Business models
to keep innovation projects on track
Student:
Coen van Veen
Studentnumber:
1808567
Address:
Oudedijk 207c
3061 AE Rotterdam
E-mail:
Coenvanveen@live.nl
Date:
August 2010
University of Groningen
Faculty of economics and business
Msc BA - Business Development
Preface
This report is the result of my master thesis research to complete the master Business Development of the faculty Economics and Business at the University of Groningen. The project is executed at Company X, a railroad contractor operating in seven countries within Europe, although this research principally focused on the activities of Company X in the Netherlands. I want to express my gratitude to anyone who contributed to my master thesis. A special thanks is there for Ernest Markus (supervisor Company X) and Hans van der Bij (supervisor university) for their advice and support.
“Learning and innovation go hand in hand. The arrogance of success is to think that what you did yesterday will be sufficient for tomorrow.”
Executive summary
Innovation is widely considered as the life blood of corporate survival and growth. However, over the last few years, in almost every industry management’s perspective was focused on cutting costs and to become ‘lean’ to achieve cost advantages. Cutting costs is a highly effective tool to become dominant in the short run, but it will not provide the ability to instigate powerful product and market developments in the long run. Although, the significance of innovation seems straightforward, literature indicated that it is hard for incumbents in a privatized and liberalized industry to be successful by innovative projects. Another element, indicated by literature, which contributed to the small degree of (successful) innovation projects within a semi governmental chain is the perspective of public authorities towards innovation. Therefore the following academic goal is formulated:
GAIN SCIENTIFIC KNOWLEDGE ABOUT THE POSSIBILITIES TO BE INNOVATIVE IN SEMI PUBLIC INDUSTRY WHICH IS RECENTLY PRIVATIZED AND LIBERALIZED.
To accomplish the academic objective, case studies were conducted at a contractor in the railroad industry in the Netherlands. This study is executed by pursuing the reflective and regulative cycles defined by Van Aken, Berends and Van der Bij and it started with an extensive analysis to define the business problem of the railroad contractor. The preliminary analysis indicated that many individuals throughout the whole organization of the contractor, perceived innovation to be hard within a semi-governmental chain. According to the interviewees this was the main cause that innovation projects were not successful or had a very long time to market, which affected the perspective towards innovation negatively. Due to this, the following business problem is formulated:
RECENT INNOVATION PROJECTS DID NOT MEET THE PRESUMED (FINANCIAL) OBJECTIVES, WHICH DETERIORATED THE MANAGEMENT PERSPECTIVE TOWARDS (PRODUCT)INNOVATION, RESULTING IN LITTLE/NONE NEW INNOVATION PROJECTS.
The aim of the research is to solve the business problem and provide a contribution to the academic literature and therefore this research consist of case studies mainly focusing on the cornering organization and an analysis which contributes to the innovativeness in semi public industry in general. Six recent innovation projects of the contractor, four failures and two successful innovation projects, were selected, namely: Mobiele Werkplaats, Tuned Raildemper, Meettrein, Sonic Samp Drill, Cliplans and Ultrasonic Impact Treatment. These projects were analyzed thoroughly to identify the underlying causes of the (on)successful performance of an innovation project. The cross innovation project analysis indicated that four elements contributed negatively to the successfulness of innovation projects:
Lack of marketing/market orientation
Narrow and insufficient determination of the innovation’s business model No clear strategy/vision regarding innovation
important element, while price is the only element a contractor could distinguish it selves from the competitors. Other directors are convinced of the importance of innovation, but advocate the switch from technology push into market pull.
Based on the conclusions of the cross innovation project analysis and the determined design specifications, two areas of redesign were selected: a structured innovation process including an accurate and broad business model. The recently developed OE project management structure is used as starting point of the new innovation process and is complemented by: a more external and open approach, a structured idea generation phase and a clear selection criteria and go/kill criteria at the start and during the process. The second area of redesign is a business model structure (see figure 10 on page 45) and a template to build an accurate business model (see appendix 9). This template allows the stakeholders to get a clear understanding of the innovation project and which essential elements should be taken into consideration. Besides a clear identification of the most crucial aspects trough the ‘template’, this research also provide a business model ‘structure’. This structure identifies three directions: a broad, a tight and a hybrid business model direction.
