New Product Development in SMEs
How do new product development processes in SMEs work and what influences the product
development speed?
Master Thesis – Small Business & Entrepreneurship
Sjoerd van Dijk
Supervisor: Ir. Chintan Shah Co-assessor: Dr. Olga Belousova
Date: June 21, 2015 Word count:
University of Groningen, Faculty of Economics and Business MSc. BA – Small Business & Entrepreneurship
Preface
This master thesis represents the work I have done in the context of the Master Business Administration Small Business & Entrepreneurship at the University of Groningen. The topic of this master thesis is New Product Development (NPD) in small and medium-sized enterprises (SMEs). The type of research is theory development, which means that the literature related to the business phenomena is still very exploratory in nature for SMEs and therefore a multiple case study methodology was selected to test general theories of NPD within the specific context of the biobased industry. The end result is very satisfying after one semester of hard work. Through this way I would like to thank a number of people who have been particularly important for the realization of this thesis.
First of all, I want to thank my supervisor Ir. Chintan Shah, he provided me with support, advice and guidance. In addition, I want to thank Dr. Olga Belousova for her role as co-supervisor.
Secondly, I want to thank the case firms for their time to conduct my interviews.
Thirdly, I want to thank my fellow Small Business & Entrepreneurship students Francois Brand and Jorn van Eck for their participation, guidance and support during the final year of college.
Last but not least, I want to thank my close friends and my father and sister for their moral support. I hope you will enjoy reading this thesis.
Abstract
Despite the fact that the small business sector provides most of the new jobs, make major contributions to social and economic growth and that the large diversity of small firms generates a great variation of innovative firms, most of the new product development (NPD) literature is emphasizing large firms or even multinationals. The goal of this research is to refine our current understanding of NPD processes and identify the factors that affect NPD speed in small and medium-sized enterprises (SMEs). This empirical research is conducted on the basis of a multiple case study within three SMEs operating in the biobased industry in The Netherlands and has resulted in interesting findings and insights regarding the existing and inconclusive literature. On the basis of these results, it can be concluded that the NPD processes in SME were characterized by: continuously testing, experimenting, iterative and multiple routes are left open concerning the launch of a new products. This is in contract with existing literature which is in favor to perceive NPD as an implemented systematic process for moving a new product through various stages from idea to launch. Concerning factors affecting NPD speed, a total number of nineteen factors in SMEs were identified and applied to the multiple case study. In total five key factors affecting NPD speed in the biobased industry were identified: formalized processes & centralization, lack of team experience/skills in human capital because of scarcity, frequent number of design iterations, complex NPD projects and regulatory burdens. An important theoretical implication of this research is that it advanced existing theories with factors influencing NPD speed, since this research proposes three new insights on factors influencing NPD speed. Next to this, this empirical research adds to our knowledge that NPD processes in SMEs are different from existing theories. In summary, the multiple case study results are expected to be seen as a source of information and as a considerable step forwards towards the understanding of NPD processes and factors influencing NPD speed for future empirical research in SMEs in other industries and other countries. However, future research should focus on comparing different industries, in diverse countries and more in-depth case studies with different respondents within SMEs.
Keywords: New Product Development, New product Development Speed, SMEs, Theory Development, Multiple case study, Biobased industry.
Table of contents
Preface ... 2
Abstract ... 3
1. Introduction ... 6
2. Literature review ... 9
2.1 Elements of the NPD process: definitions ... 9
2.1.1 Formalized NPD processes: Stage-Gates ... 10
2.1.2 Codevelopment & Open innovation ... 14
2.1.3 Multifunctional teams ... 15
2.1.4 Partnerships ... 15
2.1.5 Conclusion ... 16
2.2 Factors that affect new product development speed ... 16
2.3 Key factors for NPD speed of an SME in the biobased industry ... 17
3. Methodology ... 20
3.1 Definition of an SME and ‘new products’ ... 20
3.2 Research Method: Theory development ... 21
3.3 The multiple case study design... 21
Phase 1: Exploration and elaboration of phenomena not fully explained in literature ... 22
Phase 2: Observation of phenomena and data collection in three case studies ... 22
Phase 3: Develop explanations by within- case & cross-case analyses for observed phenomena .... 24
Phase 4: Discussion, Conclusions and Implications ... 25
3.4 Quality criteria ... 25 3.4.1 Controllability ... 25 3.4.2 Reliability ... 26 3.4.3 Validity ... 26 4. Results ... 27 4.1 Within-case analyses ... 27 4.2 Cross-case analysis ... 27
4.2.1 Cross-case analysis: NPD processes of the three case firms ... 28
4.2.2 Cross-case analysis: Factors influencing NPD speed in the three case firms ... 29
6. Conclusions ... 41
Theoretical implications ... 43
Managerial implications ... 43
Limitations & Future research ... 44
References ... 46
Websites used related to biobased industry ... 51
Appendices ... 52
Appendix A – Brief description of the biobased-industry ... 52
Appendix B – Theoretical framework for interview guide ... 54
Appendix C – Results of interview guides ... 56
Appendix C1 – Interview guide Case firm A ... 56
Appendix C2 – Interview guide Case firm B ... 63
Appendix C3 – Interview guide Case firm C ... 69
Appendix D – Within-case analyses... 77
Appendix D1 – Within-case analysis Case firm A ... 77
Appendix D2 – Within-case analysis Case firm B ... 80
1.
Introduction
If the world was stable, there would be no need to change business processes and models, nor to understand what has changed or what works well (Griffin, 1997). However, firms operate in rapidly changing environments. As source of a competitive advantage, the introduction of new products is considered as a key driver in order to cope with these rapid changing environments for firms large and small (Akgün, Lynn, & Byrne, 2004; Chang, Hu, & Hong, 2013) and to reach the market as fast as possible (March-Chordà, Gunasekaran, & Lloria-Aramburo, 2002). How firms deploy their resources to achieve new product development (NPD) has been characterized as a key determinant in obtaining and maintaining a competitive advantage (Prahalad & Hamel, 1990). In addition to this, the introduction of new products can enhance the competitiveness and market position of a firm in any phase of the market (Woodcock, Mosey, & Wood, 2000). Nowadays, customers become more and more aggressive in demanding for new products on a short term. Firms continuously need to introduce new products or services quickly to the market to cope with the changing demands and dynamic business environments. There is a need for radical innovation of products when properties, features, qualities and use of materials differ significantly from pre-existing products (March-Chordà et al., 2002). In order to achieve or keep their competitive advantage, firms need to make the right choices with respect to their NPD portfolio (Chao & Kavadias, 2008). Firms aim for a successful triangle of sales, marketing and R&D to improve their NPD process (Ernst, Hoyer, & Rübsaamen, 2010).
management). Yet, lack of financial and human resources are key constraints for SMEs to invest in R&D activities and market exploration (Lin & Piercy, 2012; Mosey, 2005; Pitta, 2008). Large firms possess a substantial amount of resources and can approach the NPD process in a systematic way (Pitta, 2008). Despite the major innovative contributions of SMEs, they often lack the ability to appropriate the value of new introduced products (Nguyen & Kock, 2011). Effective NPD is recognized as a core process that ensures the success of companies and improving NPD is a key factor for the success of a company (Costa, Rozenfeld, Amaral, Marcacinit, & Rezende, 2013). This success is needed for SMEs to be compatible and aim for growth to ensure survival (De Jong & Vermeulen, 2006). Therefore, SMEs should compete with large firms by developing new products which are novel and often simpler technologies (Mosey, 2005). In this research an attempt has been made to analyze the NPD processes in SMEs with the help of empirical research in Dutch SMEs.
