The Critical Success Factors in Open Service Innovation Collaborations.

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Author:

Sybren J. van der Zee

S1870084 / 140174191

Master Dissertation:

MSc. International Business & Management

University of Groningen faculty of Economics and Business

MSc. Advanced International Business Management & Marketing

Newcastle University Business School

Supervisors:

dr. Hanna Bahemia

dr. Kees van Veen

December 2014

Wordcount:16.488

The Critical Success Factors in

Open Service Innovation

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3 Abstract

The open innovation concept encompasses the growing tendency of organisations to expand their processes and knowledge over the traditional boundaries of business operations. This strategy has widely been researched from manufacturing business perspective while the services industry has been undervalued in research regardless of the prevailing function it has in advanced economies. This dissertation provides a conceptualisation of new service development (NSD) open innovation on a project level and delivers a profounder evidence-based understanding of the critical success factors (CSF) determining the success and failure of the NSD process in open innovation projects, specified on the process structure, collaboration strategy and timing & degree of openness. The analyses of two in-depth case studies reveal that a high-quality all-encompassing open NSD project is in need of an agile, flexible and adaptive, accelerated process, to positively influence the open service innovation project performance. A joint focus and alignment of the vision and strategy, which include responsibilities, accountability and knowledge sharing, are essential in the collaboration strategy to increase trust and knowledge input, to provide the foundation for a successful stable long-term relationship. Swift decision making about opening up and closing down the NSD process to partners will have a positive influence on the open service innovation project performance. The findings about the CSF’s by this research contribute to the current literature; by identifying the influential CSF’s within the NSD open innovation project performance.

Keywords: Open innovation, new service development process, collaboration strategy, timing & degree of openness, critical success factors, and project management tools.

Acknowledgements

This dissertation is part of the double degree of the Master of Science in Advanced International Business Management & Marketing at the University of Groningen and the University of Newcastle. This master thesis is conducted under supervision of dr. H. Bahemia and dr. K. van Veen.

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5 1. Introduction

The amplified world-trade and the ease of access to new international marketplaces offer opportunities to companies from all over the world. This increased globalisation results in a tremendous rise in the quantity of competitors who are able to compete at the highest level (Dunning, 1999). This leads to an intensified market, in which the consumers and stakeholders become more demanding and also less forgiving regarding the performance and reliability of the offered services. This includes (latent) need fulfilment with distinct products or services (Day & Moorman, 2010). These forces drive the development of new services and products. To meet this new demand, rapid development of technological and scientific knowledge is necessary (Wheelwright, 2010). Together with the limits on the available resources of a company requires collaboration with other organisations to increase the performance of the innovations (Chiaroni, Chiesa & Frattini, 2011; Hagedoorn, Link & Vonortas, 2000). To succeed in such an environment, depends increasingly on the ability of the company to effectively and efficiently create and share knowledge (Kogut & Zander, 1992). Accessing external know-how is a significant factor in successful innovation (Rothwell, 1994). This knowledge can, contrary to closed innovation where the company’s internal R&D department is responsible for the projects to develop and improve (new) services and products, be extended by the Open Innovation model designed by Chesbrough (2003a):

“Open innovation is 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, 2003a p. xxiv).

The benefits of open innovation are the access to complementary resources, synergy effects, costs and risk sharing together with the ability to quickly respond within a dynamic environment (Powell, Koput & Smith-Doerr, 1996; Hagedoorn & Schakenraad, 1994). Hopkins et al. (2011) argues however that large heterogeneity exists between these open innovation collaborations regarding their success, because significant challenges arise during the execution of these collaborations (Lokshin, Hagedoorn & Letterie, 2011).

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Likewise to the minimal research on NPD open innovation concentrating on the project level (Knudsen & Mortesen 2011, Mishra & Shah, 2009). A gap in the literature exists in the new service development (NSD), but highly relevant since in the advanced economies services play a vital role in business. The increase in severe competition leads to shortened development cycles of technologies, increased customer expectations, therefore companies constantly need new methods in service design and delivery (Smith, Fischbacher & Wilson, 2007). As a consequence NSD is seen as a highly relevant factor in various industries (Menor, Tatikonda & Sampson, 2002) and simultaneously interest from scholars in innovation management has risen (Cooper et al., 1994; De Brentani, 1989). Particularly in business services, since these are more open explorers of external knowledge compared with manufacturing firms (Mina et al., 2014).

This dissertation helps to extend the knowledge about the NSD process on a project level by looking at the CSF’s in the NSD process which encompass the collaboration strategy and the timing & degree of openness. This research combines different streams of literature, since NSD and open innovation research did not yet cover the critical success factors and their influencers in the collaboration between organisations in NSD open innovation projects. Therefore, an advanced framework that identifies and describes the relevant factors that firms can use to reflect and improve their collaborations in open NSD project processes and avoid failure of these projects becomes necessary.

1.1. Research objectives and research questions

The research within the open service innovation area is relatively unexplored; therefore new insights in the strategic NSD processes in collaboration projects can arise through the creation of novel theoretical- and empirical research. This dissertation will therefore shed light on the key critical success collaboration factors of an open innovation project during the new service development process. By answering the following research question:

What are the critical success factors in open innovation service projects to gain a competitive advantage?

The main research question is divided into the following sub questions:

 What are the CSF’s that affect the open NSD project process performance?

 What are the CSF’s that affect the collaboration strategy in an open NSD project process?

 What are the CSF’s that affect the openness in an open NSD project process?

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studies that are thoroughly analysed, by identifying and categorising the collaboration CSF’s in the

open NSD project process. The foundation of this analysis is based on the “grounded theory” perspective (Glaser & Strauss, 2009); this analytical strategy provides an inductive analysis that offers the opportunity to develop theoretical propositions and also generating a descriptive theoretical model on collaboration in open NSD projects.

1.2. Research structure

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8 2. Literature review

In this chapter the current literature will be reviewed conjointly with the introduction of the used constructs, which supports the identification of gaps in the present knowledge. In the first part of this chapter the open innovation model will be presented. This is followed by an extensive review of the literature on the difference between service and manufacturing, the NSD process and its CSF’s specifically focussing on the collaboration strategy and the timing of openness.This chapter concludes with an overview of the gaps within the literature that can be addressed.

