing from the considerations outlined above, the UCIM project aimed to explore pathways towards user centered innovation models likely to underpin competitive and sustainable manufacturing in Europe. On the base of these insights UCIM was expected to propose policy activities in support of promising options and in particular to suggest priorities for future EU research funding in the area of industrial technologies. Currently, literature dealing with user innovation hardly addresses policy issues and if so is focusing on specific questions related to either technical or organizational issues. UCIM was adopting an integrated perspective focusing on the interplay of technical, business, social and economic factors. The project comprised four main consecutive stages: First, a typology of approaches of user involvement in manufacturing industry was developed. Based on this typology, possible future situations of user involvement were drafted and discussed with experts and stakeholders from different fields. Building on these assessments more comprehensive scenarios were developed for two industries (furniture and machine tool sector). Later these scenarios were generalised into four more generic visions applying to a broader range of sectors. In a next step a roadmapping approach was used to identify crucial enabling elements for the realisation of these scenarios. Finally, UCIM developed policy recommendations suitable to foster pathways towards desirable scenarios and suggested complementary research priorities. The project shows that in order to realize a customer driven innovation approach, manufacturing needs to undergo a major transition involving a number of diverse aspects. New manufacturing approaches such as “personal fabrication”, "user manufacturing" or “fabbing” and “desktop manufacturing” are emerging in connection with user innovation, often involving new technologies such as advanced simulation techniques and new generations of rapid manufacturing technologies.
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The UCIM project has highlighted how the involvement of users by manufacturing industries requires systemic innovation involving a number of diverse elements not only on the company level but within wider socio-economic framework conditions. It is obvious that this complex process cannot be initiated by research policy alone, but requires a concerted proceeding between policy actors concerned with issues such as innovation, industry, regional development, consumer protection, education, and information society. Therefore, most of the recommendations discussed by UCIM require co-operation and co-ordination between policy actors from different realms and on different levels. At the same time policy is only one of the many actors shaping the arena of change. Successful governance will require alignment of visions and strategies of actors from industry policy and civil society. 3.4.8 Public Sector Innovation – PUBLIN A range of studies and publications on the development of new products, new production processes and new behaviour in market-based companies have contributed to understanding the main processes underlying social and economic change in modern economies. It is therefore quite surprising that the innovation literature has almost completely neglected what is in fact a major aspect of all European economies: Innovation in the public sector. The main objective of PUBLIN was to develop a consistent and general basis of understanding of the main processes of public sector innovation and policy learning. These results have been amended by other systematic insights on public sector innovation from recent studies and projects on the topic, e.g. from a recent publication handbook on Innovation in Public Sector Services (Windrum, 2008) and an ongoing project on public sector innovation in Australia (DIISR, 2009). Generally, activities by public organisations and institutions are mainly seen as either providing the regulatory frameworks for innovation activities or as more or less passive providers of inputs to private sector innovation, or as recipients and users of innovative products generated by a “private sector” of market based agents. But the role of public sector activities is more important than this – more important for socio-economic development and for the achievement of the welfare objectives that underpin the goals of public activities and policies (Koch and Hauknes, 2005). The PUBLIN project describes the differences between the public and private sectors with regard to innovation (Halvorsen et al., 2005): Public organizations are typically the primary supplier of services and do not compete in order to maximize profits. This lack of competition is widely held to mean a lack of incentives for improvement. At the same time, the notion that the connection between a firm’s behaviour and economic reward is the central and in fact only driver for innovation is too simplistic. Public sector workers may be motivated to innovate through idealism, the joy of creating something new, an intense interest in the topic at hand, career ambitions, etc. Thus, one obvious difference between the public and private sectors is that the public sector is not profit driven in the business sense. However, the motivations for innovation found in the public sector are probably also present in private firms. The fact that public institutions are not profit driven should not lead to the belief that public sector employees and 60
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managers are not concerned about financial matters. As is the case within private companies, public sector units and organisations also fight for funding and influence. Another factor that differentiates the public sector from the private one is the unit of analysis. Apart from publicly owned companies, most public institutions are part of a larger chain of command and control where it is harder to draw a line between the different parts of the system – and where legal frameworks provide little help in doing so. For instance, public agencies – like research councils or directorates of health – interact closely with ministries as well as subordinate institutions and “users”. The innovation activities in these institutions are heavily influenced by decisions made above and below in the chain of command. The closest parallel in the private sector are large conglomerates or multinational companies. Another important difference is that the political aspect is much more relevant in the public than in the private sector. Policy decisions normally affect companies indirectly, through laws, regulations and financial support. The public sector is, at least formally, controlled by elected politicians. The intimate link between this governance dimension and the funding of current activities implies a very strong link between ownership and control on the one hand and the growth strategies of the subsidiary organizations on the other. Innovation processes in the public sector normally involve both the service level, i.e. front end service providers (e.g. hospitals, schools, police departments, agencies, etc.) and the policy level with its policymakers (civil servants and politicians in regional administrations, councils, ministries, etc.). Therefore, public sector innovations can be structured along these two levels (Halvorsen et al., 2005; Windrum, 2008): PUBLIN has mapped different types of barriers to and drivers for innovation, i.e. phenomena that hinder or encourage innovation activities in such public institutions (Koch and Hauknes, 2005). Among the most important barriers to public innovation are size and complexity, professional resistance, risk aversion, and the absence of capacity for organisational learning. Against this background it becomes clear that the innovation endeavour in the public sector is very complex and challenging, comprising different forms, realms and aspects and including barriers to overcome and the drivers required to do so. This insight calls for a systemic approach, looking at public sector innovation as an assembled set of services, each of them forming part of the whole which has to be improved and developed. 3.4.9 Intellectual Property in Open Business Models – IPOB http://www.vtt.fi/proj/ipob/ IPOB was a collaborative research project co-financed by Tekes – the Finnish Funding Agency for Technology and Innovation. The main research partners of Innorisk were VTT Technical Research Centre of Finland and University of Eastern Finland. The project coordinator was Dr. Jaakko Paasi, VTT. In addition to the research partners – VTT and Univ. Eastern Finland, there were six companies involved in the work: Arcusys, Blancco, Medisize, Outotec, Tamlink and Sandvik. Furthermore, the research was based on a
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large interview study of inter-organizational innovation practices where 40 innovative organizations in Finland and in the Netherlands were interviewed. The organizations represented different sizes and fields of business. The work targeted to increase understanding on how knowledge and IP should be managed in open and networked innovation between different organizations. The work bridged and aligned networked business, IP management and contracting aspects of a firm to support the business goals of the firm through opening of innovation. The study starts from the strategic level and then goes to the implementation through practices and actions. The results of the project are summarized in two books: a text book (Paasi et al. 2012a) and a workbook (Paasi et al. 2012b). Figure 18: Elements in the workbook of opening innovation (Paasi et al., 2012b)
Source: Paasi et al.
The work is based on state-of-the-art findings of practices in innovative organizations
Typical applications
Open questions
Impact for InnoSec
Much of innovation in security organizations takes place in inter-organizational relationships. The results of IPOB will give practical guidance for the management of interorganizational innovation.
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3.4.10 Innorisk http://virtual.vtt.fi/innorisk Innorisk was a collaborative research project co-financed by Tekes – the Finnish Funding Agency for Technology and Innovation. The main research partners of Innorisk were VTT Technical Research Centre of Finland and Åbo Akademi. http://virtual.vtt.fi/innorisk Innorisk model is aimed to support firms in managing innovation by giving support in the decision making at critical stages of innovation process. It is focused to the front end of innovation because most of the choices and decisions related to the future success potential of innovation are done in the front end. The Innorisk model utilizes the new concept development model of Koen et al. (2001), foresight methodologies and risk management techniques. The principles of open innovation are built in into the model. Figure 19: Innorisk model (Paasi and Valkokari, 2010)
Source: Paasi and Valkokari
During the project the model was applied in a few firms in real new innovation development cases. Innorisk model offers one potential frame for Innosec, with a special emphasis to the front end activities of innovation. The front end process may be adapted also independently from the holistic standpoint of Innorisk to Innosec.
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3.4.11 SELUSI – Social Entrepreneurs as Lead Users for Service Innovation http://www.selusi.eu/ The project studies the market- and organisation-level behaviours of social enterprises across Europe. The focus is laid on the specific knowledge that social entrepreneurs can contribute to processes of service innovation of mainstream businesses. Thereby, it is asked in which way this expertise can be leveraged to help boost the competitiveness of Europe’s services sector. The collaborative research project is carried out by a consortium which includes the academic partners Catholic University of Leuven, the IESE Business School (Navarra), the London School of Economics and Political Science, SITE at Stockholm School of Economics, the Harvard Business School, as well as the non-academic institutions ipropeller, NESsT, The Hub and the Global Institute. The methods applied include an in-depth survey. Thereby, respondent-driven sampling was chosen in order to capture the population of interest, since social enterprises’ identity cannot be readily retrieved from telephone directories or administrative databases. In doing so, a large-scale panel database on social enterprises across Hungary, Romania, Spain, Sweden and the UK was build. Further, action-research experiments were conducted in order to study how the specific knowhow of social enterprises can be effectively sourced in by mainstream companies to help identify and shape workable new social business service innovations. These two empirical methods (survey and action-research) were complemented with case study research and lab experiments. The results reveal that social entrepreneurs are much more likely to have introduced newto-the-market innovations in goods, services or processes over the past 12 months before the survey compared to commercial entrepreneurs. Furthermore, the study found that twothirds of all innovations were service related and that overall 57% of social enterprises were at the time of starting-up and entering into new market niches. Strikingly, the study demonstrates that the value orientation of social entrepreneurs tends to be systematically different from that of mainstream entrepreneurs. In detail, social entrepreneurs attribute significantly more value to universalism and stimulation, while power and conservation are valued less compared to mainstream businesses. Moreover, corporate employees and social entrepreneurs contribute with qualitatively different ideas in response to same challenges. When it comes to developing services, social entrepreneurs rely on an integrative approach to problem-solving, where the focus is particularly laid on the question of how to achieve sustainable behavioural change. The SELUSI results offer potential use for InnoSec, insofar as security organisations can benefit from social entrepreneurs’ unique approach by using them as sources of information on societal trends and on requirements for sustainable behavioural changes.