Since NPD speed is one of the key determinants in the relationship between speed and successful product launch (Cankurtaran, Langerak, & Griffin, 2013), there is a need to understand why speed is important. Prior studies have investigated this need and speed is important because of several arguments. It brings first mover advantages (Dröge, Jayaram, & Vickery, 2000; LIEBERMAN & MONTGOMERY, 1988) and if so, firms can appropriate scarce resources and suppliers (H. Lee, Smith, Grimm, &
Schomburg, 2000). As mentioned due to competitive globalization firms need to innovate, deliver new products to keep in pace with changing customer values (Chang et al., 2013; de Brentani, Kleinschmidt, & Salomo, 2010). An increase in NPD speed also allows firms to adapt quickly to rapid changing
environments (Eisenhardt & Tabrizi, 1995a) and address the changes in customer needs designed by introducing new products. The continuous reduction in product life cycle time and intensification in competition from technological advancements and globalization forces firms to increase speed (Chen, Damanpour, & Reilly, 2010). Next to that, managing NPD speed is extremely important for products and industries with few strategic options of opportunity (Cankurtaran et al., 2013). So from a strategic
perspective it is vital to understand the importance of NPD speed to create a first mover advantage, fast-follower strategy and/or fast product development cycle time (Kessler & Chakrabarti, 1996). As it is the case with literature on NPD processes in SMEs, literature on NPD Speed in SMEs is not studied in-depth. So this research contributes to literature by identifying the factors which influence the NPD speed in SMEs.
How do new product development processes in SMEs work and what influences the
2.
Literature
reviewTo get a suitable and comprehensive understanding of the two main subjects, NPD processes and NPD speed, explanations of these terms will be provided in this section. A literature review was conducted and provided of NPD processes (section 2.1), NPD speed (section 2.2) and factors influencing NPD speed in SMEs (section 2.3).
2.1 Elements of the NPD process: definitions
There are various definitions of new product development (NPD) in literature (Acur, Kandemir, & Boer, 2012; Cooper, 1988; Costa et al., 2013; Ernst et al., 2010; Fang, Lee, & Yang, 2015). This can be
explained by the fact that the definition changed incrementally during the years, after the introduction of the model by Cooper (1988) which emphasizes more on formalization and Stage-Gates, due the effect of changing environments (MacCormack, Crandall, Henderson, & Toft, 2012). Existing literature outlined that NPD processes are continually evolving and are becoming more sophisticated, so that firms keep their NPD practices up to date and will lose their competitive advantage (Griffin, 1997). According to Griffin (1997) firms cannot stagnate in their NPD process, because competitors do not. So firms need constantly change or they will be left behind. In the following subsections the main themes are explained of the NPD process and applied to SMEs: formalized NPD processes, codevelopment & open innovation,
multifunctional teams and partnerships. As shown Table 1, various definitions of NPD processes are used in literature.
Table 1
Definitions of new product development
Definition Author(s)
“Implemented systematic process for moving a new product project through the various stages from idea to launch. Which is linear in nature and relies on extensive documentation across a fixed set of activities.”
(Cooper, 1988)
“New Product Process: a formal blueprint, roadmap, template or thought process for driving a new product project from the idea stage through to market launch and beyond.”
(Cooper, 1994)
“The NPD process spans from early discovery stages through basic research to late stages of commercialization, and codevelopment might occur at different stages along the way.”
(Fang et al., 2015)
“New product development (NPD) is a business process aimed at converting market opportunities, technology, and customer needs into technical and commercial solutions.”
(Costa et al., 2013)
product and related production process development activities of a business unit. The NPD process may be organized in many different ways, using functions or departments such as R&D, product
development, design or engineering.”
“NPD in practice is an interdisciplinary activity requiring contributions from all of the functions of a firm.”
(Lin & Piercy, 2012) “NPD is a business process aimed at converting market opportunities,
technology and customer needs into technical and commercial solutions”
(Clark, 1991)
“New product development is a complex interdisciplinary activity which requires high levels of strategic integration plus deployment of organizational competencies for success”
(Hendry, 1989)
NPD in Large firms vs SMEs
Large firms are strong in research, invention, efficient production and distribution, which exploits the effects of scale and scope (Nooteboom, 1994). In SMEs the NPD activities must be undertaken with limited resources, which theoretically implies that SMEs have to make effective and efficient use of their resources and limitations of managerial time if they want to innovate. SMEs cannot do extensive market research and make large investments in research and development (Mosey, 2005), however the early involvement of personnel in all divisions is a major advantage which reduced quality problems in later stages (Woodcock, Mosey & Wood, 2000). Aspects which discourages the participation of SMEs in NPD are the costs involved with the NPD projects and the uncertainty of the market acceptance (March-Chordà et al., 2002; Nooteboom, 1994). Another major difference of SMEs compared to large firms in the NPD process, is the lack of knowledge in the organization on management practices in how to conduct market research, management of finance, strategy formation and implementation or control production processes (Piercy, 2009) and do have smaller technological knowledge (Mosey, 2005). However, a lack of resources of SMEs compared to large firms is not automatic deterrent to success (Pitta, 2008)
Therefore the definition used in this paper, which is more suitable for SMEs, is: “NPD in practice is an interdisciplinary activity requiring contributions from all of the functions of a firm (Lin & Piercy, 2012)”. Whereas in SMEs these interdisciplinary activities differ from large firms due to constraining resources in financial and human capital (Burg, Podoynitsyna, Beck, & Lommelen, 2012; Howieson, Lawley, & Selen, 2014; Mosey, 2005; Pitta, 2008).
2.1.1 Formalized NPD processes: Stage-Gates
developed an approach, guideline, blueprint that can be applied to the new product project level. It leads to action steps that can be implemented as part of the new product process. The new product process, in which a more systematic approach is used to launch new products, is a guide for management practices. The stage-gate model of Cooper serves to map and control the new product process. It simply applies process-management methodologies to the innovation process (Cooper, 1990). Nowadays, the research results of Booz-Allen and Hamilton (1982) and Cooper (1988) are still used as the basic theory to describe the NPD processes in firms and described as best practice in especially large firms. In figure 1 the Stage-Gate model of a formalized NPD process is shown.
Figure 1. Stage-Gate model of the NPD Process. Adapted from “The new product process: A decision guide for management”, by R.G. Cooper, 1988, Journal of Marketing Management, 3(3), 238-255.