2.1. Definition of innovation

From an economic perspective, innovation has crucial significance for creating and sustaining a long-term competitive advantage for a firm (Drucker, 1984; Porter, 1985). Thus innovation is essential for the survival of a firm and offers the possibility to compete in an era of constant change (Drucker, 1985). The environmental changes within the competition landscape of the 21st_{century demand a} continuous innovation of the firms’ business models (Hamel, 2000). Kaplan & Norton (2004) argue that the market value of a firm, in advanced knowledge-based economies, is largely set by the intellectual property it possesses; these intangible assets are the foundation for the economic competition and growth of the firm.

The shift from closed towards open innovation

The classic approach of the majority of industrial firms was the internal development of new technologies which were applied to their own products (Lichtenthaler, 2009). Chandler (1962) points out that these firms often favour vertical integration to outperform the competition. This closed innovation developed towards a situation in which a firm acquires new knowledge from external resources (Cohen & Levinthal, 1990; Hagedoorn & Duysters, 2002).

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Figure 2.1: Overview of Open Innovation, based on: Chesbrough (2003); Gassmann & Enkel (2004). For definitions see Appendix V.

Contrary to these views, scholars (Trott & Hartmann, 2009) argue that the concept of open innovation is traceable much earlier in the innovation literature than Chesbrough described in 2003, whose open innovation paradigm is seen as just a reformulation of previous concepts. The exploitation of external sources of knowledge and technology is seen as an important element in innovation performance (Cohen & Levinthal, 1990; Nelson & Winter 1982; von Hippel, 1988). However in the open innovation literature diverse definitions of the term openness are used, which contributes to a level of conceptual ambiguity and limits the capability to shape a systematic knowledge framework (Dahlander & Gann, 2010). The difference with previous innovation literature though is the adoption in the open innovation literature stream of a holistic approach (Altmann & Lee, 2011). This encompasses that during an innovation process the openness is characterized in relationship to the openness towards diverse types of external partners (Faems, Van Looy & Debackere, 2005; Tether, 2002) or the number of diverse sources of external knowledge that every organisation attracts to their innovation process (Laursen & Salter, 2004; Leiponen & Helfat, 2009; Tether & Tajar, 2008). Obtaining external knowledge and ideas from customers, suppliers, competitors and other market- and

IP out-licensing Internal / external

venture handling Inbound OI process (exploitation of external ideas)

- Stakeholder integration;

- External technology insourcing;

- IP in-licensing from other companies.

Coupled OI process (collaboration with external parties)

- Alliances & Joint ventures;

- Network usage;

- Participation in other organizations.

Research _Development Current Market New Market Internal knowledge base External knowledge base Other firms Market

Outbound OI process (commercialisation of developed knowledge)

- Technology outsourcing and IP out-licensing;

- Founding spin-offs;

- Sale or divest.

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science-based parties influences the innovation effectiveness through synergies (Fey & Birkinshaw, 2005; Lakhani et al., 2006; Laursen & Salter, 2006; Tether, 2002). The degree of openness of an organisation can vary between a closed and a completely open innovation model (Chesbrough, 2003). The breadth of the innovation approach is in this research defined as the strategy that enables accessing various knowledge partners within a collaboration.

This research focusses on open innovation breadth from the perspective of formal collaboration, which is defined as hard openness by Laursen & Salter (2014) since the collaborating partners need to abide to the arrangements made. This type of cooperation offers the admittance to complementary resources that allow for successful creation of new processes (Powell et al., 1996) and is therefore used in this research.

Drivers and limitations of open innovation

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11 2.2. Differences between services and manufacturing

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12 New Service Development Process

A high performance service consists of critical service success factors which are founded in the NSD process, during the designing of the service system, the determination of the target markets and employee training (Posselt & Förstl, 2011). The basic model of the NSD process (Johnson et al., 2000; figure 2.2) offers a blueprint in the management of service projects. During the first stage the generated ideas are analysed, in relation to costs, time and risks. The most favourable ideas are nominated and the initial opportunities are valuated, followed by defining the specifics of the new service and its process. In the testing phase possible weaknesses are detected. Commonly after these stages the costs of further service development raise significantly, since other departments of the company need to be involved, engineering, service design and marketing. The following steps include test marketing, commercialization, monitoring and evaluation (Post-launch review). The main benefit of a well organised innovation process is that it can lead to a competitive advantage.

However some disadvantages of this model are probably the sequential process and the reduced speed. Based on the argumentation against the stage-gate model of Cooper (1988), also in this model the chance exists of too early cancelled projects. Because the focus of this model is on the stages instead of on the customer, which can lead to poor judgments through a lack of knowledge from the gatekeeper and affects the decision making process at each stage (Trott, 2008). A main contributor to the NSD success is offering a unique or superior service (Posselt & Förstl, 2011).

Figure 2.2: The NSD process cycle, from Johnson et al. (2000).

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procedures and policy (Asakawa, Nakamura, & Sawada, 2010). Others highlight the characteristics of

the partners, together with the selection of new partners, the overall portfolio and out licensing (Bianchi et al., 2011; Faems et al., 2005; Laursen & Salter, 2006). Also the relationship between the partners shows that the establishment and enhancement of the relationship influence the results of the R&D collaboration (Caloghirou, Kastelli & Tsakanikas, 2004; Sofka & Grimpe, 2010). Table 2.1 presents an overview of the significant identified success factors in NSD / open innovation research.

Table 2.1: Overview of success factors identified in NSD / open innovation literature, only the significant found factors are mentioned.