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4 4.1
Case Studies Analytical Model InnoSec
The case studies are based on a conceptual framework focussing on the organisational strategy, the innovation strategy and in particular the innovation management processes at the organisations studied. Furthermore the organisational characteristics, culture and the external operating environment of the organisation were taken into account. Against this background the case studies were structured along these lines, starting with an analysis of the operating environment followed by the organisational strategy. While these analyses are necessary to understand the innovation processes and practices, the case studies emphasize the innovation strategy and in particular the innovation management processes and practices in the organisations. Figure 20: Analytical model of innovation management
Organisational strategy
Organisational characteristics
Innovation Strategy
Organisational / Innovation culture
Innovation management process (Environment) search, monitoring and identification (researchers)
Evaluation and selection (procurers, users)
Adoption, adaptation and implementation (users)
Learning, feedback and interaction (users)
Source: own depiction Figure 20 illustrates the main building blocks of the conceptual framework and their relations. The conceptual framework was jointly developed for the analysis of the case
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studies in non-security organisations presented here and the case studies in the security sector (see InnoSec deliverable D1.1.).
4.2
Selection of Cases
The task in this work package was to study the innovation processes of non-security organisations to derive implications and lessons learned for the development of a modular innovation (management) model for the security organisations, the InnoSec model. By non-security organisations we understand organisations (or departments or groups of organizations) that do not have any security missions for their organizations. In order to have a broad set of current innovation and innovation management practices the case studies were selected to have a high variety in terms of sectors, countries and size of organisations. With regard to sectors, the organisations covered by the case studies are from various sectors, which are to a large extent (or regarding certain characteristics) comparable to the security sector. The organisations included in our sample are located in 8 countries, whereas their operations take place in these countries, other European states or on a global scale. Moreover the number of staff of the organisations studied varies from 5 to more than 100.000 employees, with a focus on organisation with several hundred employees. Table 2 provides an overview of the organisations included in our sample.
The names of the organisations are withheld by mutual agreement; however the detailed case studies including the names of the organisations are included in a confidential annex to this report. The reason for the confidentiality can be found in requests by participating organisations, since essential parts of the information provided for the case studies conducted are classified as being confidential.
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Table 2:Overview of the case studies Acronym of organisation
Country
Sector
Size of organisation
Importance of innovations for organisation
Formal innovation strategy?
Dedicated innovation or R&D department
Role of technology for organisation?
ORG1
Germany
Automotive, OEM2
More than 100.000 employees
high
yes
yes
high
Austria
Development & production of medical equipment
~ 300 employees, part of a multi-nationalcooperation
high
no
yes
high (80% product innovations, 20 % process innov.)
ORG3
Austria
Development & production of voice communication systems
~ 700 employees
high,
no
yes
high
ORG4
Canada/Austria
Automotive, supply company
~ 112.000 employees
high, increasing
yes
yes
high
ORG5
Switzerland
R&D, development cooperation
~ 400 employees
high
no
yes (whole team R&D focussed)
medium, decreasing
yes
no innovation network/teams within organisation
medium
ORG2
ORG6
2 3
Germany/Austria/ CEE3
Transport & Logistics
~ 5000 (South Eastern Europe)
high
OEM: Original Equipment Manufacturer CEE: Central and Eastern Europe
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Acronym of organisation
Country
Sector
Size of organisation
Importance of innovations for organisation
Formal innovation strategy?
Dedicated innovation or R&D department
Role of technology for organisation?
ORG7
Finland
Health
300+
medium, increasing
no
no
medium/high
~ 80 employees
medium/high, often not considered innovation
no
no
high
no
no
medium/high
ORG8
Finland
Health
ORG9
Netherlands
Health
~ 3000 employees
medium, focus on reliability and patient safety
ORG10
Netherlands
Construction engineering
~ 120 employees
medium
?
yes
high
ORG11
Belgium
Chemical and Plastics
~ 30.800 employees
medium
?
yes
medium/high
ORG12
UK
Design services
~ 30 employees
High; innovation is its business
No
Yes; innovation is its business
high
ORG13
UK/Ireland
Business services
900+ employees
high/medium
no
no
low/medium
ORG14
UK
Health
~ 6600 employees
medium, aim to increase
yes
no
medium/high
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4.3
Findings from the Case Studies
In the following the main findings from the case studies are presented and discussed. Detailed case studies including names of the organisations can be found in the (confidential Annex to this Document).
4.3.1 Organisational and Innovation Strategy The organisational strategy differs between the organisations almost by definition, since they are operating in different sectors, countries and positions in the value -and innovation chain. However, in particular with reference to the role of innovation for their strategies a large majority of companies interviewed acknowledged the important role of innovations for their organisations. Furthermore the importance of innovations was described as increasing, especially in those organisations where innovation did not play a major role in the past. Despite the acknowledgement of the significance of innovations it surprises that most companies do not have an explicit innovation strategy. However, since at least some of the organisations without an innovation strategy appear to innovate quite successfully the necessity of an innovation strategy remains ambiguous. Nevertheless the general acknowledgement and approach towards innovation is already embedded in the overall strategy of the organisation, so there is probably no need for an explicit innovation strategy in some organisational contexts. Remarkably the value of innovation was reported to decrease in one case (ORG5), which can be explained by the specific context of the organisation, being a Research & Development organisation. In this case the organisation has developed an innovation and is currently being transferred into an operational mode better suited to support the further diffusion of the innovation. Generally speaking innovation was considered decisive to differentiate the products and/or services of the organisation from its competitors. Nevertheless innovation activities are sometimes not labelled as innovation activities since they are regarded to be part of the daily operations of the organisation. Similar to security organisations (see InnoSec Deliverable D1.1 & D1.2) most organisations focus on “proven” technologies, or related to a modest level of uncertainty. Just in a few cases organisation experiment with radically new technologies. This could be observed mostly in cases where the company was intending to develop and produce the technology respectively the products based on it. The focus and reliance on proven technologies can be observed in particular in the health care sector. However, some organisations (e.g. ORG4) are currently trying to move away from their position as an innovation follower focussing on proven technologies to become an innovation leader in order to improve their long term competitiveness. In some cases even service providers engage in technological product development activities. In case of organisation 14, no technological solution was fitting to the needs of the organisation and its customers, so the organisation actively engaged in product development activities to develop a tailor made product.
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4.3.2 Innovation Management Practices
The innovation management practices we found in the broad sample of organisations were ranging from relatively systematic and standardized practices to very flexible and on-demand innovation processes. Remarkably we could observe the general trend, that organisations have developed relatively sophisticated and systematic innovation management practices concerning the search and identification processes, whereas standardisation decreases in other phases of the innovation process. The reasons are manifold, however there seems to be less necessity and opportunities to standardize innovation processes beyond the search phases (with the exception of organising learning & feedback) due to the nature of innovation processes. Since innovation processes are by definition future oriented and dealing with new and often risky topics and issues, opportunities to standardize innovation processes without sacrificing creativity and flexibility. Many organisations have an innovation or R&D department respectively a person/team within the management which is responsible to organise the innovation processes the company is involved in. These processes encompass in most cases not only networks internal to the organisations, but as well external networks.
Search, identify new ideas & technologies
A major finding of the case studies in the non-security sectors is that hierarchies can be an innovation barrier especially with regard to the search and identification of new ideas and technology. In particular routine communication procedure can act as an innovation barrier. The reason behind that is that for an innovation idea in order to be forwarded the person in charge has to favour the idea, otherwise it will not be forwarded. Thus, in hierarchical organisation just one person which is not in favour of the idea can stop the information flow, although a large majority may be in favour of the idea. Thus, many organisations implemented idea management systems to provide the opportunity to communicate new ideas. These systems are often supported by IT tools to keep the administrative burden as low as possible. However, the implementation of such an IT tools requires more than just the technical setup of such a system, for instance the specification of responsibilities and activities to encourage employees to use the system. Furthermore a high level of transparency was mentioned as being important to achieve acceptance within the organisation. Some organisations studies used dedicated workshops bringing together experts from a unit or different parts of the organisation together to identify new ideas and technologies. The integration of (lead) users in search processes can be considered another meaningful tool to identify new ideas and technologies for innovation. Moreover the organisations studied use tools and method like market research, patent analysis, analysis of competitors and identification of good/best practices. Furthermore in particular larger organisations try to identify mega trends in the society and/or key industries and technology and derive implication 70
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for their organisation and innovation activities. In particular the analysis of trends regarding the industry organisations are operating in and technological trend analysis is taking place in large share of organisations. In addition basic research can provide crucial ideas for future innovations. Thus some organisations have developed a more science driven idea identification process, in particular those organisations which products and services rely on science and technology. Nevertheless one case study showed that (social) science driven innovation can make sense as well for development of low tech innovations. Besides these methods and tools formal and informal networks play a crucial role in almost all organisations studied. These networks can be on a very local level, but also at a global scale. Thus, trade fairs and meetings with different stakeholder groups are considered to be an important source for new ideas and technologies. Another important source for new ideas and technologies are professionalists and their expertise and networks. A more classic source of new ideas and technologies, but nevertheless important, are technology suppliers. Even though must organisations have to adapt technologies later on together with technology suppliers, in some cases organisations buy new technology “off the shelve”. However, such a new technology frequently requires organisational innovations. Other organisations use sophisticated concepts like Lean Six Sigma, a management approach aiming to improve products and avoid the emergence or persistence of inefficiencies.