To improve the (management) perspective towards innovation, the concerning organization should gain tangible (financial) successes from the first ‘pilot’ innovation project, executed by the new innovation process and business model structure. The organization should primarily focus on incremental innovation projects with low initial costs, less unpredictability and uncertainty and a short duration to increase the added value of innovations. When the perspective towards innovation is slightly changed, the organization could start creating a more balanced portfolio of incremental, really new and radical innovation projects.
Next to providing a solution to the business problem, this study also made contributions and acknowledgements to the scientific literature. The main contribution is the necessity for incumbents to become less dependent of the public authorities after the privatization and liberalization of an industry with public authorities as main customers. This, because the profit margins decreased dramatically by the increased competition and economic regulations. This research also emphasize that the importance and the greatest opportunities for improving the innovation process, are concerned to the early phases of the process. Furthermore, this study acknowledge earlier scientific findings concerning the significance of a clear innovation structure including a proper selection criteria and business model and underline the risk avoiding and predictability pursuing perspective towards innovation within the public sector.
Content
Chapter 1 - Introduction ... 7
Chapter 2 - Theory... 9
§ 2.1 Theoretical foundation of innovation ... 9
§ 2.1.1 Degree of innovation ... 10
§ 2.1.2 Types of innovation... 10
§ 2.1.3 Innovation process... 11
§ 2.2 Theoretical exploration of environmental characteristics ... 13
§ 2.2.1 Privatization and liberalization ... 13
§ 2.2.2 Perspective towards innovation in public sector... 14
§ 2.2.3 Dynamics in the railroad industry ... 15
§ 2.3 Literature conclusion... 16
Chapter 3 - Methodology... 17
§ 3.1 Validation of the problem statement... 17
§ 3.2 Diagnosis and analyses ... 18
§ 3.2.1 Innovation project selection ... 18
§ 3.3 Redesign ... 19
§ 3.4 Quality criteria for research ... 19
§ 3.4.1 Controllability... 19
§ 3.4.2 Reliability... 20
§ 3.4.3 Validity ... 20
Chapter 4 - Validating the business problem ... 22
Chapter 5 - Analysis ... 24
§ 5.1 Innovation projects analysis ... 24
§ 5.1.1 Mobiele werkplaats ... 24
§ 5.1.2 Ultrasonic Impact Treatment... 25
§ 5.1.3 Tuned Raildemper... 26
§ 5.1.4 Sonic Samp Drill ... 27
§ 5.1.5 Cliplans ... 28
§ 5.2.5 Innovation process... 33
§ 5.3 Management perspective towards innovation ... 34
§ 5.3.1 Dichotomy within Management Board ... 35
Chapter 6 - Redesign... 36
§ 6.1 Design specifications ... 36
§ 6.2 Synthesis and evaluation... 37
§ 6.2.1 Excluding design directions... 37
§ 6.2.2 Proposed design directions... 38
§ 6.3 Actual redesign ... 39 § 6.3.1 Redesign model... 39 § 6.3.2 External focus... 40 § 6.3.3 Idea generation... 41 § 6.3.4 Business model ... 42 § 6.3.5 Project selection ... 46 § 6.4 Implementation plan ... 48
Chapter 7 - Scientific implications ... 50
Chapter 8 - Conclusions and limitations... 52
§ 8.1 Conclusions... 52
§ 8.2 Limitations and further research... 54
References ... 56
Appendices ... 62
Appendix 1: Background of the research ... 63
Appendix 2: Reflective and Regulative cyclus ... 65
Appendix 3: Extensive theoretical exploration of main causes ... 67
Appendix 4: Cause-effect diagram per individual innovation project... 73
Appendix 5: Overview interviewees... 75
Appendix 6: Questionnaire problem definition... 76
Appendix 7: Questionnaire innovation projects... 77
Appendix 8: Summary of Operational Excellence Project management structure ... 78
Appendix 9: Template business model ... 79
Chapter 1 - Introduction
Innovation is a critical element and already seventy years ago, economist Joseph Schumpeter advocated the argument that innovation is the primary driver of economic development. However, over the last few years, in almost every industry management’s perspective was focused on cutting costs and to become ‘lean’ to achieve cost advantages (Tomkovick & Miller 2000). Cutting costs is a highly effective tool to become dominant in the short run, but it will not provide the ability to instigate powerful product and market development in the long run, especially since downsizing and reengineering cripples employees moral (Cross 1997).