Previous research identified success factors of implementing a formal Stage-Gate model: (1) assign cross-functional teams with different activities executed from many different departments, (2) use a holistic process from idea through launch, (3) use a strong market orientation and (4) flawless criteria for go/no go decisions on each gate (Cooper, 1994; Howieson et al., 2014). Next to that, support of top management is an important factor in NPD success (Ledwith, 2000). However in SMEs, skills and competences of owner manager and employees are more important (Hoffman, Parejo, Bessant, & Perren, 1998), because in SMEs it would be highly unusual to undertake NPD projects without support of top management (Ledwith, 2000).
However, SMEs are usually resource constrained and cannot ensure all these pre-development activities (Burg et al., 2012). Besides that, SMEs are characterized by lack of human resources, which means the development of cross-functional teams can be problematic (Howieson et al., 2014). Thus a systematic approach of ‘manned’ gates with project teams and a project leader may not be applicable for SMEs. The steps which must be taken to launch a new product cannot be mapped and controlled in SMEs at all times due to limitations human and financial resources (Burg et al., 2012; Howieson et al., 2014; Mosey, 2005; Pitta, 2008) and the Stage-Gate approach is characterized by rigid, time-consuming and inflexible. On the other hand, SMEs are more flexible than large firms because of their size and usually have strong interactions with customers, which enables them to rapidly respond to technical and market changes (Berends et al., 2014; Scozzi, Garavelli, & Crowston, 2005). SMEs favor short-term product developments they can control and progressive resource commitments and risks they can afford (Berends et al., 2014).
In SMEs, ideas could make it to the introduction-to-market stage without being assessed with a thorough stage-gate process (Pitta, 2008). In large firms, effective governance control for portfolio management is needed during the NPD process (Baker & Bourne, 2014). Nevertheless, a more formal new product process could increase the success rate of the NPD performance projects heavily (Booz Allen & Hamilton, 1982). So managers should not automatically skip the stages of clear-defining project goals in the development phase and up-front stages, but use strong gates to facet the NPD process.
Nowadays, the majority of markets are characterized by changing demands and dynamic business environments firms should be adaptive and must quickly respond to changes, there is a need for
continuous efficiency and speed. According to MacCormack et al (2012) changing business environments need to adapt different new product development processes. Dependent on the business context and the sustainable competitive advantages they possess, SMEs have to choose a NPD process and incrementally change it along the way of delivering (de Brentani et al., 2010). Griffin (1997) and Baker and Bourne (2014) argued that a lot of firms use some kind of cross functional stage-gate process for NPD of idea-to-launch, but still a lot of firms still use no formal process for managing NPD.
Hence, there is no uniform or formalized NPD process characterizing the development of products or innovation in SMEs or large firms. SMEs deploy their resources differently from large firms in NPD activities.
Empirical findings of NPD processes in SMEs
Furthermore, the NPD process is rather simple and short than extensive. They indicated that the NPD process in SMEs is going through only four stages: original idea, brief development, prototype and fabrication. The process is less planned and formalized than literature recommended. In the research of March-Chorda (2002) just a small amount of firms followed a formalized and ordered plan in their NPD processes, opposite of the literature stream on step-by-step Stage-Gates. In support of this findings, Rycroft and Kash (2002) claimed that firms should use a trial and error approach while introducing new products to the market by constantly building new networks of customers and suppliers. However this approach may not be applicable for SMEs since they are less credible than large firms in the perception of a new partner by customers and suppliers. According to Pitta (2008) small businesses often do not follow a formal NPD process, they have a propensity to rely upon the owners’ opinion and staff thoughts. This results often in emotional decisions and not in pure objective decisions based on clear criteria. The research of Siu et al. (2006) in China and Taiwan provided evidence that the vast majority of SMEs did not use a sequential NPD process, instead they jump from one stage to another. Next to that, SMEs excel in technical aspects of NPD, but lack the marketing skills to exploit the technical innovations (Huang, Soutar, & Brown, 2002). So the NPD process is underdeveloped after the invention and the launch will not succeed because of poor performed marketing activities (Howieson et al., 2014).
Pitta (2008) emphasized in his research that SMEs do not have the same depth of personnel and expertise. SMEs usually do not have product or category managers with additional support staff to monitor and control product performance. So SMEs lack the sufficient information to make the most effective choices. According to Pitta (2008) if there is a high level of competition, more complex products are in the product portfolio, more regulations have to be followed and more customers have to be served, the need for planning, formalization, goals and objective increases for firms in the NPD process.
In their research in high-tech SMEs, Akgun et al. (2004) identified the opposite, that SMEs should foster a stage-gate NPD process to make a NPD project successful. The NPD processes which was
followed was: idea generation, screening and evaluation, development, testing and launching. This is in line what Cooper (1988) proposed and what was mentioned before. Managers should develop a clear project vision, create and follow mechanisms to track the project’s progress, encourage communications including documentation among the diverse project teams within the firm and increase team cohesiveness. A managerial focus to innovation is often regarded to be a key factor in realizing product innovations (De Jong & Vermeulen, 2006). In their research on Australian SMEs, Huang et al (2002) concluded that a majority of the firms undertook most of the activities suggested by the stage-gate approach of Cooper (1988). However, these firms carried out marketing-related activities less regularly than technical activities.
Hence, there is a vast number of studies in favor of formalized Stage-Gate approaches to succeed the NPD process, especially for large firms, but the few empirical findings that exist indicate that this may not be the case for SMEs. Instead SMEs lack the resources to do effective pre-development research and the NPD process is characterized as more ad hoc and based on emotional decisions of the owner manager. 2.1.2 Codevelopment & Open innovation
crucial in obtaining important information to meet customer expectations and influences the new product performance profoundly (B. C. Y. Lee & Kou, 2014). Firms acquire and gain knowledge from their customers used for the NPD process.
Codevelopment is in line with the stream in literature of open innovation (West, Salter, Vanhaverbeke, & Chesbrough, 2014) to use an extensive variety of external actors and resources to support in achieving and sustain innovation. The research of Ledwith (2000) indicated that Irish SMES are not effectively defending their investments in new technologies and there were lower levels of
involvement with external parties compared to large firms. Next to that, SMEs were less likely to interact with customers and suppliers. These findings indicate that these SMEs did not make use of pooled human and financial resources to overcome constraints. Due to labor mobility, abundant venture capital and widely dispersed knowledge across multiple public and private organizations, a growing number of firms, especially large firms, has moved to an open innovation model (van, de Jong, Vanhaverbeke, & de Rochemont, 2009). SMEs are also more likely to engage in open innovation. The most important motives of open innovation are keeping up with the market developments and meeting customer demand (van et al., 2009). According to van de Vrande et al.,(2009) customer involvement, external networking and employee involvement are fairly common innovation practices in SMEs.