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14 2.3. Project process management

Brown & Eisenhardt (1995) argue that the most important drivers of the implementation of innovation strategies are Research & Development projects (R&D) together with project management. The development of new products and services in projects need to be measured and managed with focus on efficiency and with clear and precise aims (Adams, Bessant & Phelps 2006). These projects have technological, market and organisational motives (Tidd, Pavitt, & Bessant, 2001). The importance of project management is highlighted in numerous studies (Cooper & Kleinschmidt, 1995; Ernst, 2003; Slevin & Pinto, 1986). The usage of management tools and techniques in the process of planning, monitoring and controlling the realisation of R&D projects is the project management of a company (Pinto & Prescott, 1988). The predefined goals of a company are established by the execution of R&D projects, which perform a sequence of interconnected and multifaceted activities on a temporary basis. On the other hand it is also argued that that there is no general optimal approach regarding the management of projects, the difference between projects should be recognized and each project requires its own structure and management (Howell, Windahl, Seidel, 2010).

Based on the extensive literature review conflicting results are found regarding the role of specific types of knowledge together with the role of which collaborating partner is beneficial for the process. Similarly Hipp (2010) argues that since the tradition of innovation literature focusses on tangible assets (Miles, 2007) a knowledge gap in substantial findings exists when extending the underdeveloped service innovation literature area towards collaborative innovation areas. The following section will discuss the focus on the collaboration strategy in an open NSD project.

2.4. Collaboration strategy

Behind every organisation and every project there is a strategy, which can have very different purposes and depends on many different factors. The collaboration strategy is nested in the larger NSD project process. Partnerships offer possibilities to companies in different ways. To increase the success rate of a NSD project access needs to be provided to partners resources, which reduces the risks that logically is beneficial for a successful new project. According to Fleming (2001) the innovativeness and the R&D project quality is improved by the usage of partnerships.

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The usage of open innovation by a firm requires a strategy that provides benefits and value for the

created knowledge and innovations together with intellectual property (IP) protection. IP is a fundamental part of the open innovation process, considering the flows of knowledge to and from the firm (Arora et al, 2001; Chesbrough, 2003; Lichtenthaler, 2007). Laursen & Salter (2005) show the continuous tension that exists among IP protection and open innovation. Where Lakhani et al. (2006) point out that organizations easier work together with external parties when they are in an industry which has strong Intellectual Property Regulation (IPR). A formal innovation approach allows further continued exchanges between the partners; nevertheless it entails an increase in administrative work in finding appropriate external partners, making arrangements and manages cooperative creation (Dyer & Singh, 1998). Subsequently Mishra and Shah (2009) show that the collaborative practices such as supplier involvement, customer involvement, and cross-functional involvement positively affects the project performance on a project level. So the following section discusses the different external partners and when the innovation process should be opened up or closed down.

2.5. Timing of openness in the service innovation process with partners

The previous section has examined the factors regarding the collaboration strategy and the knowledge protection, this section reviews the literature about the timing of opening up and closing down the NSD project process. According to Almirall & Casadesus-Masanel (2010) closed innovation can be more beneficial at the start of a project, since there is an increased technological complexity compared with later on in the process, where open innovation becomes more useful in the exploitation process. Cornell (2012) argues that a firm should make the consideration in which stage it is advantageous to implement a closed innovation strategy and when to implement an open innovation strategy. A firm should not become completely open, although there is sufficient intellectual property protection; still unintentional spill-over effects to competitors will be present regarding the knowledge resources of a firm (Kolk & Püümann, 2008). Subsequently the different sort of parties involved will be examined more closely.

To come to a clear understanding this research follows the research of Du, Leten & Vanhaverbeke (2014) with a division between market-based (not significant) and science-based (significant) partnerships who can strengthen the process performance of a project.

Customers

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Cooper (1999) found no relation between customer partnerships and new product success. This can be related to the research of Gruner & Homburg (2000) who show that customer interaction in the NPD process during both the early and later stages lead to an increased success rate of the developed products. Customer knowledge development increases the suitability of the features of the new product with the consumer, which improves the new product performance (Joshi & Sharma, 2004). In a highly turbulent environment organisations are expected to involve customers during the innovation process (Carbonell et al., 2009). Day & Moorman (2010) argue that an outside-in approach will positively affect the performance. Ulwick (2002) shows the essentiality of co-creation with customers in the development process to display the needs of the customer accurately. The other side of this market-based relationships is that a too intense relationship with customers may lead to preliminary elimination of new highly breakthrough potential technology innovations (Christensen & Bower, 1996). Based on an extensive literature review it is not known how customer involvement can affect the project performance in an open NSD process with multiple partners.

Suppliers

The increased success rates by collaborating with suppliers is shown by e.g. Bessant, Kaplinsky & Lamming (2003); Ragatz, Handfield & Scannell (1997); Song & Di Benedetto, (2008). NPD literature shows that to improve the NPD performance the technical capabilities of a company can be extended with the exchange of knowledge with suppliers (Cousins et al., 2011). Especially to minimize the lead-time and modification costs it is useful to integrate the suppliers in the first stages of the NPD process (Millson, Raj & Willemon, 1992). Suppliers offer the expertise and knowledge on the newest technological enhancements which are available (Du et al., 2014). This offers the opportunity to identify early in the NPD process potential (technical) problems. However also negative relationships are found by Knudsen (2007). This can be connected to the findings that a close relationship between buyer and supplier can decrease the objective decision making ability of the buyer and upsurge the probability of opportunistic attitude of the supplier (Song & Thieme, 2009; Villena,

Revilla & Choi,

2011). Nevertheless it is not known how supplier involvement affects the project performance in an open NSD process with multiple partners.

Science- based partnerships

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(Fabrizio, 2009). Leten et al. (2013) brings up that the availability of equipment, which can be very

specific and costly offers a potential benefit to a science-based partnership. Access to academic networks is another potential which can be offered by this kind of partnership (Liebeskind et al., 1996).