Meijer and Kao (2002), emphasize the significance of innovation and argued that innovation is the key element for motivating employees and lowering costs of doing business. They also mentioned that the alternative of innovation, routine and stagnation, is often a precursor to economic failure. According to Sutton (2001), managers must learn to deal with uncertainty, acknowledge risk and be willing to accept failures to foster innovation, but this will be a hard process especially for managers that build their own careers of stability, reliability and predictability.
This research study focuses on managing innovation projects within a semi-governmental chain. Literature indicated that it is hard for incumbents in a privatized and liberalized industry to be successful by innovative projects and that new entrants will introduce the majority of the new innovative developments (Stienstra et al. 2004). Furthermore, the perspective of public authorities towards innovation contributed to the small degree of (successful) innovation projects within a semi-governmental chain (Ross et al. 2004). Unsuccessful innovation projects will deteriorate competitive advantage and will hamper the progress of an organization. Improving the innovativeness of suppliers of governmental authorities is therefore a prerequisite to continuously obtain desired strategic objectives.
Despite extensive literature about privatized and liberalized industries, there is less research about industries that are privatized and liberalized, but still have a significant interaction between private companies and public authorities. This research gap and the power of the supplier in a governmental controlled value chain, which is rather different than in industries with multiple private customers resulted in the following academic objective:
GAIN SCIENTIFIC KNOWLEDGE ABOUT THE POSSIBILITIES TO BE INNOVATIVE IN SEMI PUBLIC INDUSTRY WHICH IS RECENTLY PRIVATIZED AND LIBERALIZED.
Van Aken et al. (2009) identified two contexts where knowledge can be developed, first the authors indicated an academic context which should provide a contribution to the scientific world by elaborating, underlining, complementing and contradicting to existing literature. The second knowledge development context is to provide a solution to a particular business problem. To complete these two contexts, this study is structured in line with the business problem solving
Choice of type of problem Choice of case Developing technological rules Reflection on results Problem mess Problem definition Analysis & Diagnosis Plan of action Inter- vention Evalua- tion Regulative cycle Reflective cycle
Figure 1: Integration of reflective and regulative cycle (adapted from Van Aken et al. 2009)
The reflective cycle is focused on a business solving activity and consist of four interdependent steps. The first step is choosing a type of business problem, the second step consist of solving that problem through the regulative cycle and reflecting on the results with the intention to learn from it. The third step in the reflective cycle is establishing preliminary technological rules to define an objective theory which can be applied on other cases and which is useful for literature and people without a direct link with this particular project. The last step is the first step for a new project with the same type of problem identification considering the information from previous research.
The second step in the reflective cycle is the regulative cycle and this is the most comprehensive step of the cycle. The regulative cycle is based on six phases with underlying sub phases. These phases have no strict sequence but are flexible in the problems solving process. Through this flexibility it is possible to jump forward (explorations) and jump backwards (iterations) in the cycle (ibid.). To execute the empirical perspective of the research (the regulative cycle) case studies were conducted. The completion of the regulative cycles provides the fundament for the remaining steps in the regulative cycles, the reflection of results and developing technological rules (a more elaborated description of the research cycles, see appendix 2).
This thesis is structured in eight chapters to provide a logic sequence from start to finish. After this introduction (Chapter 1), the academic literature concerning the academic research question will be derived in Chapter 2 to clarify the main elements of this study. Then, the methodology to execute this research properly will be defined in Chapter 3, next to the methodology the determination of the business problem will be executed to validate the actual problem (Chapter 4). Chapter 5 consists of the actual analysis of the research by conducting case studies, followed by the redesign (in Chapter 6) to solve the business problem replenished by an implementation plan to execute the redesign. Chapter 7 provides the contribution to the current scientific knowledge and finally the conclusion will be portrayed in Chapter 8 by answering the sub questions of the business problem followed by the limitations of the research and future research specifications.
Chapter 2 - Theory
As innovation is widely considered as the life blood of corporate survival and growth (Zahra & Covin, 1994), innovation is studied in many disciplines which resulted in many definitions from different perspectives (Von Hippel 1988; Craig & Hart 1992; Damanpour & Schneider 2006). To clarify the designation of innovation and come up with an unambiguous perspective, this chapter provides an extensive literature research about innovation and describes the approach from where this thesis will be executed. This chapter starts with a ‘general’ theoretical foundation concerning innovation and is followed by a more focused theoretical analysis of the semi governmental industry chain.