2.1.3 Multifunctional teams
In recent literature there seems to be an agreement concerning the necessity to use a cross functional team in the NPD process (Ahmad, Mallick, & Schroeder, 2013; Barczak, Griffin, & Kahn, 2009; Cooper, 1994). The NPD process is characterized as multidisciplinary activities between people from all different functions within the firm with strong leadership and high level of ownership and accountability (Ledwith, 2000). SMEs could more easily make this organizational configuration of creating an integrated project team due to their smaller size and greater flexibility (Mosey, 2005). However, because of the lack of human resources in SMEs, the development of a complete well established cross-functional team can be problematic (Howieson et al., 2014). So, while a cross functional team can contribute to NPD success in the process of NPD, it may not be applicable for SMEs.
2.1.4 Partnerships
Mosey (2005) argued that partnerships are essential for SMEs to exploit new technologies. During these partnerships SMEs explored with new technologies in new markets and generated knowledge. The research of Noke and Hughes (2010) stressed that partnerships, especially alliances, licensing and
of flexibility (Aragón-Sánchez & Sánchez-Marín, 2005). Due to rapid changing environments and the mentioned resources constraints, it is much more difficult for SMEs to build a strong market position on its own. In support of these findings Deeds & Hill (1996) found that a small number of alliances increased the NPD process and success significantly in order to overcome resource constraints and skill gaps. However, the findings of Ledwith (2000) suggest that smaller firms report lower levels of involvement and interaction with customers and suppliers in developing new products with other firms than large firms. Thus, SMEs should have a hybrid form in the NPD process consisting of in-house development,
complementary with different kind network partnerships and outsourcing. 2.1.5 Conclusion
From this literature review on NPD processes it can be derived that there is no ‘ideal’ process which can be applied either in large businesses or in SMEs. The practices of NPD in large firms compared to small firms is unlikely to succeed if small firms’ unique characteristics are not taken into account (Berends et al., 2014). Many of the factors in the NPD processes in large firms are not applicable for SMEs. This research aims at providing a more comprehensive understanding of the process of NPD in small businesses.
2.2 Factors that affect new product development speed
NPD speed is differently defined in literature. According to Kessler and Bierly (2002) it is the ability to move quickly from ideas to actual products. This is an important intermediate outcome of the NPD process (Cankurtaran et al., 2013). It is a key determinant of NPD success, but it is only one of the several determinants of NPD success. Literature is still inconclusive and conflicting in relationship with other determinants of NPD success such as product performance, market share, profitability (Ahmad et al., 2013), development costs, product quality (Chen et al., 2010). In this research, combined with the review literature on NPD processes in section 2.1, the NPD speed of a firm is defined as follows: it represents how quickly an idea moves from conception to a product in the market place, measuring firm’s
capabilities to move quickly through the NPD process (Chen, Reilly, & Lynn, 2005). However almost no literature is presented within SMEs and what influences the NPD speed in small business. This research makes an attempt to identify the factors which influence NPD speed in SMEs.
As mentioned in the introduction section, NPD speed is a key determinant in the relationship between speed and successful product launch (Cankurtaran et al., 2013). Product life cycle times,
intensification in competition from technological advancements and globalization forces firms to increase speed (Chen, Reilly, & Lynn, 2012).
integrated technical tools and formal methods. This can be accomplished using cross-functional teams, incremental innovation projects and through broadening tasks instead of specialization (Gerwin & Barrowman, 2002). The organizational structure also plays a significant role on NPD speed. Structure in organizations can be defined as the allocation of power across organizational levels (Menon & Lukas, 2004). Chen, Damanpour & Reilly (2010) indicated with their broad meta-analysis that clear project goals, process concurrency, number and frequency of design iterations, effective leadership, team experience and dedication and internal integration are factors that significantly influence NPD speed. This meta-analysis was conducted in large firms, so perhaps the other antecedents from their research: strategy which is emphasized on speed, project newness, complexity, process formalization, learning and external
integration are also major influences on NPD speed for SMEs. On a more comprehensive view, strategic orientation and organizational capabilities are key determinants of NPD speed (Kessler & Chakrabarti, 1996). Customer orientation also improves the firm’s ability to reduce NPD speed (B. C. Y. Lee & Kou, 2014). The information obtained from brand customers and understanding the customer preferences could forecast market performance and in that way improve product-launch schedule and maintain quality (Wagner, 2009). Consequently, managers must understand the purchasing behavior of their customers and consider their suggestions for enhancing NPD activities. By setting up parallel marketing, R&D,
manufacturing, engineering and finance teams companies could reduce development time (Rosenau Jr., 1993). The creation of an appropriate climate for innovation and the use of cross-functional teams all contributed to NPD speed (Parry, Song, de Weerd-Nederhof, & Visscher, 2009).
However, previous above mentioned research on NPD speed was mostly conducted in large firms rather than SMEs. So this research aims to identify the factors which influence NPD speed in SMEs. 2.3 Key factors for NPD speed of an SME in the biobased industry
Table 2
Factors influencing NPD speed in SMEs
Factor Reasons for expectation
Process formalization & Centralization
Organizational structure influences NPD speed in how fast firms can be responsive to their environment (customer needs, technological advancements, etc.). The more formalized the process and centralized the decision making in firms, the slower the NPD Speed. It hinders fast distribution and utilization of information (Menon & Lukas, 2004). SMEs are usually flexible and fast in decision-making to changes in the environment and therefore less formalized and decentralized.
Organizational resources Adequate provision of human and financial resources influences NPD speed (Chen et al., 2010). SMEs lack the resources to do effective pre-development research which could have consequences for NPD speed in missing information or mismatch with customers. Besides that, SMEs lack the knowledge in the organization on
management practices management of finance, strategy formation and
implementation or control production processes (Piercy, 2009) and SMEs do have smaller technological knowledge (Mosey, 2005) which could slow down the NPD process.
Time pressure Firms need to introduce new products quickly to the market continuously to cope with the changing demands and dynamic business environments. This makes time pressure a common experience in NPD processes (Chong, Van Eerde, Kah, & Rutte, 2011). It can enhance and speed up the NPD process, but can also hinder the NPD process which eventually leads to failure of the NPD project. SMEs tend to have less formal processes and informal quick communication, which could enhance the timely launch of a NPD project.
Cross-functional teams The creation of teams with different members of different divisions to ensure parallel marketing, R&D, manufacturing, engineering and finance activities streamlines the NPD process and improves speed (Rosenau Jr., 1993). However, because of the lack of human resources in SMEs, the development of a complete well established cross-functional team can be problematic (Howieson et al., 2014).
(Team) Leadership Effective leaders can pursue organizational members and deal effective with resistance, they motivate, gather information, can attract resources and apply their knowledge directly to the NPD project to reduce development time (Chen et al., 2010; Pitta, 2008; Siu et al., 2006). In SMEs skills and competences of the owner are important and the NPD process is characterized as more ad hoc and based on emotional decisions of the owner manager (Pitta, 2008; Siu et al., 2006) . The NPD process is therefore possibly not that streamlined and rational and more iterations are needed which decrease NPD speed .