2.6. Theoretical Lens: Dynamic capabilities

This section will discuss the theoretical lens used in this research. Resources are continuously changing and reconfigured throughout the NSD process, as a company is in dynamic circumstances, this is considered in the theory of dynamic capabilities (Teece et al., 1997) where the current, at the firm level existing resources and capabilities, are in a proactive attitude creatively destructed. With this approach the limitations by the static assumption within the Resource-Based View (Barney, 1991), where resources are previously obtained, is addressed. This theory is based on the viewpoints of Schumpeter (1934). These dynamic capabilities offer the ability to decisively generate and alter the resource base of the company (Helfat et al., 2009) together with the adoption of changing resources in a shifting environment to keep hold of a competitive advantage (Ambrosini, Bowman & Collier, 2009). In order to continuously develop new services companies must develop dynamic capabilities ( Kindström, Kowalkowski & Sandberg, 2012)

The development of a dynamic capability is based on the organizational processes, a firm’s position (with emphasis on the appropriability regime) and path dependency (Teece et al., 1997; Ambrosini et al., 2009). According to Makadok (2001) the embeddedness and non-transferability of a capability means it is firm-specific, furthermore a capability’s purpose is the enhancement of resource productivity. However Scherer (1965) mentions the unexplored potential of the technology as the technological opportunity. Kogut & Zander (1992) combine this with the knowledge exploitation capabilities of a company, this leads to combinative capabilities. So resources available on the market can be acquired by the company. The dynamic capability lens is valuable for examining the NSD process considering the service intangibility and the connection with capabilities (den Hertog, van der Aa & de Jong, 2010).

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organisational assets (Teece et al,. 1997). This was taken into account while composing the research question and sub-questions.

2.7. Literature gaps & research focus

This research provides a conceptualisation of an open NSD process on a project level and delivers a profounder evidence-based understanding of the factors determining the success and failure in this process, specified on the collaboration strategy and timing & degree of openness. An analysis on micro level shows the factors of individual NSD projects since they are expected to differ considerably between different projects in the timing and degree of openness, which determine the timing and degree of openness on firm level. For this reason this research will focus on the project level.

According to the literature review on NPD and NSD research it is expected that market-based partnerships are most effective in the beginning of the process and less effective in the later stages. Since suppliers can add most value in the beginning and consumers throughout the process.

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19 3. Methodology

This section will describe the methodology used in this research. Based on the character of the research question and the propositions a combination of grounded theory and in-depth case study research is used in this research.

3.1. Grounded theory approach

The extant literature as discussed in the literature chapter offers limited guidance regarding the CSF’s in open NSD projects, a grounded theory approach supports the exploration of nuances and theory discovery from data (Glaser & Strauss, 1967). The usage of the grounded theory approach is based on the detailed, rigorous and systematic capabilities it offers, together with the flexibility and freedom for this dissertation (Jones & Aloni, 2011). Together with the suitability for research on complex multifaceted phenomena. This research however follows Dunne (2011) in conducting an early literature review, since it provides a compelling rationale for the study and it supports the contextualisation the study (McCann & Clark, 2003). During the research it is kept in mind that other theories are not imposed on the data (Urquhart, 2007). The foundations for the interview questions are shown in table 3.1.

This approach allows the shaping of an emergent theoretical framework based on the views of the participants, who are an integral element of this research subject (Strauss & Corbin, 2014). Especially when they are not hindered by the expectations of the researcher (Creswell, 2013). The grounded theory is not a part of case study research but they are overlapping (Myers, 2009). The used research strategy combines grounded theory and case study research methods. Both approaches for explanatory research and theory building are justified by the absence of systematic research in the open service innovation context (Eisenhardt, 1989; Glaser & Straus, 1967). This approach will offer a subjective and explanatory understanding of the open NSD process. To validate the explanatory stage this research employs a comparative in-depth case study.

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20 3.2. Data collection

This grounded theory and comparative in-depth case study are used to generate a model, however limits exist regarding the generalizability, and therefore the following precautions were addressed during the data collection. According to Seawright & Gerring, (2008) a strategic selection of the case increases the generalizability. Following Yin (2014) this research uses representative and typical cases with the implementation of an open innovation strategy, in which the NSD process and the collaboration strategy together with the degree and timing of openness can be researched in great detail. For the analyses of the problem framing and solving, a single case study is valuable method (Barzelay, 1993). The sampling decisions in this grounded theory / in-depth case study research are based on Hutchison et al., (2010). The theoretical sampling is responsive to the data instead of being established before the research begins (Corbin & Straus, 2014) and is used for the comparisons that lead to category identification. The cases are selected on their theoretical relevance. The chosen organisation is: iSkate which is an organisation with substantial knowledge and experience with collaboration projects. The focus on one organisation reduces the heterogeneity in the processes through which the outcomes are more isolated and this facilitates the comparison between the two cases. After conducting the first interviews based on the analysis a second case was chosen within the same company to show the factors influencing the NSD project performance by comparing and benchmarking the similarities and differences between a successful and a failure case. This comparison offers the opportunity to see if certain factors contribute to the success of a project or that there influence is of less determining influence. These sampling decisions are a function of the main research question and also support the continuing theoretical development.

The open research question indicates the usage of an inductive research design (Gill & Johnson, 2002). The relatively novelty of the field of open innovation for services requires the usage of a method which provides the tools to explore this topic. According to Yin (2014) and Ghauri (2004) case studies offer the opportunity to explore the research field in a situation where the current knowledge is relatively absent. These aspects also ask for studying the phenomenon within the context in which it occurs with examining one or few entities, together with intensive study of its complexity (Benbasat, Goldstein & Mead, 1987; Dubé & Paré, 2003; Yin, 2014). The explorative aspects of this research come forward in the crafting of a new framework. Case study research provides the possibility to generate new theories in fields with a minimum of previous studies (Eisenhardt, 1989). Not only the methodological choice is captured in the terminology of a case study, but also the object which will be studied (Locke, 2001).

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structure together with the main objectives and vision. The interviewees were selected based on their

pertinence to the project process. To guide the process of information gathering the structure of the interviews was based on several basic open-ended questions, which provided the possibility for necessary follow-up questions. Using this semi-structured approach it provides both an explanation for the subjects in the questions together with exploration of the obtained information (Kunz & Warren, 2011). Where it was taken into account that the participants should not be guided in their answers to the expectations of the researcher (Creswell, 2013). The questions are based on the conducted literature review, the main subjects of the questions and the articles on which they are based are summarised in table 3.1.