§ 2.1 Theoretical foundation of innovation
The term innovation is often confused with invention (Nerkar & Shane 2007), however Schumpeter (1934; 1950) early elucidated the main difference between invention and innovation:
An ’invention’ is an idea, a sketch or model for a new or improved device, product, process or system. It has not yet entered to economic system, and most inventions never do so.
An ’innovation’ is accomplished only with the first commercial transaction involving the new product, process, system or device. It is part of the economic system.
As mentioned above, many definitions of innovation are described in the last decades. There are many ‘simple’ and straightforward definitions of innovation, Thompson (1965) for example defined innovations as: “the generation, acceptance and implementation of new ideas, processes, products or services”. Duggan (1996) came up with an even shorter definition: “innovation is the successful exploitation of new ideas”. Recently Albury (2005) defines innovation as: “The creation and implementation of new processes, products, services and methods of delivery which results in significant improvements in outcomes, efficiency, effectiveness or quality”.
Besides these broad definitions which are primarily focusing on successful implementations of new idea’s, there are many definitions from different disciplinary perspectives. Bodewes and De Jong (2003) for instance are focusing on the learning perspective of innovation as according to these authors, “Innovation is the development and/or implementation of products or production processes that require a substantial degree of learning”. Damanpour (1996) determines innovation from the change perspective and formulated the following definition: “Innovation is conceived as a means of changing an organization, either as a response to changes in the external environment or as a pre-emptive action to influence the environment”. Plessis (2007) in contrary is focusing on knowledge management, as she stated: “Innovation as the creation of new knowledge and ideas to facilitate new business outcomes, aimed at improving internal business processes and structures and to create market driven products and services. Innovation encompasses both radical and incremental innovation”.
§ 2.1.1 Degree of innovation
The second point of discussion in literature is the degree of newness of the innovation, as many authors described and interpreted the weight and impact of the change differently. According to Song and Montoya-Weiss (1998) innovativeness could be split up in several categories, although the main distinction regarding the nature of innovation projects is the degree of newness expressed in radical versus incremental innovation (Song & Thieme 2009).
Several authors (Garcia & Calantone 2002; Kleinschmidt & Cooper 1991) outline three types of innovativeness: a ‘radical’, a ‘really new’ and an ‘incremental’ innovation. Radical innovations are according to Veryzer (1998), innovations that involve dramatic departures from existent products or their logical extensions. A ‘really new’ innovation is as Kleinschmidt and Cooper (1991) define, a really new product or service which will result in a market discontinuity or a technological discontinuity but will not incorporate both. However, the majority of the innovations are incremental, this category of innovations consist of products or services that provide new features, benefits or improvements to the existing technology in the existing market (Song & Montoya-Weiss 1998).
Figure 2 clarifies the degree of newness and contains of the two decision components, a macro (new to the world, market or industry) / micro (new to the firm or customer) and a marketing/technology discontinuity. Radical innovations have discontinuities along both levels (macro/micro) and both sublevels (marketing/technology). Really new innovations have just one discontinuity on one level and incremental innovation have only a discontinuity along the micro level (Garcia & Calantone 2002).
Figure 2: Operationalization of innovativeness (Garcia & Calantone 2002)
§ 2.1.2 Types of innovation
In literature multiple different typologies of innovation are defined (Hartley 2005). The majority of the authors distinguish ‘technical’ and ‘administrative’ innovations, as this is the most fundamental dissimilarity (Afuah 2003). Technical innovation is about improved, product, services, or processes or completely new ones. Administrative innovation in contrary, consist of changes in the organizational structure and or administrative processes and may or may not affect technical innovation (Damanpour 1993). However, many authors elaborate on these two types of innovation, Wolfe (1994) for example propose the distinction between product, service and process innovation and Moore et al. (1997) emphasize the importance of strategic innovation. Tidd et al. (2005) finally, even define four different types of innovation:
Product innovation: changes in the things (products or services) which an organization offers; Process innovation: changes in the ways in which they are created an delivered;
Position innovation: changes in the context in which the product or services are introduced; Paradigm innovation: changes in the underlying mental modes which frame what an
organization does.
This paper will discern only the two fundamental types of innovation, ‘process’ and ‘product’, since it relates to a more general distinction between technology (product) and social structure (process) (Zahra & Covin 1994).