Skills in human
capital/Team experience
An experienced team deals with problems and changes effectively in the NPD process. This is necessary to follow the NPD objectives and identify what is practical in a certain situation (Chen et al., 2010). In SMEs the lack of resources and
consequently the missing skills in human capital can be a constrain to perform the above mentioned interdisciplinary activities needed to increase NPD speed. Broadening tasks instead of
specialization
An increased specialization of tasks within an organization or team makes it harder to coordinate the NPD process, however it depends on the industry when specialization instead of broadening tasks reduce NPD speed or not (Gerwin & Barrowman, 2002). Organizational members involved in the NPD process of an SME usually have a broad knowledge base of various disciplines because there is no chance to specialize in tasks regarded their human capital resources.
This could slow down the product-launch trajectory.
Process concurrency Process concurrency is the overlapping of activities and interaction between NPD activities during the NPD process (Chen et al., 2010; Swink, 2003). It may delay the NPD process because of discussions and organizational members could redo work of others. It could also enhance NPD speed due to (1) parallel performing activities, (2) reduction of the hurdles between functions in a formal stage-gate process, and (3) identification of dealing with addressing, potential problems in a timely manner. As mentioned in section 2.1, a formal stage-gate process for SMEs may not be
applicable. However because of the small scale of SMEs interactions and overlapping activities are possible within the whole firm and could therefore increase NPD speed. Number and frequency of
design iterations
Prototyping and testing products increases the NPD speed by avoiding errors and providing flexibility to understand the product and the market (Eisenhardt & Tabrizi, 1995b). Yet, lack of financial and human resources are key constraints for SMEs to invest in R&D activities and market exploration (Lin & Piercy, 2012; Mosey, 2005; Pitta, 2008).
Dedication and internal integration
Organizational members with dedication are willing to relearn, catch up from shifting tasks, are motivated and committed to achieve success in the NPD process, but are costly too (Eisenhardt & Tabrizi, 1995b; Zinger & Hartley, 1996). Internal integration helps to build a common belief within the organization to complete the NPD project successfully. It increases NPD speed by providing mutual support, coordination and reduce misunderstandings. So, dedication and internal integration may be costly for SMEs, but is a major influence on NPD speed
Complexity of NPD project If a project is more complex, this will lead to more development errors and more time is needed to repair these errors and eventually slows down the NPD process.
Incremental innovation projects increases the NPD speed. On the other hand, if the project is relatively new, it requires a firm to reflect upon more design alternatives and new marketing channels which requires more time and costs. If the NPD project is too complex and too new, this may be too costly and human resources are not available for SMEs and because of the lack of resources not applicable (Chen et al., 2010; Clark & Fujimoto, 1991; Meyer & Utterback, 1995).
Learning The NPD processes could be speeded up by organizational members who could
gather, process and integrate information efficiently and effectively towards the NPD objectives. To create teams that learn, it is important to establish a clear vision of the project, to refrain from changing the vision prior to launch (Lynn, Reilly, & Akgun, 2000,p. 227). However for SMEs it is not always possible to create teams because of constraining resources and to do probe-and-learn. Next to that, a clear vision is not always present because of the ad hoc character in SMEs. On the other hand, SMEs are usually decentralized and information is quickly spread through the organization which could enhance learning and therefore increases NPD speed.
Strategic orientation Strategy which is emphasized on speed motivates employees to rethink the structure, activities and perspective of the entire NPD process to achieve their project’s goals (Chen et al., 2010; Eisenhardt & Tabrizi, 1995b). If the focus is on time-based performance, organizational members will limit actions of side issues and remain focused on the main tasks (Eisenhardt & Tabrizi, 1995b).
External integration As mentioned in literature section 2.1.4, SMEs should have a hybrid form in the NPD process consisting of in-house development, complementary with different kind of network partnerships and outsourced activities. If a firm is well integrated with external parties, this can increase information and generate quicker actions to complete the NPD project (Chen et al., 2010).
Using integrated technical tools
3.
Methodology
To use an integrative approach to advance existing SMEs theories, this paper specifically investigates the NPD practices for SMEs in the biobased industry. Most of the existing literature reflects upon the situation of NPD processes and factors influencing NPD speed in large firms, resulting in a lack of empirical studies to identify the NPD processes and factors influencing NPD speed in SMEs. A multiple case study methodology (Yin, 2013) was selected as appropriate to test general theories of NPD within a specific context, where the relationship between theory and context is unclear (Mosey, 2005). In this explorative research an attempt has been made to get an insight in the NPD processes and factors influencing NPD speed in SMEs with the help of empirical research in three Dutch SMEs operating in the biobased industry. The biobased industry was selected because there is regularly a news item about a new kind of material used for alternative energy solutions. This may be caused by political regulations as new laws, but also external developments as increased oil prices and increasing demand of energy are factors influencing the rising interest in renewable energy as alternative energy supply. Entrepreneurs in The Netherlands are responding to this by building biofuel plants or other biobased firms and are investing in the development of new kinds of biobased solutions. However, the development, potential and way of production of this ‘new’ kind of biobased products is mostly unknown. The goal of this research is to refine our current understanding of NPD processes in SMEs and identify the factors that affect NPD speed in these SMEs. Therefore Dutch small scale biobased firms will be researched to get a comprehensive understanding about their NPD processes and the factors influencing the NPD speed.
This section explains the methodology selected for this research. First the definitions used for this research were explained in section 3.1. Subsequently, the use for theory development is explained in section 3.2. After that, the different phases of the case study is described in the multiple case study design in section 3.3. Finally a discussion of the quality criteria of this research was included in section 3.4. As mentioned above, the industry selected for this research was the biobased industry. A description of this industry was included in appendix A. Three case firms were selected Case firm A, Case firm B and Case firm C to collect the data. For the privacy and according to agreements made with these case firms, the names of the case firms will be used anonymously in this research.
3.1 Definition of an SME and ‘new products’
small enterprise up to 10 persons engaged; medium sized enterprise between 10 and 100 persons engaged.” Therefore an SME for this research has a minimum of 10 and a maximum of 100 employees.
This research is focused on new product development in the biobased industry. The definition of a biobased firm used in this paper: “Biobased firms are focused to contribute to a society in which fossil fuels are replaced by biobased products. These are products made from living things, or the waste that living things produce.”1 In literature there are various typologies of new products (Mosey, 2005), these are roughly: incremental innovation, new to the firm and new to the market. In the media the biobased
industry is often in the news and there is regularly a news item about a new kind of material used as alternative for fossil fuels and innovative practices are followed in quick succession. For this research new products are considered as new to the firm, because the market is already very explorative in nature and therefore most likely new to the market.
Hence, a new product in this research is classified as follows: a (biobased) product, produced for the first time by an SME biobased firm and placed on the market.