Table 3.1: Interview questions foundations. (During coding new insights led to further literature review) Questions regarding: Based on:

Nature of the service De Bretani (1989)

Product / market characteristics

De Bretani (1989); Knudsen & Mortesen, (2011) Newness: Atuahene-Gima (1996)

Open innovation characteristics

Chesbrough (2003); Chesbrough et al. (2006); Leiponen, (2012); Love & Mansury, (2007)

Project level Mishra and Shah (2009)

Partnership involvement Stages: Customer: Supplier: Competitor: Science-based:

Leiponen, (2005); Mansury & Love, (2008); Tether, (2005) Johnson et al. (2000)

Gruner & Homburg (2000); von Hippel (2001); Magnusson et al. (2003) Cousins et al. (2011); Villena et al. (2011); Song & Thieme, (2009) Lhuillerya & Pfister (2009)

Cockburn & Henderson, (1998); Fabrizio, (2009); Liebeskind et al. (1996); Mina et al. (2014)

Project Management tools Pinto & Prescott, (1988). Brown & Eisenhardt (1995); Adams, Bessant & Phelps

(2006); Cooper & Kleinschmidt, (1995); Ernst (2003); Slevin & Pinto (1986)

Market launch Easingwood & Storey (1996)

Project synergy Cooper & De Bretani (1991); Edgett (1994)

Sources of knowledge Behara & Chase (1993); Froehle et al. (2000) (Formalisation and steps)

Knowledge protection Alexy et al. (2009); Arundel (2001); Leiponen & Byma, (2009); Arora et al.,

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Project performance Atuahene-Gima (1996); Brunswicker (2011); van de Vrande et al. (2009);

Caloghirou, Kastelli & Tsakanikas (2004); Sofka & Grimpe (2010); Knudsen & Mortesen (2011)

Throughout the interview guide

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These subjects are followed to identify the CSF’s during every interview. The questions in the first part of the interview addressed general information about the organization and the project. The second part got more into detail about the process of the NSD process, followed by questions about the collaboration in this process, together with questions about the timing of opening up and the delivered value of each partner at certain stages in the process. The next part focussed on the knowledge within the project how this was transferred and implemented in the project. Furthermore the team characteristics and the managerial aspects were addressed. The last part offered the opportunity for the participants to give their view on which factors were thought to be relevant and influential for the open NSD project performance. The interview question scheme can be found in Appendix II.

3.2.1. Interview overview

After each interview the data analysis took place, which provided adjustments and new questions for the following interviews. The data analysis of these interviews led to 13 categories (see Appendix I). Interview results after analysis with Nvivo10, all interviews were conducted face-to-face and semi-structured; an overview of the interviewees is shown in table 3.2.

Table 3.2: Overview interviewees.

RTC Project (n=8) Abbreviation STP Project (n=6) Abbreviation

General Manager GM1 General Manager GM2

Technical Manager RTC project TM1 Project Leader PL2

Coordinator RTC project CO1 Project Member PM2

Project Leader/manager PL1 Project Member (external) PME2

Project Member PM1 Project Customer PC2

Project Member (external) PME1 General Manager check GMC2

Project Customer PC1

General Manager check GMC1

3.2.2. Company profile

iSkate was founded in 2010 as an umbrella organisation with the main goal to offer support to the entire career of juniors towards world class speed skating athletes. At iSkate an athlete can develop from the foundation at the speed skating academy towards a professional speed skater within a team with Olympic champions (iSkate, 2014). The company provides the management for seven different speed skating teams. iSkate offers all the facilities necessary for individuals to grow in the sport. Currently iSkate has 104 athletes in their speed skating teams, including two Olympic champions and World champions. (GM1).

iSkate collaborates with many different parties. The first cooperation started in 2009, this gradually

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Olympic medals other companies wanted to be a part of this collaboration.(GM1) The main purpose

of the collaboration is that, the knowledge and resources iSkate possesses are limited compared with

the possibilities other organisations can provide. Becoming an Olympic champion requires that all aspects regarding facilities and knowledge should be of the best quality and available to you the first, this is only possible by working together with the leading organisations in this field. (GM1)

Case 1 – Regional Talent Centre speed skating

This project is designed for a part of the athlete development program. The overall coordination is done by iSkate and the speed skating districts KNSB Groningen and KNSB Drenthe; they divide the four seats in the board of the organisation in this project. This in-depth case study focusses on eight partners in this project who are highly involved in this service, together with customer involvement.

Quote CO1: The overall project goal is to create a stable and continuous training/educational process, for speed skating talents.

The RTC project is a means to reach an objective of iSkate, which is to create a solid and stable trainings/educational route. The RTC supports this, since it opens doors and improves the whole educational route within our organisation (TM1). This project can be described as an incremental service innovation: The project itself is a combination of different projects already taking place in

mostly the United States; we used and combined those models to come to a system which works here in the Netherlands (GM1). We make decisions at iSkate, based on our vision, does this fit in our road to success or not, in this case the RTC project strengthens a part of our organisation, it benefits our learning curve, so that’s why we have chosen to set it up, to offer continuity to our target group.(TM1)

Case 2 – School team pursuit

The school team pursuit is a project in which iSkate participated for two years. After those two years they decided to stop with participating in the project with the current partners. They started a new project that is somewhat similar however with different partners, which is now in the development stage. The School speed skating team pursuit, it was a project for students on the high schools who

could compete on the ice against each other on different levels, with distinction between race skaters and amateurs. Also there was differentiation on age. (GM2)

The market in these case-studies is defined as the speed skating market in the Netherlands, according to the KNSB (2011) there are + 1,3 million active speeds skaters in the Netherlands. During the Winter Olympics the television ratings were at the 5 kilometre race 4,4 million viewers in the Netherlands alone (SKO, 2014). These viewers are indirect customers and for some partners this is a really important marketing channel especially in project 1.

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Table 3.3: Comparison of the two cases.

3.3. Data analysis

Following the earlier described data analysis by Dunne (2011), the collection of data and the analysis of the data was done simultaneously. This provides the advantage of being able to set out a clear analytic strategy (Miles & Huberman, 1994).