Although a large number of methods and processes to identify new ideas and technologies have been identified through the case studies, innovation processes in most of the organisations studied lack a systematic approach in their everyday business, probably excluding idea management systems. Often even very successful and innovative organisations rely on informal search processes and their innovation culture. Thus, it seems to be of utmost importance to encourage employees to develop and communicate about new ideas and technologies. Still many ideas for subsequently successful innovations developed rather ad hoc, than in formalized innovation processes.
Evaluate and select new ideas & technologies
The evaluation of new ideas and technologies is organized in different ways in the organisations studied. However many representatives emphasized the importance of transparency concerning evaluation and selection processes. In case employees cannot understand who eventually evaluated and probably rejected their proposal, it will most likely frustrate employees and they will not develop and communicate ideas in the future. Some organisations integrated the evaluation and selection process in their idea management system. In doing so it appears to be important to pre-define who will evaluate the idea and in particular who will be responsible to proceed once an idea or technology was selected to be developed further.
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In addition organisations have more or less formal definitions of quality criteria and/or guidelines against which new ideas and technologies are evaluated. These criteria may differ with regard to the budget and capacities which would be necessary to develop a certain innovation. Furthermore a pre-defined matrix can be used by evaluators including a list of criteria and their importance to reduce the workload of evaluators. The use of a pre-defined matrix can also be mandatory in order to ensure an adequate level of transparency. Other organisations have more general problem oriented selection criteria. An organisation studied within the field of water drinking water provision evaluates new ideas and technologies based on the question if they potentially can contribute to the provision of drinking water for poor households in developing countries. When it comes to more complex ideas and technologies almost all organisation set up teams of experts from different departments and backgrounds. This may includes as well external experts (customers, scientists, suppliers, civil society, etc.). A tool which is used by organisations is the implementation of requirement workshops to develop requirement against which the innovation idea is eventually evaluated. In order to take a final decision on the innovation in particular private companies aim to conduct an early cost and benefit pre-assessment which focuses on costs, benefits and the time frame. Customers/users could be included at such an early stage to gather more precise information about the potential benefit the innovation could provide to customers. Generally speaking most organisations studied apply a multi stage evaluation and selection process including a pre-evaluation (included in the idea management system) and pre-filtration by experts. If the idea or its implementation/the development of the innovation and its effects are more complex the further assessment is done by an expert jury/working group. Final decisions in case only minor investments are necessary are regularly taken by operational managers while other decisions requiring large investments are taken at the executive level or even at the level of the supervisory board/the owners. Adopt, adapt & implement new ideas & technologies
The adoption, adaptation and implementation processes are generally characterized by a higher degree of flexibility than the identification and the evaluation processes described previously. Many organisations reported that there is on the one hand less need for standardized innovation processes and on the other hand there are fewer opportunities for standardization due to the nature of innovation processes in contrast to routine operations. Nevertheless clear responsibilities, probably already defined during the evaluation make sure that the implementation of innovative ideas is delayed or that innovation projects “die silently” since nobody feels responsible to develop them further. Moreover the implementation of monitoring processes concerning the progress of innovation projects in terms of maturity and quality were mentioned as being in particular important for the management of the innovation process. Concerning the actual implementation of innovations a large number of organisations use stage gate or similar forms like modular projects including midterm (or even more frequent) evaluations. In some cases organisations used the “normal” project format of their organisation 72
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for innovation projects. Furthermore “normal” management methods are applied to operate innovation projects. While these formats and methods appear to work relatively well for incremental innovations, they turned out to be problematic for more radical innovations. As a general pattern we observed, that external partner become more important during the adoption, adaption and implementation of new ideas and technologies. Most organisations organized their innovation processes based on innovation networks, in particular in cases the organisations had now dedicated R&D department. If they have not been consulted already before suppliers and customers, authorities (if permits or a change in legislation is required) and/or social scientists (to assess e.g. the acceptance of effects of a certain innovation) are integrated in the innovation process at this stage. To integrate customer perspectives a number of organisations identify lead customers and integrate them in their innovation processes, for instance by providing prototypes to experiment with them and provide feedback to the developers. These feedback loops can be informal or pre-defined.
Learning and feedback
Learning and feedback processes are regularly only weakly developed and implemented. Many organisations reported that there are no systematic procedures or defined processes in place to systematically facilitate and enable learning and feedback. Often feedback is just provided mouth-to-mouth and only in case of problems written reports are compiled. However we could identify several methods and tools to enable learning and feedback: A number of organisations have implemented formal feedback processes and a permanent internal evaluation of processes and results of innovation activities. This may includes the benchmarking of the organisation’s innovative performance in comparison with its main competitors, post-project reviews, dedicated meetings focussing on lessons learned or a scientific monitoring by consultants and/or social scientists. Another option to enable learning is to extend the coverage of the idea management system, by integrating ideas to improve innovation processes as such. However, some cases show that learning and feedback can be an integral part of all stages of the innovation process. In particular science driven organisations (uncertainty high, hardly any routine operations) appear to acknowledge permanent learning and feedback within the organisation and by advisory boards or the like. Nevertheless one has to take into consideration that such processes may be relatively resource intensive. Though they may provide crucial input or avoid making expensive or even dangerous mistakes. The diffusion of knowledge about successful innovation projects and processes was identified as being insufficient in several organisations studied. Thus, these organisations have developed attempts to improve the learning between different innovation teams or departments/branches of the organisation. More concrete tools are networking events, the selection of innovation champions, reports and newsletters and the setup of databases including information about successful innovation projects. One specific example is the development of an innovation map: This innovation map covers all innovation projects conducted in the – in this case multinational company – to enable learning and to stimulate the 73
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imitation of successful innovation projects or practices in other parts of the organisation (other departments or the same department in other country).
Table 5 gives an overview of important innovation management methods employed and used by the examined case study firms.
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Table 3: Interesting innovation management practices Innovation management practices Search, identify new technologies & ideas
Evaluate and select new ideas & technologies
ORG1
Trend analysis, foresight and forecast methods, technology monitoring, especially customer analysis
Bases on a number of quality criteria the most promising ideas are selected and the maturity of the innovation is estimated. Early involvement of customers
ORG2
Lead users, no formal in-house idea management system but company culture open for ideas by employees, patent, literature, and competitive analyses, the latter one also supported by other GE units
Assessment of costs and benefits,
Adopt, adapt & implement new ideas & technologies
Learning & feedback
Transferability to security sector
Monitoring in terms of innovation quality and innovation maturity.
Permanent internal evaluation of processes and resulting innovations. Benchmarking of innovative performance with competitors
Transferable to security sector, strong focus on future user requirement including systematic trend analysis and close cooperation with customers, regulation seen as barrier for innovation
Post-project reviews
Transferable to security sector, importance of customer involvement, identification of lead users, institutionalised learning culture, understanding rationales of regulations if not possible to influence them
Modular structured projects, Stage gate process
Remarks
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Innovation management practices Search, identify new technologies & ideas
ORG3
ORG 4
workshops and technology-specific meetings, no systematic monitoring
Analysis of mega trends, key industries, legislation, product, process, technology trends Idea management system
Initial impulses from basic research ORG 5
Evaluate and select new ideas & technologies
Learning & feedback
Transferability to security sector
post learning meeting
Transferable to security sector, importance of work in standardising committees , importance of customer involvement, identification of lead users transferable to security sector, apparently working in a complex setting, opening of innovation process intended, could be problematic for sec. organisations
Small team of experts
Not standardized, classical project management methods used
Idea management system: Pre-filtration, specialist assessment, expert jury
Depending on the nature of the idea: development at universities, RTOs or internally, stage gate process
No specific processes in place
Inclusion of social scientists to improve implementation phase
Integral part of all stages of the innovation process, different levels of learning (local to global)
Ongoing projects
Problem oriented selection criteria (idea has to improve provision of drinking water)
Informal & formal networks
Need for innovation on a general level important
Science driven
Adopt, adapt & implement new ideas & technologies
Reliance on existing partners for innovation activities
Scientific, independent monitoring (social scientists)
Remarks
Challenges:: resistance against external ideas, opening of innovation process
Science driven approach (publications) h including cooperation with external partners probably problematic Scientific and interdisciplinary monitoring of innovation processes useful
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Innovation management practices
ORG 6
Search, identify new technologies & ideas
Evaluate and select new ideas & technologies
Sources: customers, suppliers, internal
Idea management system: evaluator, clear responsibilities defined, transparency crucial
Idea management system Trade fairs & meetings No defined processes, ad-hoc basis
ORG 7
ORG 8
Professional networks of experts, who are aware of developments Professional networks of experts, who are aware of developments Push from technology developers
Pre defined matrix for evaluation If complex: working group
Evaluation by management from a business perspective
Evaluation of limited investments by operational managers, major investments by owners, who are leading specialists
Adopt, adapt & implement new ideas & technologies Evaluator becomes responsible for idea, definition of project & use of project mgmt. tools Sometimes additional cycle with preparation of project work
No specific process defined Lack of resources
Learning & feedback
Idea management system as a tool Innovation map listing all innovations to enable learning across the organisation
Transferability to security sector
Remarks
High, almost all innovation processes appear to be transferable to the security sector
Shift from quantity to quality intended with regard to the idea management system
Networking activities
Mouth to mouth, in case of problems as well written communication
Similar challenges to transition to more innovative organisation
Formal feedback process Networked R&D without own R&D department
Technology developers may be active part of the feedback process
Similarity to security sector
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Innovation management practices Search, identify new technologies & ideas
ORG 9
ORG 10
ORG 11
ORG 12
no defined search process across different departments, ideas for incremental process improvements from Lean Six Sigma
Creative workshops
Open innovation mode (networks) IDEA Box (idea management system)
Works with R&D departments of client organisations; crossfertilise new ideas and emerging technologies
Evaluate and select new ideas & technologies
Adopt, adapt & implement new ideas & technologies
Learning & feedback
Transferability to security sector
Remarks
Lean Six Sigma as main reference point in the complete innovation management practice, strong focus on optimizing processes quality management
Selected by management along the guidelines of lean six sigma and on available budget or capacity
Projects are usually lead and executed on the level of the departments to ensure identification
No effective feedback mechanism in place
Importance of controllable risks in innovation process, Lean Six Sigma model considered useful if focus lies on improving existing processes
Assessment of benefits and costs by innovative department
Involving of suppliers and customers on a early stage, close coordination with building authority in terms of safety aspects
No formal feedback loop, experience of the people involved considered to be sufficient
High, no major barriers expected
Stage gate process, Innovation committees
Stage gate process, important role for engineers in local business units and suppliers
For the creation of a new technology, evaluation and selection done in specification prior to creation Testing very important
Innovations adapted/ adopted based on usefulness to clients and to support business
Innovation champions in every business unit, learning from interesting cases Innovation Scorecard to measure innovation performance Regular reviews with design teams, maintain close contact with testing centres, works to ISO9001
High, especially idea management, stage gate model seem promising
Low, very few security organisations involved with designing and prototyping innovations.