3.2 Research Method: Theory development
As explained in the literature review (section 2), most of the existing literature is focused on NPD processes and factors influencing NPD speed in large firms. As a result of that, the scattered literature field deals with many unresolved issues regarding the above-mentioned business phenomena for SMEs. Thus, theory development is needed because the literature related to the business phenomena are still very exploratory in nature (van Aken, Berends, & Van der Bij, 2012). A multiple case study approach was therefore considered appropriate to develop in-depth insights by studying the phenomena in SMEs in practice. According to Yin (2013) a case study is appropriate for finding and providing answers to the ‘how’ research question of NPD process and ‘what’ research question of factors influencing NPD speed in SMEs. To conclude, a multiple case study research in the biobased industry was considered suitable to address the development of theory in terms of the NPD processes and factors influencing NPD speed in SMEs.
3.3 The multiple case study design
The case study of this research consisted of four phases that constitute the path for theory development (Figure 2). 1 http://www.biobasedeconomy.nl/wat-is-biobased-economy/ Phase 1 Exploration and elaboration of phenomena not fully explained in literature
Phase 2 Observation of phenomena and data collection in three case
studies
Phase 3 Develop explanations
by within- case and cross-case analyses for
Figure 2.The four phases of case study design. Adapted from “Problem solving in organizations – A methodological handbook for business and management students”, by J.E. Aken, van., H. Berends & H. Bij, van der, 2012, Cambridge University Press.
Phase 1: Exploration and elaboration of phenomena not fully explained in literature
The first phase was focused on the exploration and elaboration of the mentioned phenomena NPD processes and factors influencing NPD speed in SMEs which were not fully explained in literature. Current literature fields were investigated what was already written about these phenomena and an exploration and elaboration was given. This is phase is provided in the literature review (section 2). Various electronic databases (i.e. EBSCOCase firm A complete, Business Source Premier, Google Scholar) were assessed on the several keywords, based on the mentioned main subjects explained in the literature reviews; new product development, new product development speed, NPD process, NPD speed, innovation processes, development processes, NPD in SMEs, development processes in SMEs, NPD speed in SMEs, NPD in small businesses, NPD speed in small businesses, factors of NPD speed
innovation in SMEs, development time factors, product cycle time, open innovation, networking in SMEs, multifunctional teams. As a result of that, a theoretical framework was conducted on the basis of four indispensable elements: NPD processes, NPD processes in SMEs, NPD speed and factors of NPD speed in SMEs.
Phase 2: Observation of phenomena and data collection in three case studies
and extend emergent theory of NPD in SMEs (Eisenhardt, 1989). The case firms were selected based on a report of Milieudefensie (2008) where an overview of different types biobased firms and biofuel plants in The Netherlands were included. On the basis of this, three firms were chosen as firms that were all aiming to develop new-to-firm products, based on the criteria described in section 3.1. The three cases in the so called ‘second’ and ‘third’ generation’ biobased firms were selected. The development of new techniques and thus new product development (NPD) in these kind of biobased firms are going rapidly and there is a high potential for these kind of products.
Hence, NPD processes and factors influencing NPD speed are investigated in these kind of small scale biobased firms. In table 3 an overview and description is provided about the case firms.
Table 3
Descriptions of case firms
Case firm Description of selected case firm
Case firm A
Case firm A is independent since 1999 and is one of the largest suppliers of bioenergy systems in Europe and has 60 employees. The expertise of case firm A is aimed for technological developments and digestion of special bio mass and supply and delivery of systems for sustainable energy solutions out of bio mass. Case firm A develops and delivers diverse components for the optimization of bioenergy systems such as upgrading biogas to natural gas for houses and transport.2
Case firm B
Case firm B develops, installs and controls innovative systems for the cultivation of algae and duckweed since 2008 and has 10 permanent employees. In such manner these valuable crops are made available for a broad range of applications. Algae and
duckweed have a great potential. When used as a biomass stock they readily become inputs for industrial processes. Therefore these small, quick-growing aquatic plants are an important stock for a biobased economy.3
Case firm C
Case firm C is an independent, private group of companies, which for the past 25 years has specialized in the process of conversion of biomass into useful fuels and energy with nowadays approximately 70 employees. This unique combination of their business units is the base for providing highly innovative and commercially attractive services. Case firm C wants to contribute to a sustainable energy society and works on the development of smart technologies that help biomass emulate fossil fuels.4
2
Company website Case firm A
3 Company website Case firm B 4
Each of the three firms were visited and semi-structured interviews were conducted with the owner or director to identify the NPD process in each of the firms and the factors influencing NPD speed. Because of the specific and particular technical biobased industry, an extensive investigation towards the sector and individual companies was necessary to conduct correct and useful questions.
This research is aimed to contribute to a more comprehensive understanding, so an open view is essential. That is why the interviews of this research could not be planned as completely structured interviews. These interviews took about 1 hour each, were digitally recorded and conducted in Dutch in May and June 2015. The questions in the interview guides for the semi-structured interviews were composed on the basis of Emans (2004) by basing the interview questions on variables, with the use of codes and descriptions for values and indicators of the theoretical framework. The theoretical framework of the interview guide is in appendix B. For the complete and in-depth overview of the questions and analyzed answers of the interview guide applied to the cases, see appendix C1, C2 and C3. Next to that internal documentation (company website and documents provided during interviews) and external documentation (news sites about case firms) were consulted in order compose questions and to acquire the necessary results related to the main subjects of this research.
Phase 3: Develop explanations by within- case & cross-case analyses for observed phenomena Once the data was collected, the third phase was the within- and cross-case analysis. The within-case analyses are displayed in appendices D1, D2 and D3. The cross-case analysis is displayed in the results sections 4.2. Analyzing the data is the heart of theory development and thus for the comprehensive understanding of NPD processes and factors influencing NPD speed in SMEs (Eisenhardt, 1989). First a within-case analysis was conducted for drawing and verifying descriptive conclusions about the
is developed to get more sophisticated descriptions and more powerful explanations (Miles & Huberman, 1994).
Phase 4: Discussion, Conclusions and Implications
The fourth and last phase of this research is aimed at finishing the research through a discussion and conclusion of the multiple case study findings. The insights of the results section are compared with existing theories in literature in section 5, the discussion part. The discussion is mainly paying attention on the findings in the case study of NPD processes and NPD speed relating to existing theory and reflecting upon the provided literature review in section 2. Principally the insights which are new or different from existing literature are promising for theory development. The discussion is based on the new insights from the data and yield an empirical valid theory (Eisenhardt, 1989). This research will be concluded by providing answers to the sub questions, necessary to answer the main research question of this research. Besides that, in the conclusion theoretical and practical implications are addressed, but also the limitations of this research and possibilities for further research. These limitations and possibilities for further stresses that the empirical findings of this study should be interpreted carefully due to context dependency of the case study conducted in one specific industry: the biobased industry.