The interviews were transcribed directly after the interview session. To manage the data and to insure reliability the coding process was executed with the usage of NVivo 10 software (QSR International) (See Appendix I & II). To solve the analytic puzzle, memos were used throughout the coding process. The coding is done as described by Strauss & Corbin (1990) as the decomposing, conceptualisation and the reuniting of data; this took place at the following three levels:

Characteristics Project 1 (RTC) Project 2 (STP)

Project size # of organisations involved

8 16

# of direct team members 6 5

Sort of innovation Incremental Incremental

Duration 15 months 12 months

Project objective To offer the best training facilities

for speed skating talents in the North of the Netherlands

To promote speed skating among high school students.

(Expected) yearly revenue € 400.000 € 28.000

Perceived project success High Low

Main difference with existing comparable projects

Engaging directly with lead users and early adopters

A collaboration, in promoting speed skating

Market based partners Customers, suppliers, competitors,

NGO’s (regulators)

Customers, suppliers, competitors, NGO’s

Science based partners Participating in research consortia Are partly participant

Project management communication tools

Scrum, e-mail, weekly meetings E-mail, meetings

Project status during interviews In full scale launch phase NSD process evaluated

Next steps Evaluation and expansion of the

project when success

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1. Initial / open coding: Large quantities of raw qualitative data are decomposed, examined

compared, conceptualized and labelled, following Strauss & Corbin (1990). Proceeded with focused coding / category development which re-examines the initial coding and further focuses the data. Categories were based on clustered concepts that are related by a similar phenomenon.

2. Axial/Thematic coding is the procedure of the reconstruction of the data in new forms; the previous coding is studied and rearranged to make connections between categories to develop highly refined themes (Strauss & Corbin, 1990).

3. Selective coding, this story building stage requires the selection of the core categories and the validation of the relationships between categories, necessary further development and clarification of the categories also took place based on Strauss & Corbin (1990). Propositions emerged from saturated categories and themes.

3.4. Research design quality: Validity & Reliability

To insure internal validity the causal relationships and all explanations are examined, so the internal coherence is high which minimizes the chance of confounding (Yin, 2014). The comparative in-depth case studies provide the possibility to establish cross-case patterns in the NSD project process. The theoretical sampling strategy as mentioned earlier reinforces the external validity (Eisenhardt, 1989; Huberman & Miles, 1994; Yin, 2014). To further improve the accuracy of the findings in this qualitative research is by validating the results with respondents the analysis and the interpretations of the researcher (Creswell, 2013). This is done by discussing the findings and results with the general manager of the researched company.

A main test in this research is the construct validity, to test if the phenomenon is measured by the appropriate operational set of measures (Yin, 2014). The tactics used for this in is the usage of multiple sources of evidence. Data triangulation is used during the data collection stage, through accessing different sources of information and knowledge, these included: structured interviews, documentation about the projects procedures together with the strategic plans. Secondly a chain of evidence was established for the measurement of the constructs from multiple perspectives. This required not only data collection from within the company, but also with external partners and customers, to gather also the viewpoint from an external perspective. All different perspectives were systematically analysed and compared using Nvivo10. The comparison and findings will be presented in chapter 4. The project’s coding scheme can be found in Appendix I.

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Theoretical sampling

Data collection:

 In-depth case study

 Interviews

Codes Concepts Categories

Theor eti ca l Me m oi ng

findings of the in-depth case studies cannot be statistically generalized, however the findings are generalizable to a theory of the phenomenon being researched, this is also known as analytic generalization (Eisenhardt, 1989; Yin, 2014).

Summary of methodology

The qualitative methodological approach used in this research is schematically shown in figure 3.1, which resulted in a solid model with three main propositions. To uphold the quality of this research; validity, reliability and generalizability were taken into account. With the different steps involved in the research design, this approach leads to the findings described in the following chapter.

Figure 3.1: Followed research process.

Data saturation? Relationships between categories Open Innovation project

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27 4. Findings

The results of the analysis of the extensive critical success path of an open innovation new service development project will be presented in this section. First, some general findings are discussed about structuring the new service process, followed by a section in which the findings are grouped in two main categories namely collaboration strategy & timing of openness. These are discussed in-depth based on a comparison of the results between the success (project 1) and failure (project 2) projects.

4.1. Findings related to structuring a high-performance NSD process

The NSD process of project 1 has a timespan of 15 months during which 8 organisations are highly involved, the process is while conducting this research in the full scale launch phase. As the start of the process in developing a regional training centre for talents in speed skating, members of project 1 experienced the benefit of the collaboration with external partners and the team members concentrated on the project team’s success. It is useful to have so many different partners in the process who all

have their own expertise. This really helps to stay ahead of the competition and to create a competitive advantage. (GM1) These partners were professional trainers and medics, schools, universities, local

government, accommodation organisations, suppliers of materials, consultants in different areas, speed skating districts and the Royal Dutch Speed Skating Union (KNSB). In project 1 the NSD is seen as a process, of which the quality improved by constructing quality checks and control mechanisms. The identification of the core processes and tasks that needed to be executed contributes to the focus on achieving the core objectives, which determine the completeness of the project. The main objective is creating a top-edge trainings opportunity together with all partners, for a continuous period and eventually expand towards other locations.

4.1.a. Process execution

The concentration of project 1 is on the systematic execution of the innovation process, with a focus on the high-performance execution of the NSD process. When certain partners or steps were not seen as vital for the achievement of particular objectives they were left out of the process in project 1. The

ability of each partner to execute their task effectively, offered the opportunity to have structured meetings and created trust in the execution. This reduced the attention to details of the other partners. (PL1)

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This led to the following rational: Working together with a variety of partners could lead to something

great but can also lead to a disaster (PM2). At the start of project 2 all partners where enthusiastic to begin, only quite early in the collaboration three partners started to notice that their goals of the project were quite far apart from each other. During a meeting we tried to align those goals, but especially one partner did not agree at all to any changes. (GMC2) This hard attitude towards the

other partners minimized all effort the other partners wanted to put in to achieving the goals of the partner who did not agree. Eventually this resulted in a standstill between those partners. All flexibility in the process was gone. (GMC2) The alignment and the wrong management led to the escalation. It is expected that earlier usage of project management tools could have prevented the low results from the project (PM2, GM2).