Close working relationship and collaborations with experts in the network worth emphasising
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Innovation management practices Search, identify new technologies & ideas
ORG 13
ORG 14
no formal mechanisms, Searches tend to be more informal; staff are encouraged to be proactive
Market research, best practice, purchase off-the-shelf of innovations
Evaluate and select new ideas & technologies
Adopt, adapt & implement new ideas & technologies
Learning & feedback
Transferability to security sector
Project specific analysis of costs, benefits and time frame
Gradual depending on the character of the innovation (incremental vs. radical)
Extensive database on all past projects including outcomes but also occurring problems
High, similar to end users organisation is service company, focus on innovation chain probably useful for security organisations
Field tests of available products, requirement workshop
Testing of prototype, feedback loops with supplier, small volume purchase, user-ledchange
Importance of user feedback and integration of intermediary organisation Testing, respectively learning and feedback before operational changes are made
Remarks
High, importance of reliability and safety
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4.3.3 Conclusions: Lessons Learned from the Case Studies In the following chapter we summarise some important conclusions from each of the different case studies.
Lessons learned from the perspective from a leading automotive company (ORG1) Within security organizations processes have to work very properly and usually there is not much room for experiments. At least in this aspect automotive companies can be compared with them. The automotive company is aware of the fact that change often causes instability. However, change is needed for the system in order not to become heavy and to slow down. The companies answer to this question is that controlled space for experiments is needed. The automotive sector has to face a lot of regulatory guidelines, which is also a fact that makes this industry somehow similar to the security sector. These guidelines are very often seen as strong innovation barrier. The automotive manufacturer eacts on these barriers by trying to compensate them with other user oriented innovations. So their main focus is on the future customers of the company, because the products have to be bought by the customers at the end. Based on the fact that the automobile sector is a manufacturing sector and the security sector is a service sector, this focus can be translated into the security sector by putting a very strong focus to future requirements of security services within the security sector. This could happen,- as learned from the case of the automotive companies,- in form of trend analysis, foresight and forecast methods, technology monitoring, and especially by customer analysis, which e.g. could range from general consumer trend analysis to surveys of specific new security service characteristics. Innovation management process used in the automotive industry are frequently based on a classical stage-gate-model-process which can on principle be transferred to all kinds of organizations, hence also to security organizations. The importance of entrepreneurs for innovations is also a general one. Therefore the “not invented here syndrome”, which was mentioned as a barrier, is also a general problem within innovation processes. It means that if the idea has to be further developed not by the inventor but by another group, there will be opposition against it. The automotive companies studied addresses the problem in the way that those who have to further develop the idea have to be involved very early in the process. Regarding the importance of networks within innovation processes, the automotive manufacturer interviewed regards this trend ambiguously. Network co-operations are seen as important factors within the innovation process, but as the organisation experienced, they have to be precisely picked. E.g. the company is re-thing the topic of open innovation at the moment into various directions. One of the new directions is the integration of users for evaluation issues. On the one hand it could be the involvement of experts and on the other hand it could be a broader involvement of users in form of votings. This is in the experimental phases at the moment. These thoughts and experiences could also be inspiring for the security sector.
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Installing an own department for innovation being responsible for the innovation process,- as it exists in the organisation studied,- makes sense only from a certain size of a company and with a very strong focus on innovation. This applies also for a separate customer analysis area which carries out market analysis and trend research. However implementing a process for the analysis of future requirements of security services and also installing innovation management as a distinct process delivering clear innovation steps and also room for experiments can be reasonable opportunities for innovation oriented security organizations.
Lessons learned from a company producing medical equipment (ORG2)
There are some lessons and conclusions for innovation management in general and the security sector in specific:
4
The close and direct interaction with the customers and the exploitation of lead users ideas and ambitions is a key for the success, this is not a really new message for innovation management, however, a fundamental necessity of the success. Listing carefully to the voice of the customer is important which requires also some specific competencies in listening to the voice of the customer.4 But even more important is that researchers and developers even have the opportunity to talk to the customers. In some companies this is not “allowed” as managers do not want to have too much irritating discussions. The firm practices a very specific rather informal routine and combines different elements contributing to the success of the company. The entire process is formalised, also because within a large group one has to communicate and legitimate decisions, though, it is rather a flexible process and practiced dynamically. Learning from each project is institutionalised within the firm and contributes to the organisational culture. Kretztechnik is in a market where regulation and approval of products is very important. In the medical and health sectors one can hardly influence this processes, however, it is very important to build up competencies within the head quarters but also locally in the markets served to understand the rationale of regulation.
Mr. Schmied argues in this context: “What we often recognize is that the medical doctors are often not aware that they have expressed an idea. We have often rather open unstructured unsealed talks, where we just ask, what is your problem, how may the product look like.”
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There are some pillars and elements which can be transferred:
Keep the process flexible and dynamic in environments with a fast technological progress and fierce competition; Engage lead users and exploit the ideas of the users (LU approach); Create space and opportunities for developers to directly talk with users and customers, - which is not always the case in many companies and industries; Build up in-house competencies and knowledge required for registration and approval of products if this is relevant; Learn from projects by organising post-project reviews with the aim to avoid that the same failures happened twice; Organise diverse communication channels and communication possibilities between R&D, marketing and the customers.
Lessons learned from a company producing voice communication systems (ORG3)
The case studies offers a few interesting conclusions for the security sector:
The early work in standardising committees is very important and the company aims to have an influence on the definition of standards by participating and – and if possible even nominating chairman – by contributing in a pragmatic way with a high solution competence and orientation. The organisation clearly aims to follows a leadership strategy in market niches and as small high tech company currently scan technological and market opportunities to positions itself in an early phase. The participation in FP projects is here an important strategy which delivers information about the strategy of competitors. The probably most important lesson from the case study is that the organisation already during the design and development of a new system aims to foresee the implications on the process at the customer and soon aims to communicate the customers that the introduction of a new technological solution also requires to adapt its processes. The involvement of customers is very important and the company is never producing a project with a high development risk without having a customer which has the willingness to co-operate of a specific project. Assuring the best usability of the systems is a key element for the development process and being aware that new technological solutions often have far reaching consequences on the handling, routines and process of the end users and its task environment is important. The company warns not to forget the user due to the strong focus on technology. How will the customer use the product is a fundamental question as one will be successful if a company is only technologically advanced but this is not aligned with the users’ needs. However, like in any other industry many users, particularly if 82
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they are older aged, do not want to change their behaviour. If a user, for instance, works for 20 years with one system he or she is not really interest in a change. The customers and market segments of the organisation are very different ranging from big airports over military to small fire brigades. The question, how the procurement of new technologies is organised is an important aspect which even makes it sometimes difficult to involve the end user. Typically for a rather small firm the company has a less formalised product development process which offers the employees a quire large scope for development. In addition, the entrepreneurial top management further contributes to the success of the organisation.
Transferability to security organisations
The following aspects are relevant:
Consider how the purchasing of new technologies and systems is organised and how the user can be involved in the development process; Usability (interface) design must be a top priority for the development team; If standardisation is issue, which is an topic in many areas, adopt an solution oriented approach showing soon practical solutions; Make already very soon clear and communicate to the customer that new technology almost always require to adapt the processes, e.g. handling, task routines, business process re-engineering, etc., i.e. organisational innovations. Customers and security end users how have not the willingness to adapt may not be able to fully exploit the potential of new technologies; Identify Lead users within the sector and start development projects with them.