3.4 Quality criteria
The ultimate aim of research is to yield true conclusions (Golman, 1999). However, given the fallibility of our knowledge, it is not sure if these conclusions are the truth or not. The three most important quality criteria of research are controllability, reliability and validity (Swanborn, 1996; Yin, 1994) as they provide the basis for inter-subjective agreement (van Aken et al., 2012). This refers to refers to the consensus between the actors who deal with a research problem. The quality criteria are used to manage the quality of this research to reflect upon the choices for theory, data collection and analysis methods. In the following subsections the used quality criteria will be discussed and applied to this research. 3.4.1 Controllability
3.4.2 Reliability
To make this research as reliable as possible, the results of the case studies need to be independent of the characteristics of the study (Van Aken et al., 2012; Yin, 2003) and in that way can be replicated by other researchers. This research should be replicated by other researchers, with a different research instrument and with different respondents or cases to achieve the mentioned inter-subjective agreement (van Aken et al., 2012). According to van Aken et al.,(2012) there are four potential sources of bias: the researcher, the instrument, the respondents and the situation. The potential biases of the researcher in this study are controlled by using standardization. The use of semi-structured interviews contribute to this. Next to that, a case-study protocol for all three cases of how the case study is conducted and which standard questions were asked and documentation was used (see appendices). The potential bias of instruments is controlled by triangulation, using multiple research instruments: the data collection consisted not only of primary data (interviews) but also of secondary data (internal and external documentation). The potential bias of respondents is to some extend controlled by interviewing three different case firms with different CEOs. However, the three selected case firms can be too diverse which makes replication hard and only one person of the case firm was interviewed which could mean that this respondent was biased. Finally the potential bias of the situation is to some extent controlled by researching different forms of NPD processes and influences of NPD speed in different cases of the biobased industry. Yet again, the case firms were diverse in nature which could mean a potential bias in the situation.
3.4.3 Validity
According to Audi (1988) a research is valid when it is justified by the way it is generated. In this way, it should offer good explanations to suppose the results are true or adequate (van Aken et al., 2012). The semi-structured interviews needed to measure what is had intended to measure. So, the concepts of NPD processes and NPD speed should be covered completely and the measurements should have no
4.
Results
The methodology described in section 3 was used to actual execute this study of NPD processes and NPD Speed in SMEs. This section will describe the outcomes of the multiple case study research done in the biobased industry. Firstly, section 4.1 consists of a description how the within-case analyses were conducted. The results of the within-case analysis of the three selected case-firms are provided in appendices D1, D2 and D3. Secondly, section 4.2 consists of a cross-case analysis of the three selected firms to look for within-group similarities and for within-group differences (Eisenhardt, 1989). The categories and codes selected are based on the literature elaborated in section 2 about NPD processes and factors influencing NPD speed in SMEs.
4.1 Within-case analyses
For the within-case analyses tabular displays are used for ordering the data and drawing and verifying descriptive conclusions based on the gathered data about the phenomena in a bounded context of one single case (Miles & Huberman, 1994). The three selected cases, described in the methodology section, are analyzed and the within-case analyses results of the interviews and documentation are displayed per case in appendices C1, C2 and C3. Based on the literature, the results are divided in sections of NPD processes and NPD speed using codes from A1 to G2. Whereas NPD processes of the cases are analyzed by codes A1 to E1. The factors influencing NPD speed of the cases on the other hand, are analyzed by the codes F1 to G2. After each code a description of the codename is given in the next column based on the literature subject of section 2. The last column provides requested information, descriptions and support claims for the results in a concise manner (Miles & Huberman, 1994). This information is the material for explanations used in the cross-case analysis of section 4.2, discussed in the next section. 4.2 Cross-case analysis
4.2.1 Cross-case analysis: NPD processes of the three case firms A1-A4. Definitions: the process
The depiction of the NPD process was characterized as lots of testing and experimenting. First there is an idea and afterwards a lot of trial, error and adjustments come forth before it can reach the scale of a real project. Concerning organizational resources there are restrains in financial resources because of the absence of private investors and banks investing in these kinds of SMEs. The only options left are public money or combine resources by partnerships. The other constraint in resources is human capital, since there is scarcity: finding and allocating people with the right specialized knowledge is problematic.
Regarding market research the outcomes are slightly diverse, but it became clear that the vision of the firm in this is important. The vision of the firm determined if market research had to be done in order to
discover potential and monitor or to create a market with a non-existent product. As a result of that, the case firms were convinced of their unique product and did not do an extensive form of market research, only a simply some form of it or just monitoring. On the topic of investment in new technologies, the results revealed that the selected case firms could spend a great deal in new technologies which was one of their core strategies in order to obtain a unique position with an unique product.
B1-B3. Formalized NPD processes: Stage-Gates
In none of the case firms a formal stage-gate NPD process was detected. There were no formal procedures, protocols or clear instructions towards the pathway of a new product. As mentioned, the process was characterized as a great deal of experiments and testing ideas. However, the NPD process was occasionally slightly more formalized in new projects if certain similar techniques or concepts were used again. Regarding the fact that firms organize their process step-by-step, various results were revealed. Case Firm C organized their NPD process step-by-step and in Case firms A and B activities intertwined between departments who worked parallel. In all case firms there was a major influence and close involvement of the owner in activities and decisions regarding the NPD process, especially in the
technical field. The results showed that these decisions were taken ad hoc, based on a vision, hunches, test results and a lot of ideas could be tested which eventually could lead to new products.
C1-C2. Codevelopment & Open innovation
D. Multifunctional teams
Only in Case firm A the results confirmed the formation of multifunctional teams to design and execute the whole project towards the launch of a new product. In the other case firms the NPD process was differently executed. There was an absence because the firm was too small to compose a team or the team formed itself in the R&D department by shared commitment, expertise and knowledge which eventually leads to a spin-off of the firm.
E. Partnerships
The results confirmed the presence of established partnerships between the SMEs and other firms, customers, suppliers, universities or government agencies. Primary goal of these partnerships was to acquire financial resources to obtain public money (e.g. subsidies, EU grants) or alternative risk financing. Next to this, there was a need for exchange in specific knowledge. However, not all
partnerships succeeded because of major differences in business structures and practices between the three SMEs and larger firms.
4.2.2 Cross-case analysis: Factors influencing NPD speed in the three case firms F1. Process formalization & Centralization
In all three cases decentralization was detected with short communication- and information lines, which increased the NPD speed tremendously. The importance of independence and own-responsibilities of employees was emphasized and stimulated the speed of decision making in the NPD process. So, the level of formalization was considered as very low with a flat organizational structure in all cases. One quote by the director of Case firm C illustrated this best: ”Innovation is achieved through decentralization and not through centralization.” Hence, a low level of process formalization and decentralization instead of centralization stimulated the NPD speed considerably.
F2. Organizational resources
F3. Time pressure
Time pressure is not a factor which influences the NPD speed significantly because of the low competitive and slow moving biobased industry these firms operate in. The focus of the case firms is on developing and delivering quality products and to create an unique position or market for their products, so the factor time pressure is limited in relation to NPD speed.
F4. Cross-functional teams
Because of the absence of cross-functional teams in two out of the three case firms, these factor will not be considered as an influencer on the NPD speed of these firms. However, one of the case firms who composed cross-functional teams considered this as a stimulus for the realization of new products. Because all layers of the organization were involved, innovation could be realized faster by rapidly exchanged information and fast design iterations.
F5. (Team) Leadership
The influence of project managers, owners and directors was substantial in the three case studies.