The analysis of the data showed a distinction between focus, the successful project focused on the key parts of the innovation, where during the failure project the focus was on less crucial parts of the innovation. This negatively affected the relationships within the project team which in return damaged the achievements of the key parts of the innovation. Combined with the fact that in project 2 all participants needed to be consulted before any steps could be made, this reduced the speed and also the flexibility of the decision making process. To guide this process both projects made use of project management but used them in a different way.

4.1.b. Project management tools

The limits in a project are: time, cost, performance and good customer relations (Kerzner; 2013). The usage of project management tools and techniques in the process of planning, directing, monitoring and controlling can be beneficial for the realisation of R&D projects (Pinto & Prescott, 1988; Kerzner, 2013). These tools and techniques might furthermore improve the interaction between the collaborating partners. In the following section the most influential attributes of project management based on Kerzner (2013), which were of significant influence according to the team members are compared and discussed.

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that you need to write down every arrangement that you make and verify it with the other organisation. And you really need to make sure that people with whom you’re working and communicating have the ability and also the authority to make decisions that are important for the project. (PME2) The ideal situation would be one where everything is well defined and written down,

however this requires a tremendous amount of work, which can’t be done by the project leader, and is not beneficial for the speed of action within the project’s process.

Another often mentioned factor was the quality of the project. The quality delivered by the individual partners in both cases was according to all participants relatively high. However through communication difficulties in project 2 the outcomes of the different partners were not completely aligned, which negatively affected the quality of the project. The process quality was restricted by the

other partners with whom we had bad contact, such as limitations on branding and specific targeting. This really slowed down the process and reduced the quality dramatically. (PME2)

The following factor is the scope of the project. All effort that needed to be put into the project to produce a deliverable that meets the requirements that need to be fulfilled for the customer’s satisfaction is called the scope of the project (Kerzner, 2013). However it needs to be highlighted that a difference is found in the approach to the scope factor. The continuous enhancement of the projects objectives in the projects deliverables (scope creep) is seen in project 1 as positive, since more can be gained from the project. Where in project 2 this expanding scope of the project is seen as negative and the extra effort would not lead to extra benefits at the end of the project.

The overall objective of any project will be to execute the whole scope of the project to the satisfaction of the customer within a certain time and budget. These factors influence the success of the final offered service. Good planning and direct communication are critical to successful project

management. These factors are able to prevent problems from occurring or can if problems occur minimize the impact on the achievement of the project objectives. (PL1)

A collaboration offers opportunities regarding the budget, but when the overview is blurred the costs of different parts of the project could increase, without having knowledge about this increase. Early indications of the costs in project 2 (PM2) differed much more in a negative way from the actual costs. The estimations were too optimistic. Where in project 1, also differences occurred but these were compensated in other parts of the project. This was possible because project 1 had more separate elements which were not directly linked in their costs and performance.

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0 2 4 6 8 10 # ment io ned d u ring int er view s

Factors influencing the NSD process

Project 1 Positive Project 1 Negative Project 2 Positive Project 2 Negative

on the NSD process. However timing and flexibility also play a determining role in the NSD process, these will be discussed in the following section.

Figure 4.1: Factors influencing the NSD process.

4.1.c. Timing & Flexibility in the process

Working together with other organisations who have other cultures can have an effect on the execution time of parts of the project. This can be avoided by making arrangement regarding goals, based on estimations. In project 2 the planning was too optimistic, so the failure of the project was not only an actual failure (poor performance) but also a planning failure (difference between planned and achieved performance), which together is the perceived failure (Gilbreath, 1986). This increases the pessimistic feeling about the project. In project 1 the planning was more accurate so the perceived failure of milestones was smaller when a delay occurred during the process. Project 1 made use of Scrum which is a project management tool for agile and unpredictable projects, which are characterized by uncertainties in the requirements such as software development (Koskela & Howell, 2002; Schwaber & Beedle, 2002). The method of agile project management is incremental and iterative and manages the NSD/NPD design together with core team members, customers, suppliers (Highsmith, 2009). These tacit and explicit exchanges of knowledge occur in a flexible manner (Highsmith, 2009).During this project we made sure the time schedule was also clear to all partners, something that it is highly important in my eyes. By example delays in the process were communicated as early as possible, so the process could be adapted, since all steps interact with each other. (PL1)

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equipment was not able to deliver them on time. With a lot of effort and determination another

supplier was found, however this required adjustments in other equipment of a couple of partners and customers together with changes in time schedules to make everything fit within the process before the final execution stages were reached (GMC1).

4.1.d. Managerial accountability

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Table 4.1 summarizes the findings regarding the structuring of a high-performance NSD process, which led to four propositions.

Table 4.1: Summary of findings and propositions regarding the NSD process based on findings. Project 1 Project 2

A high-quality all-encompassing execution

Concentrated on:

- the systematic execution of the innovation process.

- focus on the high-performance execution of the new service development process.

Concentrated on:

- the view of their own firm and especially during the down-turn,

- fixation on how the collaboration negatively affected their own firm.

The successful project focused on the key parts of the innovation, where during the failure project the focus was on less crucial parts of the innovation.

1-a A high-quality all-encompassing execution of the innovation process throughout the project increases the chances of successful new service innovation.

Project management tools

Usage of Scrum improved communication and planning.

Lack of usage of project management tools, with emphasis on communication, quality and scope, reduced the monitoring and controlling of the NSD project.

The planned and well communication of the management tools support the defining of the organization's strategic direction, together with managing the process scope and costs and fulfilling customer needs. This improves the stability of the NSD process.

1-b Applying decisive project management tools improves the stability of the NSD process.

Timing & Flexibility (emergent)

Openness for quick adjustments increases the performance of the project.

Actual and planning failure.

When the flexibility increases in the process, quick adjustments can be made to increase the success of that part of the innovation process.

1-c Flexibility in an open innovation project is vital for the right adjustments when necessary.