Lessons learned from an automotive supply company(ORG4)
One of the main factors influencing the organisations innovation strategy is the high degree of heterogeneity within the company combined with a comparable high level of independence of the single operating groups. Therefore decisions on the holding level always have to keep potential resistance on the performing level in mind and try to integrate the performing units as early as possible in the innovation process to avoid the “not-invented-here-syndrome”. This is a situation similar to some organizations in the security sector which also experience high levels of heterogeneity combined with high levels of independence of the single operating units. Establishing innovation networks within the organization across the different operating units is a possible way to enhance within firm cooperation,
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The increasing complexity of both, the technologies used and the upcoming challenges to be tackled, force the company increasingly to cooperate with consumers, suppliers, research institutes and universities. As large MNC with significant financial and human resources is not able anymore to relay just on in-house innovation, this is even more the case for security organizations, which often face serious financial constraints. Therefore, innovation networks with partner outside of the organization are of growing importance. Another similarity between the company studied and many security organizations is the fact that the company studied is not active in the consumer market but at the same time has to closely monitor developments in this market. While the company traditionally just developed products along the specification of car producers, it moved on to monitor upcoming challenges and provide solutions for such challenges to car producers pro-actively. Security organizations tend to be in a similar situation, as the final consumer of their services is usually not equal to the entity ordering and/or paying this service. The organization studied realized that even without activities in the end consumer market, monitoring changes in this market is crucial to be able to provide on time or even before solutions to new upcoming challenges. Finally, innovation in the automotive sector is heavily influenced by regulations and standards, which significantly differ across markets and change over time. The effects of such regulations depend on the regulation considered and can range from a strong incentive to innovate to making certain innovations entirely impossible, however, monitoring changes and trends of such regulations is of growing and crucial importance for both, the car producer studied but also for security organizations.
Lessons learned from a R&D and development corporation organisation (ORG5)
To conclude, the studied organisation is a science driven group, embedded at a research institute. However, it cannot only be understood as a research organisation, in particular in recent years since the focus has shifted from science/research towards a stronger focus on implementation activities. This shift does not only initiate changes within the organisation, but a transfer of the existing team from a public research institute to a development cooperation organisation. Thus, the organisation, respectively the organisational embedding of the team evolves with the innovation. In other words, not the innovation activities as such are transferred from a research institute to an organisation with an implementation focus, but the organisational unit as such will change its organisational embedding. An important aspect with regard to the implementation period is the strong focus on existing partners to start innovation projects. Based on existing networks and trust among the partners innovation are first implemented in small scale projects before they are rolled out on a wider scale. The most important lesson from this case study is the importance of a scientific/evidence based monitoring system. The feedback channels in terms of integral parts of several innovation projects as such as well as the evaluation by people not directly involved in the projects are crucial elements for the improvement of existing approaches. The case study shows the value of scientific studies and evidence based decision making, even or better in particular in a 84
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resource constraint environment. Another lesson to be learned from this case is that a multidisciplinary approach to innovation is essential in order to be successful.
Transferability to security organisations
Most of the lessons learned (see above) can be applied to security organisations. In particular the science based monitoring and evaluation system is an element which appears to be promising to security organisations as well. Even though some people would probably argue against such an approach due to the high costs, the case study shows that even in a very resource constraint environment such as development cooperation such a monitoring and evaluation system could be implemented and is increasingly appreciated. Therefore the idea to setup a kind of scientific monitoring and evaluation system for or in security organisations appears promising.
Lessons learned from transport & logistics company (ORG6)
To conclude, transport & logistics company in our sample has developed sophisticated innovation management practices and is taking into account many obstacles to innovation in order to work around them. Interestingly the search for new ideas and technologies is rather standardized, but the further an innovation processes the innovation process becomes more flexible. Another important characteristic of the innovation process of the organisation is the basic idea of transparency and a clear definition of responsibility. Furthermore the implementation and in particular the operation of an idea management system does require a continuous investment to maintain the enthusiasm and keep people motivated to submit their ideas. A key element concerning an idea management system is a balance between the quantity and quality of the submissions, to keep the number of ideas manageable and avoid a bad image in case almost all ideas are rejected. Nevertheless one has to take care to keep the system as open as possible to stimulate thinking out of the box. Although the organisation has implemented a sophisticated idea management system, most of these ideas are rather incremental improvements, while many more radical innovation processes are initiated top down and take place in even less standardized processes.
Transferability to security organisations Most of the innovation management practices at the company can be transferred to the security sector. However, there are several pitfalls which should be taken into account. First, even though the organisation has implemented and is marketing a sophisticated idea management system, many radical innovations are emerging outside of the idea management system. Thus any organization should take care to leave enough room for less standardized innovations. Second, management emphasizes the importance of transparency during the 85
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whole innovation process. Whereas transparency could be an important element of an innovation management model for security organisations, some issues with regard to confidentiality could arise. However, there is no principal reason to reject an idea and innovation management system based on the idea of transparency. Third, the necessity to define who is responsible for the further development of an innovation idea appears to be crucial. Fourth, a standardized idea management system is a tool, which is capable to support and supplement innovation processes in an organization; nevertheless it is only one out of several ways to stimulate innovations. Thus an innovation friendly culture, and several flexible ways to develop innovations are essential to become an innovative organisation.
Lessons learned from an organisation in the health care sector(ORG7)
The organisation has lots of similarities with many organizations in the security sector from the perspective of innovation management. Innovation has been recognized as important topic and firm’s target is to use good and proven technology. But the innovation management is not as professional as in industry. From the innovation point of view there are little resources allocated for the design, development and implementation of innovation. There are not much knowledge (experience) and tools to manage innovation. Neither does the organization culture give much support for innovation, although innovation is mentioned in the business strategy of firm. The firm would obviously be better prepared to meet increasing competition if more attention is paid for professional innovation management. The management has realised this issue and they have started actions to improve innovation management in the company. From the standpoint of technology sourcing and implementation, the organisation has well established and functioning procedures and practices. The procedures itself are simple but sufficient. What is outstanding is that specialists are active and keen on searching for knowledge for novel health care practices and technology used in these practices. So in this sense the innovation culture is good. Where the culture is deficient concerns the development of new services, processes and business models. Perhaps the main lesson of the case is the difficulty to change the mode of organization from non-innovative to innovative. In the organization there is desire for the change, implicitly written in the strategy, but the realization for the change is challenging because the organization is not used to be innovative, and knowledge and tools for professional innovation management are deficient.
Lessons learned from a health care service provider (ORG8)
The company studied has lots of similarities with many organizations in the security sector from the perspective of innovation management. Innovations and new technology play an important enabling role in the business but they are subordinated to the actual service of organization. Accordingly, the culture of organization has been developed to support the front stage service 86
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action, not innovation. Also nearly all resources of the company are harnessed to customer service in one role or another. The company, however, has recognized the need for own R&D. Their aim is to realize that in a networked manner without own R&D department or even full time R&D personnel. There will be experts that orchestrate the networked innovation actions with the collaborators of the organisation. The experts do that management work of networked innovation beside their main work. The realization of R&D through networked manner does not mean here the outsourcing of R&D. Instead it means agendas of mutual interests between the actors of networked innovation, the actors having different roles in the network and complementing interests towards collaboration. The networked innovation management practices are under early development so the company does not have ready practices. The idea of networked R&D or innovation, however, is something that should be considered.
Lessons learned from a hospital (ORG9)
The parallel between the hospital environment and the security sector is the demand for outstanding service and communication and the need for a stable, always outstanding performance of the people working in both sectors. With police man and nurses you see a great passion for their job, although they have to do more and more, with less people. The demand for outstanding performance creates a need for proven ideas or technologies. So the implementation of ideas can be a test, but is has to be a controllable risk. A trend for both the hospital and security sector is the need for good chain management. Making the connection not only with partners in the operating environment, but also within the organisation itself. A difference between the sector is that Lean Six Sigma concentrates on the problems and faults of existing processes. For the security sector the focus on processes is interesting but their need for information or risk driven operations is not a problem in existing processes to solve. It needs a whole new process and way of doing thinks. The question should be what information do people need to function in their role? Huge advantage of the Lean Six Sigma approach used by this hospital is their effort to involve all the people that will have to deal with an innovation later on. This improves the adaptation and adoption of a new idea or technology for a more effective implementation. The conclusion of this study is that the Lean Six Sigma method, the focus on processes and involving people in the identification, development and implementation of ideas is valuable for the security sector if they want to concentrate on the processes to be improved. An expected barrier though is the lack of focus on information or intelligence products and new to be designed processes. It might be possible to let information or intelligence products follow the process that is improved like the technical implications at the hospital in this case study. This might be interesting to give more thought in the InnoSec project. 87
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The way this hospital gives everyone an opportunity to be part of their innovation management shows to be an effective way to identify new ideas and as the people of departments develop ideas themselves, the adaptation and adoption with implementation is higher. When this is a challenge for security organisations, the way to go by this hospital can be an example.
Lessons learned from a construction engineering company (ORG10)
The similarity between the building and the security sector is that there is more and more attention for chain integration. There are a few aspects which can be learned from this case study, that are usable for the security sector. A very useable aspect is the clear separation between ‘day-to-day’ innovation and innovation that needs more attention and time. Making a choice what is worthwhile to invest the resources of an organisation with specific criteria makes the vision of an organisation transparent for the employees. In combination with the fact that ideas are fostered by the person that came up with it, supported by the innovation department makes projects more successful. In the security business though, staff members may are not consistently as well educated as people working at a construction engineering bureau. A different kind of support to let employees foster and develop their ideas can lead to commitment and more sense of purpose for the employees.