Decisions were based on the clear vision of them and therefore to some extend based on emotions. Next to this, decisions were taken ad hoc based on test results and a lot of ideas could be tested which eventually could lead to new products. Consequently, this increased the NPD speed in the three selected case firms. F6. Team experience/ Skills in human capital
Employees are specifically hired because of certain specific knowledge they possess. The multiple case study revealed that financial resources are available to attract these people. However, because of the scarcity in people with specialized knowledge and thus finding and allocating this people in the organization, it takes time before these people contribute to new innovations. This is slowing down the NPD process considerably, but once these people are hired and contribute, this stimulates the NPD speed significantly because of the specific competences they possess.
F7. Broadening tasks instead of specialization
As mentioned, employees are in essence specially hired because of certain competences and are
specialized in a certain area of exptertise. These explicit knowledge is necessary because of the specific technologies used in the biobased industry. Employees in the case firms have to develop their skills and knowledge all the time. So, this factor is affecting the NPD speed in the selected case firms, but is not determined in speed regarding to the situations of idea-to-launch of new products.
F8. Clear project goals
suggests delay in a need for more finance. Subsequently, the end result and the amount of financial or human resources is not clear along the pathway on the development of new products, which could indicate a slower NPD process.
F9. Process concurrency
In two of the three case firms activities intertwined and departments worked parallel. Therefore it becomes easier to make decisions by using short communication- and information lines. Besides that, obtaining and processing information from other areas of expertise goes faster. However, the results on this factor varied between the case firms and therefore there was no strong proof for all case firms if this factor influenced NPD speed substantial.
F10. Number and frequency of design iterations
The NPD processes in all three case firms were characterized by frequent design iterations and
adjustments. Because a great deal of testing is involved, the design becomes even more adapted towards the end of the NPD process. The many changes by the small scale experiments resulted in regular consulting and coordinating with cooperating partners. Furthermore, regulatory and certification processes and adjustments because of this cost a lot of time. This slowed down the NPD process tremendously towards the eventually commercialization of a product on larger scale.
F11. Dedication and internal integration
In all three case firms there was a presence of commitment and strong cooperation. A common vision dominated within these firms and the informal atmosphere stimulated to experiment and try out new things. This stimulated the NPD speed when mutual support was present and the organizational culture is focused on innovation to develop new products.
F12. Complexity of the NPD project
In general, the NPD projects in the case studies were complex in nature for the biobased industry. This resulted in time consuming pathways to new products because there is a lot of testing, new techniques and the end result is unclear. Financial resources were available to accomplish these complex projects,
however often there was a lack of human capital to realize these projects. So this factor slowed down the NPD speed considerably.
F13. Learning
Overall, employees are endorsed to gain expertise, share knowledge and make mistakes while
experimenting for new products. However, the process of converting a new technique into a new product is very specific in the biobased industry. So the development of new products is rather slow in its
F14. Strategic orientation
The case studies revealed that the focus is not necessarily on producing rapidly new products, but rather on developing quality products. The biobased industry is still in an early stage and the step for biofuel, bio mass or algae as alternative for fossil fuels into the transport market takes several years. The case firms do not emphasize on speed, but to realize a product which is new to the market and thus creates a market. F15. External integration
In general the results showed that collaboration with external parties frequently involves delay, because of differences in business structures and practices between the three SMEs and larger firms. Because a great deal of testing is involved, the design becomes even more adapted towards the end of the NPD process. The many changes by the small scale experiments results in regular consulting and coordinating with cooperating partners resulted in a slower NPD process to launch new products. However, one of the directors of one of the SMEs stated: “In each step of the NPD process we determine which partner is suitable. This stimulates the realization of new products”.
F16. Using integral technical tools
The results of the case studies showed that the case firms did not use specific software or particular networks in their operations to increase development speed. Therefore this factor will be considered as neutral and/or of little influence for NPD speed.
G1. General experienced constraints in NPD speed
The financial crisis was a major constraint in developing new products the past decade. Investors were hesitant and funded less risk investments. Next to that access to inexpensive capital and bureaucracy of public money is a significant obstacle to improve the rate of innovation. Finally laws, regulations and certification processes are considerable barriers which decrease NPD speed and will be described as regulatory burdens.
G2. General stimulus in NPD speed
4.2.2.1 Identifying and summarizing factors influencing NPD speed
In order to cope with the large amount of data of the cross-case analysis, table 4 is provided to get an overview of the factors influencing NPD speed in the biofuel industry. These factors are categorized in stimulus, neutral, slowed down and key factor. A factor is considered as a stimulus if it increases NPD speed and as slowed down if it decreases NPD speed regarding to the case firms. A factor is considered as neutral if the results showed that the effect is not considerable on NPD speed. Finally, if the results showed that a factor had a considerable large effect on NPD speed, this factor is considered as key factor and highlighted.
Table 4
Summary of findings on factors influencing NPD speed
Factor Stimulus Neutral Slowed down Key factor
Process formalization &
Centralization X X
Organizational resources X
Time pressure X
Cross-functional teams X
(Team) Leadership X
Team experience/ Skills in
human capital X X
Broadening tasks instead
of specialization X
Clear project goals X
Process concurrency X
Number and frequency of
design iterations X X
Dedication and internal
integration X Complexity of the NPD project X X Learning X Strategic orientation X External integration X
Using integral technical
tools X
Factors not on the list Stimulus Neutral Slowed down Key factor
Financial crisis X
Regulatory burdens X X
5.
Discussion
In this research an attempt has been made to analyze the NPD processes and factors influencing NPD speed in SMEs with the help of empirical research in Dutch SMEs. How firms deploy their resources to achieve NPD has been characterized as a key determinant in obtaining and maintaining a competitive advantage (Prahalad & Hamel, 1990). Next to this, NPD can enhance the competitiveness and market position of a firm in any phase of the market and helps to deal with more aggressive customers who are demanding for new products on a short term (Woodcock et al., 2000). For that reason, in literature, effective NPD is recognized as a core process that ensures a companies’ success (Costa et al., 2013) and is determined for survival and growth, especially for SMEs (De Jong & Vermeulen, 2006). Another key determinant in the relationship between success and the introduction of new products is NPD speed (Cankurtaran et al., 2013). This is because of first mover advantages (Dröge et al., 2000), the
appropriation of scarce resources and suppliers (H. Lee et al., 2000), keep in pace with changing customer values and adapt to quickly changing and more intensive globalizing environments (Chang et al., 2013; Chen et al., 2010; de Brentani et al., 2010; Eisenhardt & Tabrizi, 1995a). So there is a need to understand why NPD speed is important.
The multiple case study analysis of NPD processes and NPD speed in three SMEs operating in the biobased industry has resulted in interesting findings and insights regarding the existing and inconclusive literature. This section will discuss and summarize the insights of the multiple case study findings compared with existing theories in literature. Per literature subject the key findings are discussed. Afterwards, explanations of these findings in relation to other findings in literature will be provided.
NPD processes