Managerial accountability (emergent)

The decision making process was quick since the participating members had the authority to make the majority of the main decisions

No clear leader on all aspects, and the results had a minimum measurable effect on the participating organisations management

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33 4.2. Findings related to collaboration strategy

Behind every organisation and every project there is a strategy, which can have very different purposes and depends on many different factors. Each organisation has its own strategy, in a collaboration these strategies should somewhat align. This strategic fit is necessary to avoid problems in the relationship. The collaboration can be seen as an alliance in which multiple parties invest to

gather benefits of each other. A lot of created knowledge flows directly back to the organisations and is used in other projects, products and services. (GM1)

4.2.a. Clear and aligned goals based on a long-term vision / purpose

Different aspects of the partnership will affect the NSD project performance. The reasons for collaborating were mainly that without the partnerships the end result would never be so good (GM1, PL1, PL2). At the start of a new service project every party has an idea of what the final service should do and achieve. Within project team 1 the long-term vision was well present at the start of the project. Surprisingly these visions are sometimes quite different between partners, the interviewees argued that coming to a common vision is beneficial for the execution of the project. Usage of brainstorm sessions contributed to this (GM1). In project 1 all respondents showed they had a clear idea of the long-term vision of the project together with an idea of the next steps, these were quite aligned. The technical manager gave the following example: We have really clear ideas on this point and the KNSB also, that

should match, we often look through the glasses of iSkate and sometimes we take them off and we see what is best for the speed skating in the Netherlands. Because eventually we also benefit from what is best for the speed skating in the Netherlands, since more people start skating and the fan base grows. (TM1)

A contrary approach was found in project 2, here a lot of different partners were included in the collaboration with a wide variety of objectives. All wanted to organize a series of events which benefitted their own organisation. They came up with the idea of organizing a team pursuit for high schools in the Netherlands, with qualification races throughout the Netherlands.

In project 1 the focus was on the long-term, where the focus of project 2 was more on the short-term (with a maximum of two years for most partners). Also the alignment of the vision was problematic in project 2, the visions differed which led to a different interpretation of goal importance and quality differences. According to the project leader: we were not able to come to a mutual understanding, but

we wanted to execute the idea as soon as possible due to time restrictions so we started the process, by this decision we did not had a framework in which the visions and objectives were aligned, I think this negatively influenced the collaboration success (PL2).

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fulfil and that they have an overview of the organisational goals and objectives, together with an idea of the changes in priorities over time. (PL2, PME2) During project 1 long-term goals were established and evaluated monthly by the main project members, the outcomes were communicated to the other members and their own organisations. The short term goals and tasks were talked through weekly by the executing project members and kept up-to-date for the project leader in Scrum (PL1). The alignment of the goals at the start of the process takes away a lot of questions and frustrations, it offers the opportunity to work constructively with partners who also have their own goals. (GM1)

This lack of a joint focus and alignment of the vision and strategy led in project 2 to doubts among partners towards each other’s effort and knowledge input (PM2, PME2). Partners started to lose trust in each other which had a negative effect on the relationships which in turn negatively affected the input of effort and knowledge by each organisation. This decreased the project’s performance. Argued by the respondents from both projects is that discussing the objectives of the project together with explicit goals within the process, ensure the calibration of the goals between the partners. This will be necessary for successful and stable long-term relationships (PL1, PL2). Where in project 1 the strategy regarding the project is thought through, with knowing the relevant input a certain partner can give, in project 2 the partners want to learn from each other and want to be involved in every step of the process, this delays the process in comparison with project 1 the process.

4.2.b. Collaboration boundaries

The following section will describe the boundaries of a collaboration strategy, these include the previous experience of the partners, the shared responsibilities and the managerial accountability. The first boundary of the collaboration are the team characteristics, including the team composition, leadership and responsibilities those are thought of as crucial especially in project 2. A solid

collaborative relationship is built on mutual trust and respect. These should be established at the start of a new project and within the project team. (PME2) This highlights the importance of partner’s

choice especially if the project starts to show the first cracks in achieving its goals. The project’s

environment is highly volatile, so choosing the right partner is vital for retrieving the best knowledge and products (GM1). This also means that all partners should focus on what they´re good at, which is beneficial for all. (CO1) We try to make trains, so every partner can provide the resources which they can deliver cheaply or the best, this is beneficial for both the project as well as the partner (TM1).

Since each organisation is different, with its own culture and own aims, the way of executing the project should fit with the other collaborating partners to create a relationship where trust is present (PL1). Choose the partners with care and don’t work with too many partners, so communicating with

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showed conflicts in this area. During this project partners had different attitudes, because some were

volunteers, others non-profit organisations (NPO) and others profit firms. These differences within a team can increase the creativity and with that increase the performance of the project as seen in project 1. However the different members in project 2 had major difficulties working with members with another attitude, especially regarding the working ethos (PM2, PME2, GME). Also the specific knowledge and the decision making authority of the partners lacked with foremost the NPO, this slowed down the process (PM2).

In project 1 there was a clear division between responsibilities, direct from the start. By using scrum and email all members were up-to-date of all decisions and actions made (PL1, PM1). All agreed upon the task division and everyone is responsible for the execution of their task. Where in project 2 there was limited division between responsibilities. Responsibility among team members can increase the performance of the project. This is shown in project 2 where there was according to some respondents no clear leader on all aspects, and the results had a minimum measurable effect on the participating organisations management. This led to the following issue: no one felt responsible for the

communication towards the customers, eventually one team member became so annoyed that this team member started the whole communication process towards the customers, but it started off too late to become a success (PM2). This is contrary to project 1 where there was an overall leader who was

accountable for the actions of the project team and the results of the project quite directly influences the performance of the participating organisations. While the members had the freedom to make decisions and felt responsible for making the right decisions. To avoid future problems the main partners of project 1 including the customers sign a contract, this is thought to be beneficial for the relationship. Just like in a marriage it is useful to write all agreements upon paper during the good

times, this will make it a lot easier if bad times come in a relationship (PL1). This was lacking in

project 2, which negatively affected the responsibility feeling with certain partners, who refused to execute certain tasks. The main problem that arose from this point was that the communication towards potential new customers was lacking (PM2, GME).