Lessons learned from a chemical and plastics company (ORG11)
The chemical and plastic sector faces nowadays turbulent restructuration among the firms operating in this sector. This market is restructuring himself from the offer side (overcapacity), with alliances and acquisitions. Global markets are stable in the EU, while there is a growing demand in emerging countries, with many niche opportunities (special polymers and plastics…). I.e. SOLAR IMPULSE project launched by Solvay (more than 20 new products in the aircraft to make it ligther, more efficient batteries,…). At the same time, chemical industry remains profitable in general terms.
In spite of Portfolio Management is a main instrument used in Solvay embedded in the stage gate model for innovation management, the current priority is harmonizing the innovation management practices after the acquisition of Rhodia. Top down and R&D based innovation involving external researchers is operating in the company and is a pattern in this sector.
Participatory innovation was tested in the past, being abandoned nowadays, while at the same time big efforts have been allocated to manufacturing excellence programs in different plants. In some extent, this is a continuation of participatory continuous improvements to improve 88
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efficiency. The experience after implementing an Idea Box system is not very positive in terms of innovation (new product development), while was having increasing impacts combined with the Innovation Champions program, focusing the idea generation process on specific problems previously identified and formulated.
Is the underlying innovation model transferable to security end users?
Some of the innovation management practices at Solvay can be transferred to the security sector:
Combining idea management programs with additional programs to encourage leadership on innovation. Some aspects of the Portfolio Management and stage gate model can also be useful in the security sector. However, in the security sector, R&D based innovation is not dominant. The importance of transparency during the whole innovation process is a factor to encourage the use a clear portfolio management process. Creating internal (and external) networks in order to integrate efforts for innovation impacts is also a transferable practice and lesson learned. Managing tension among corporate and business units, different functional perspectives on innovation are some of the challenges within the organization, specialy as the size of the company growths.
Lessons learned from a design company (ORG12)
As very few security organisations are involved with designing and prototyping innovations, there is probably very little transferability in this aspect between this sector and security organisations. However, an aspect of innovation behaviour that can be transferred is the emphasis on close interaction and collaboration with users as well as other experts within the network. The organisation studied, is a small company, and therefore overcomes shortage of capacity through mobilising external resources; this is an alternative view to merely building capacity through expansion. Another good feature is the focus on testing; this helps to ensure risks are anticipated and minimised, while also ensuring that a product that has high user satisfaction is developed. As a result, many of the innovations that the company develops are highly innovative and unique. The innovation model used in the case of the organisation may not be as easily transferable to the security sector; this company is a small firm and therefore is able to be quite flexible and adaptable whereas large organisations may not have that luxury.
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Lessons learned from a business service company (ORG13)
As a services company, there are some similarities between the company studied and security organisations. Both types of organisations are not manufacturers of innovation and more often than not are mainly concerned with buying innovation and adapting them for their own use (or their customers) rather than creating new innovations. As such, it is important to understand the business need/ requirement that the innovation is going to help/ enable and develop processes to facilitate achieving that objective. This case study highlights the importance of empowering staff to look for and consider the role of innovation for the company. This is a transferable characteristic that security organisations can consider. However, an expected barrier to this in the security organisation might be the lack of expertise knowledge about innovation. Furthermore, the development of existing buyersupplier relationships has been crucial in the adoption, adaptation and implementation process of innovation management as well as in the early innovation generation phase. This is also another area of learning that can be transferred to the security sector; existing suppliers and customers as sources of innovation. An interesting aspect of this case study is the supply chain innovation that has occurred. This may not have as much practicality or feasibility for public sector security organisations, for example, but highlights the importance of considering upstream and downstream collaborations within an innovation system.
Lessons learned from a health care service company (ORG14)
The health and security sector are similar in that they both are concerned with the safety and well-being of human lives. As such, there is some relevance of innovation in the health sector that is applicable to the security sector. For example, there is a strong emphasis on eliciting user requirements and satisfying user needs and making sure that there is efficient service delivery without compromising safety. This case study shows a good example of how organisations can approach innovation differently, and the different approach that can be taken when acquiring and implementing specialised products that might have significant impact on service delivery. The process of adopting and implementing off-the-shelf products is very different to adapting and implementing a bespoke or specialised product, especially one that might have significant impact on the working practices and processes of staff. This case study also highlights the role of innovation intermediaries5 who can help in the innovation search and management process to overcome any capacity or competency gaps that organisations might face.
5 For an overview on innovation intermediaries, please see Howells, J. (2006). "Intermediation and the role of intermediaries in innovation." Research Policy 35(5): 715-728.
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The use of project management tools and techniques to manage the innovation process is a useful lesson from this case study. However, the authors feel that the practices undertaken in the earlier stages, i.e. searching, identifying and evaluating, are more interesting and significant as they highlight the importance of establishing a clear criteria and specification of the innovation in the first place to ensure that the innovation eventually acquired and adopted serves the purpose it is intended for. 4.3.4 Summary Summarizing the main findings of the case studies it becomes clear that many different innovation practices have emerged in non-security organisations and that a large amount of methods can be applied. Most of them appear to transferable to the security sectors, although in some cases, in particular in case of more open innovation approaches additional challenges emerge within the security sector. Especially methods concerning search processes could provide a significant benefit when they are applied within security organisations. Examples of such promising tools and methods are systematic trend analyses, the introduction and operation of advanced idea management systems. With regard to the involvement of stakeholders in the innovation process, a more sensitive approach appears to be adequate for security organisations. Whereas stakeholder involvement is probably even more important for certain security organisations, in particular public organisations, these organisations have to take care that of sensitive information which cannot be shared with stakeholders. Although this aspect seems to be specific to security organisations it has to be taken into account, that most if not even all organisations studied have to take care that sensitive information is not distributed otherwise they risk losing their competitive advantage. Finally, security or non-security organisations developing and diffusing innovations always included the risk of failure. To fail to develop the innovation as such or that the product or service does not meet expectations or even worse. Reliability from day one onwards is in particular relevant to security organisations, however not exclusively. Especially in the health care sector reliability and patient safety is at least equally important as it is in the security sectors. Thus the case studies illustrate and discuss numerous possibilities how non-security and security organisations could learn from each other to innovate successfully.
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5
Typology of Advanced Innovation Management Models
The aim of this chapter is to build a first typology of innovation management models and methods addressing the specific context and needs of the security sector. First of all, understanding processes, dynamics, barriers and opportunities for innovation in end user organisations in the security sector requires to consider their specifics and environment. The operating environment is likely to have an impact on the innovation management practices and the opportunities for innovation and may also act to constrain innovation. Innovation management methods thus have to cope with the specifics of security organisations, their user environment and should allow to transfer the learnings and best practices from other industries whenever possible. In Work package 1, amongst others, the following factors have been identified which describe the operational environment of users of the security sector: - public policy and regulation (either direct or indirect) has a strong role influencing the strategic investment and innovation decisions, however, end users in the security sectors have different levels of discretion; - budgetary constraints limit the possibilities to innovate (limited investment budgets) and investment and innovation decisions are often driven by cost considerations; - end users of the security sectors include also citizens in some areas - end user organizations in the security sectors develop and adopt very different technologies, information and communication technologies are dominant technologies. For the specific innovation management practices and methods, the case studies in security end user organisations have delivered the following specific findings amongst others: - technological innovations have gained importance in most security organizations and is driven by different forces such as cost considerations, new threats or incidents, however, some companies still have no explicit strategy, a more explicit innovation strategy can help to raise the awareness for innovation across the company; - some organisations recently have introduced specific subunits dealing with innovation management which obviously is an indication of importance and awareness for innovation; some organizations have their own R&D units; - an early involvement of different stakeholders is considered as very useful by many security organizations, though, not all organizations are involving different stakeholders such as employees or users, more and more organizations are having co-operation arrangement with partners such as universities; - in a number of security organisations innovation is driven by a request from their clients and/or newly arising threats, hence, they do not actively seek new innovations but rather have a passive approach on innovation;
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-
formal idea systems can help to collect ideas and are used by some end users in the security sector (some in combination with financial bonuses); risk management and vulnerability assessment is done by some organizations, which reflects the risk aware culture of some organizations (and probably risk aversion) in general, the companies use hardly any incentive systems the innovation process is organised very differently in the organizations ranging from standardised and formalised processes to rather informal ad-hoc routines; scanning and monitoring ideas and technological and market opportunities is done systematically in some firms; decision-making in the security organisations is in some cases constrained as it has to be aligned with public authorities or policies (and their budgeting constraints).
In addition, we can learn from other sectors how organizations can successfully professionalise the introduction of innovations. The case studies conducted and presented in this work package has shown: - for a large majority of organisations the importance of innovation in the overall strategy is already high or increasing, however, still most companies do not have an explicit innovation strategy (the innovation goals are then for instance an element of or embedded in the generic company strategy); - many organisations focus on ”proven” technologies and only just a few experiment with completely new technologies, companies hence try to minimize the risk and often either follow a second follower strategy or focus on market niches; - innovation competition is increasing and hence a few organizations aim to move from an innovation follower to an innovation leader; - concerning the process, most organisations use a stage-gate-type approach which is more or less standardised; - the companies use very diverse methods and sources to create ideas ranging from employee suggestion schemes to the lead user approach; - while some companies use rather formalised and comprehensive innovation management systems others deliberately aim to keep it more simple and flexible in order to maintain the entrepreneurial orientations and enhance creative thinking; there is no evidence that more formalised or systematic innovation management systems necessarily are associated with better innovation performance or output;
Besides the empirical findings collected by the INNOSEC research so far lliterature provides a vast and increasing source about how to organize and manage different kinds of innovations. The most important methods suggested in literature used by companies to foster innovation primarily help to manage and structure the innovation process on the firm level and create innovations, increasingly exploiting also external innovation sources. The stage gate model (Cooper, 2001) is probably the most relevant and widely used method for managing the new 93
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product development process. In addition, strategic decisions making related to innovation, such as how to manage disruptive innovation or creative new combination, i.e. value innovation (Kim and Malbourgne, 1997; 1999) are important concepts. Methods which aim to integrate external agents such as open innovation (Chesbrough, 2003), the lead user method (von Hippel, 1976; 1986) or crowdsourcing (Howe, 2006) have also gained importance recently. Finally, the management of specific types of innovations, such as service innovation (Tidd and Hull, ed. 2003; Lush and Vargo, ed. 2006) and software innovation (Pikkarainen et al., 2011) are relevant, too. Business model innovation is the most recent topic which is heavily discussed in the literature and hence may become more important in the future. The following specific methods and approaches for managing innovation are considered as relevant for the security sector and have been presented above6: • Managing innovation: Holistic process • Stage-Gate innovation process (Cooper, 2001) • New Concept Development model (Koen et al., 2001) • Value Innovation (Kim and Malbourgne, 1997; 1999) • Model of continuous corporate renewal (Apilo, 2010) • Knowledge creation process (Nonaka et al., 2000) • Open Innovation (Chesbrough, 2003) • User Innovation and the Lead User Methode (von Hippel, 1976; 1986) • Innovation communities (Hippel, 2005; Tuomi, 2002) • Virtual Customer Methods (Dahan and Hauser, 2005) • Crowdsourcing (Howe, 2006) • Service innovation management (Tidd and Hull, ed. 2003; Lush and Vargo, ed. 2006) • Scrum and Agile software development • Business model generation (Osterwalder and Pigneur, 2010) In addition, innovation literature has proposed a number of theoretical approaches to explain innovation competition, technological change and the innovation process (also on the meso and macro level) which not necessarily aim to present a specific management method but reveal lessons which then can be transferred to industrial practice. Models such as the well known product-process innovation life cycle by Abernathy and Utterback or the concept of Architectural Innovation by Henderson and Clark are explaining different phenomena on the markets and offer also lessons for strategic decision making. Foster (1985), for instance, stated that firms need to adapt their organisational structure and competences to market demands and technologies that may abruptly change. Accordingly, a firm’s decision whether to innovate or not depends on given market and technology developments, which in turn require continuous observation by the firm. However, following the competence-based models of Abernathy and Clark (1985) and Henderson and Clark (1990), the firm’s competences as knowledge are directly responsible for its success. In other words, even when the technological capabilities of a firm are rendered obsolete by a new technology, the firm can still use its
6
This selection was done based on the screening of the literature (which was done before the case studies have been finalised) but has not taken into account fully the empirical findings of the case studies.
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market knowledge to open new markets or sustain a comparative advantage over new entrants. An innovation can have different impacts, according to how the firm uses its competences. Following Afuah and Bahram (1995), for instance, the innovating firm’s decision making process should consider the innovation’s impact on its customers, suppliers and firms that provide complementary products. This is due to network effects, which not only have an effect on the firm’s own competences, but also on the competences along its products' valueadded chain. However, the border between concepts and models describing and exploring the process of innovation (e.g. disruptive innovation as proposed by Christensen) and its management (how to overcome the innovators dilemma by Christensen) are overlapping and fuzzy or tow faced of the same coin. These innovation models help also to explain the role of standards for technological change and innovations which are relevant for many security organizations. In the following we present a first typology for innovation management methods for security end organizations referring to the literature review and findings of the case studies. We distinguish between the six building blocks for innovation management adopting and further developing the framework of WP 1. These elements are: i) Innovation strategy The formulation of an innovation strategy which defines the importance and types of innovation activities deliver the framework for innovation management. The innovation strategy should be alinged with the generic company strategy (organistional strategy) and guides strategic decisions making during the innovation process. ii) Organisational Structure, Culture and Human Resources Innovation mainly rests on and deploys knowledge-based resources and procedures such as organizational and human capital. iii) Innovation Process: Ideation The generation of ideas using various sources is the first stage of the innovation process and more and more companies are using specific systems and methods to continuously create ideas from very different sources. iv) Innovation Process: Selection The selection of ideas and of projects during the different stages of the development process is important, particularly for new ideas by users. A number of criteria, assessment tools and methods have been suggested to support the deliberate decision making along the innovation process. v) Innovation Process: Implementation The implementation of ideas and projects requires to take into account a number of criteria and requirements and needs careful management attention. vi) Innovation Process: Internal and external interaction and learning (e.g. between employees within the organistions but also with users or other external partners) As internal and external interaction becomes more and more important (e.g. open innovation), hence, this element is considered as explicit building block for innovation management. 95
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The previously listed approaches and methods for innovation management proposed in academic literature and (partly) used by case study companies are assessed below with regards to their ability to support the management of the described six different elements of innovation management (building block) (see Table 4: Typology of innovation management methods). In addition, we analyzed, to which extent the proposed methods are used by the case study firms (see Table 5: Use of relevant innovation management methods in the case study firms). Thereby we indicated just by which type of companies the relevant methods are used (i.e. the fields where specific methods have a medium or strong relevance).
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Table 4: Typology of innovation management methods Groups of models, methods and tools
Involvement of Users (e.g. Lead Users) (v Hippel)
Open Innovation and Innovation Communities (e.g. Chesbrough, Tuomi)
Service Innovation Management (e.g. Tidd & Hull)
X
X
XX
XX
XX
XXX
X
X
X
XX
XXX
X
XXX
XXX
XX
XX
XXX
X
X
XX
X
XX
XX
X
XX
X
X
XX
X
XX
XXX
X
X
X
X
XXX
XXX
XX
Integrated approaches (e.g. Tidd & Bessant, Goffin & Mitchell)
Strategic decision making (e.g. Kim and Malbourgne)
Stage Gate Process (Cooper)
Idea creation and management systems (e.g. Six Sigma)
Knowledge Creation (Nonaka)
Innovation strategy
XXX
XXX
X
X
Organisational Culture, Structure and Human Resources
XXX
XX
X
Innovation Process: Ideation
XXX
X
Innovation Process: Selection
XXX
Innovation Process: Implementation Innovation Process: internal and external interaction
Building Blocks
X: no or low relevance XX: medium relevance and contribution for a specific management task XXX: strong relevance and contribution for a specific management task
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Table 5: Use of relevant innovation management methods in the case study firms Groups of models, methods and tools
Building Blocks
Innovation strategy
Organisational Culture, Structure and Human Resources Innovation Process: Ideation
Innovation Process: Selection
Innovation Process: Implementation Innovation Process: Internal and External Interaction
Integrated approaches (e.g. Tidd & Bessant, Goffin & Mitchell) Only used by leading large organisation (e.g. automotive) Only used by leading large organisations (e.g. automotive) Only used by leading large organisations (e.g. automotive) Only used by leading large organisations (e.g. automotive) Only used by leading large organisations (e.g. automotive) Only used by leading large organisations (e.g. automotive)
Strategic decision making (e.g. Kim and Malbourgne)
Stage Gate Process (Cooper)
Only used by leading large organisations
Used by different organisations (size and sector) Used by advanced small and large companies
Only used by leading large organisations
Partly used
Idea creation and idea management systems
Used by different organisations (size and sector) Used by different organisations (size and sector) Used by different organisations
Used by large and advanced organisations
Knowledge Creation (Nonaka)
Involvement of Users (e.g. Lead Users) (v Hippel)
Open Innovation and Innovation Communities (e.g. Chesbrough, Tuomi)
Service Innovation Management (e.g. Tidd & Hull)
Only used by few leading organisations
Used by some organisations
Used by a few leading organisations
Used by some organisations
Used by large organisations Used by very different organisation (size and sector) Used by very different organisations (size and sector) Used by very different organisations (size and sector) Used by very different organisations (size and sector)
Used by some organisations
Used by some organisations Used by a few leading organisations
Used by some organisations
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6
Validation Workshop
In order to introduce, discuss and review the main results of work packages 1 and 2 a validation workshop was held in Vienna on Nov. 13th 2012. The workshop participants consisted of the Innosec partners, members of the project advisory board, and some project-external participants. All attendees are listed in annex A. The workshop had two parts. In the first part information on the project Innosec was given and the main results of the first two work packages were introduced. Besides the general introduction of the Innosec project the titles of the given inputs were: WP1: Security organisations’ environment and innovation management; WP2: Innovation management practices in non-security sectors; and WP3: Existing innovation (management) models and the Innosec model. In the second part of the workshop the given results were discussed and further developed by means of the world café method. The main results concerning work package 1 were the following: •
•
•
•
•
Innovation challenges are not solely specific to security organisations, but structural/ institutional set up of security sector and mission-orientation may lead to different approach and responses – Public sector organisations particularly affected by budgetary issues and risk aversion; culture of innovation perhaps related to being a service provider – Private sector more motivated by profit; approach to innovation different Strategy important but danger of thinking one “strategy” needed; must be different depending on what it is dealing with/ focused on – Organisational/ innovation strategy with regard to dealing with emerging threats (and opportunities) different to (operational) strategy dealing with idea generation and evaluation process, or implementation process – Can be broad overall and more specific lower down, or highly regulated overall and more flexible in individual units Level of user involvement – Organisation should set out strategy on level of user involvement and engagement for different phases of innovation process – Some prefer hands-off, others find integrated approach critical Importance of reactive and proactive strategies and practices – Reacting to current threats and opportunities – Proactive in anticipation of future anticipated needs (of citizens and society, and of users) Corporate/ organisational memory – Continuity important; can be electronic or physical (artefacts)
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•
Mobilising network – Related to organisational and innovation strategy and specific innovations
The main results concerning work package 2 were the following: Most of the introduced innovation practices seemed to be transferable to the security sector as they are not sector-specific at all. Specifically there were pointed out several important factors for innovation methods by the participants: Concerning the starting level of innovation approaches, both directions, top-down and bottom-up, are seen as highly relevant for security organisations. One present security organisation preferred a top-down approach, as people involvement is seen as a risk, another security organisation strongly uses bottom-up approaches and encouraged in trusting in one`s communities. Even open organisation approaches were considered as very practical for security organisations by one participating organisation It was proved by the participants that transparency is very crucial point within the innovation process. Choosing the right networks is seen as a very important factor. Clever tools can assist in the process. Security organisations mentioned their special interest in organisational innovations. Formal innovation processes are needed, this opinion was shared by the participnats. A specific challenge is seen in running the innovation process and making it a succes: ”It is not enough to formalise the process. It must really run.” This was pointed out by the example of one which has a formal innovation process, which doesn’t run at all. The introduced building blocks of the Innosec model were reviewed as follows: The building blocks were considered sufficient and the model was considered easily understandable. However, it was mentioned that the following factors should be introduced in the model: • People • Bottom-up approach – Innovation Management researchers see the people and bottom-up approaches in the framework but Security Organizations representatives do not – strong message for the InnoSec work – Private-public partnerships, control… Additionally, the participants’ expectations of the Innosec model were obtained: • It should go beyond technological innovations – Organizational innovation etc. • It should be easy to communicate – Transparent, short, simple • It should support both top-down and bottom-up approaches • It should support security organizations to be 100
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– more innovative – capable of adapting innovations Some other findings were the following: • From the viewpoint of innovation management needs there are very little differences between public and private organizations • Researcher seems to think more advanced things than what is the primary need of security organisations in innovation management To sum up, the workshop ensured the results of the project so far and gave precious inputs for the further development and refinement of the Innosec model within the next work package.
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Conclusions: Practices, Future Requirement and Building Blocks of a New Innovation Management Model
In this report we presented i) important theoretical concepts for explaining the innovation competition and process on the firm and industry level, ii) described significant methods for managing innovation which have gained popularity in the industrial practice, and iii) presented empirical findings of innovation management practices of firms in different industries (e.g. automotive, ICT, health). Literature provides a vast and increasing source about how to organize and manage different kinds of innovations. The most important methods suggested in literature used by companies to foster innovation primarily help to manage and structure the innovation process on the firm level and create innovations, increasingly exploiting also external innovation sources. The stage gate model (Cooper, 2001) is probably the most relevant and widely used method for managing the new product development process. In addition, strategic decisions making related to innovation, such as how to manage disruptive innovation or creative new combination, i.e. value innovation (Kim and Malbourgne, 1997; 1999) are important concepts. Methods which aim to integrate external agents such as open innovation (Chesbrough, 2003), the lead user method (von Hippel, 1976; 1986) or crowdsourcing (Howe, 2006) have also gained importance recently. Finally, the management of specific types of innovations, such as service innovation (Tidd and Hull, ed. 2003; Lush and Vargo, ed. 2006) and software innovation (Pikkarainen et al., 2011) are relevant, too. Business model innovation is the most recent topic which is heavily discussed in the literature and hence may become more important in the future. In this report 21 of the described methods and approaches for managing innovation were considered as most relevant for the security sector7. These concepts were pooled based on their main focus, resulting in ten groups of approaches which are the following: Holistic and integrated approaches (e.g. Tidd & Bessant, Goffin & Mitchell); Strategic decision making (e.g. Kim and Malbourgne); NPD process models (e.g. Stage Gate Process of Cooper); Idea creation and management systems (e.g. Six Sigma); Knowledge Creation (Nonaka); Involvement of Users (e.g. Lead Users) (v Hippel); Open Innovation and Innovation Communities (e.g. Chesbrough, Tuomi); Service Innovation Management (e.g. Tidd & Hull), Software development (e.g. Scrumb), Business Model Innovation (e.g. Osterwalder). In Work package 1, amongst others, the following factors have been identified which describe the operational environment of users of the security sector: - public policy and regulation (either direct or indirect) has a strong role influencing the strategic investment and innovation decisions, however, end users in the security sectors have different levels of discretion; - budgetary constraints limit the possibilities to innovate (limited investment budgets) and investment and innovation decisions are often driven by cost considerations; 7
This selection was done based on the screening of the literature (which was done before the case studies have been finalised) but has not taken into account fully the empirical findings of the case studies.
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-
end users of the security sectors include also citizens in some areas end user organizations in the security sectors develop and adopt very different technologies, information and communication technologies are dominant technologies.
Integrating the results of literature review and empirical study of WP2 and on the basis of the operating environment of security organizations as described in WP1, the following building blocks of the INNOSEC model are suggested: We distinguish between five building blocks for innovation management adopting and further developing the framework of WP 1. These elements are: 1. Innovation strategy; 2. Organisational Structure, Culture and Human Resources; 3. Innovation Process: Ideation 4. Innovation Process: Selection 5. Innovation Process: Implementation 6. Innovation Process: Internal and external interaction and learning As internal and external interaction becomes more and more important (e.g. open innovation), hence, this element is considered as explicit building block for innovation management, and hence we adapt the analytical model which served as base for the case studies (see Figure 20) indicating also that the external relationships are more and more important making the boarder of an organisation more open. The first two elements can be also understood and described as organisational innovation system, the last four elements as innovation process. For each of these building blocks we suggested specific approaches and methods for innovation management with various strengths of impact. This typology of relevant approaches for innovation management delivers a broad and also specific source of methods for a modular innovation model (see Table 5). Finally, we summarise some challenges and barriers we particularly identified in the security sectors (from work package 1) (row “Specific issues”) and indicate which practices can be transferred from other sectors, i.e. our case findings (row “Lessons from other organisations”) and which management methods can be used proposed by the literature (row “Possible Methods”) (see Table 6: Typical challenges and barriers of end user organizations in the security sector and possible methods addressing them). The management methods mentioned her go partly beyond the methods described above and will be elaborated in more detail in the work package 3. This grid hence delivers a first building block and fundament for the development of a modular innovation management model. Additionally, through the developed typology of approaches for innovation management and their combination with the needs of security organizations (as described in work package 1) for each building block of the model a source of specific methods was established. In addition we formulated “lessons learned” from non-security organizations, describing innovation practices which can be transferred from other sectors to security organizations.
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Table 6: Typical challenges and barriers of end user organizations in the security sector and possible methods addressing them Challenges and barriers in relation to… Innovation strategy
Organisational Culture, Structure and Human Resources
Innovation Process: Ideation
Specific topics
- Strategy not formalised - Innovation strategy not aligned with the organizational strategy - Focus on a very narrow concept of innovation - Lacking top management committment - Lacking commitment of shareholders and board of management - Lacking commitment of public policy -
Lack of innovation management capabilities Less of qualification of human resources Unclear responsibilities for innovation management Conservative culture and attidutes Bureaucreatic structures and routines Governance structures and board of management Organistional inertia Financial constraints
- Unsystematic idea generation - Various internal and external idea and creativity sources not used - Lack of process know-how - No incentives and motivation
Lessons from other organisations and industries
- Calculate the risk and do not take a too high risk - Engage in standardising committees
- Keep processes flexible - Professionalise recruitment
- Use many different sources - Monitor competitors - Implement and employee idea suggestion scheme and reward - Attend conferences and workshops - Screen scientific sources (e.g. publications)
Possible Methods
- Integrated and systematic innovation management (e.g. Tidd and Bessant) - Value innovation concepts - Market position strategies - foresight methods and roamapping
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Organisational design Knowledge creation process Organisational learning concepts Total Qualtiy Management and Six Sigma
-
User Innovation Crowdsourcing Lead User approach Employee suggestion schemes Incentive systems Stage-Gate process Creativity techniques
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- Technology monitoring - Design thinking Innovation Process: Selection
- No knowledge or biased knowledge to asses projects and perfom cost/benefit analysis - No adequate assessement tools and selection criteria - Too many ideas
- Define criteria
- Cost/benefit analysis - Stage-Gate process
Innovation Process: Implementation
- Lack of project management support and routines - Difficulties to involve advanced customers and lead users - Lack of testing and marketing capabilities
- Consider the process of the end user - Keep usability design (of ICT) as top priority
-
Marketing strategy Quality Management Life-cycle costing Service innovation and training
Innovation Process: internal and external interaction
-
- Search for lead users
-
User Innovation Open Innovation Enterprise 2.0 Social Innovation
Lack of awareness for external knowledged sources Lack of competencies to involve external stakeholders Communication barriers between organisational units Difficulties to identify lead users
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Annex A: Innosec validation workshop of WP1&2 – list of participants The list of participants of the validation workshop in Vienna on Nov. 13 th 2012 is given below (two pages).
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