Porter (1985) described product innovation as a company’s efforts to introduce new or modify existing products or services. Process innovation refers to activities that result in changing the process and procedures how products or services are produced (Schroeder 1990). Process innovation is generally a discrete initiative and it also implies the use of specific change tools and technology for transformation of business processes (Papinniemi 1999). The difference between innovation type in relation to the business strategy is quite essential, as it can be a significant determinant of the company’s performance (Zahra & Covin 1994).
§ 2.1.3 Innovation process
The urgency for organizations to be innovative is quite obvious, a more relevant question is: how to innovate and how can innovation projects be managed properly (Frambach 1993). The originate of managing innovation and development models came from the field of New Product Development (NPD) (Booz et al. 1982).
Stage-Gate Model
These contributions described the NPD as an organized process of well defined steps (Stevens & Dimitriadis 2005) and one of the most popular models is the Stage-Gate model of Robert Cooper. The Stage-Gate model is a conceptual and operational model to transfer innovation projects from idea to launch (Cooper & Kleinschmidt 1993). The model divided the innovation process in multiple stages (see figure 3), and defines the concerning underlying cross functional and parallel activities. At the entrance of each stage a gate is positioned which determinate the quality per stage and provide a quality control and Go/Kill checkpoint in the innovation process (ibid.).
Figure 3: Stage-Gate model (Cooper 2000)
The main benefit of the Stage-Gate model is that it provides organizations the ability to put discipline in innovations projects, as many projects are executed ad hoc and without a clear structure. The
Open Innovation model
The most dramatic change in innovation processes in the last decade is initiated by Henry Chesbrough (2003) in his book ‘Open Innovation’. Chesbrough et al. (2006) define open innovation as: “the use of purposive inflows and outflows of knowledge to accelerate internal innovation, and expand the markets for external use of innovation, respectively. Open Innovation is a paradigm that assumes that companies can and should use external ideas as well as internal ideas, and internal and external paths to market, as the companies look to advance their technology”.
Many organizations switched from the traditional closed innovation model, where an organization is dependent on the internal research and creativity to develop new innovations, to a more open innovation process model. Open innovation creates according to Chesbrough et al. (ibid.), the opportunity of developing collaborative innovations between firms, suppliers, customers and even competitors. The open innovation process redefines the boundary between the organization and its surrounding environment. Figure 4 shows, that within an open innovation model companies look inside-out en ouside-in, and across all three aspects of the innovation process, including ideation, development, and commercialization (Cooper 2008).
Figure 4: Adapted Stage-Gate model to become an Open innovation model (Cooper 2008)
The centre of open innovation is, as argued by Laursen and Salter (2006), how companies use ideas and knowledge of external actors in their own innovation processes. Chesbrough (2003) stated that: “companies that are too internally focused are prone to miss a number of opportunities because many will fall outside the organization’s current business or will need to be combined with external technologies to unlock their potential”. Another reason why companies are changing their innovation model is very straightforward, as radical innovations developed by the closed innovation model have an enormous possibility to become a failure (in product innovation it is more than fifty percent) (Booz et al. 1982). Research indicated that this high fail percentage is caused by a deficient understanding of user needs and demands and not by technical shortcomings (Luthje & Herstatt 2004).
Closed innovation principles vs. Open innovation principles
The smart people work for us Not all the smart people in the field work for us To profit from R&D, we must discover, develop and
market ourselves
External R&D can create significant value
If we discover: get to market first For profit: not necessarily do the research ourselves The winner is the first mover Essential to build a better business model
We win if we create most/best ideas in the industry We win if we make best use of internal and external ideas
Control our intellectual property (IP), to prevent others to profit from our ideas
Profit from others’ use of our IP and buy other IP if it advances our business model
Table 1: Closed vs. Open Innovation principles (based on Chesbrough 2003)
The closed innovation model, accentuated companies on the assumption that innovation processes need to be developed, controlled and executed internally by the company. The open innovation model in contrary, emphasize companies to broaden their perspective and go beyond the internal boundaries of the company to generate additional opportunities (Huston & Sakkab 2006). Table 1, indicates the main differences in the fundamentals between ‘closed’ and ‘open’ innovation.
§ 2.2 Theoretical exploration of environmental characteristics
The second part of the literature research consist of the innovativeness within a semi public industry. Besides, a public authority as main customer, the privatization within the rail sector also influenced the innovativeness of contracting companies. This paragraph outlines the fundamentals of the privatization and liberalization of an industry, the governmental perspective towards innovation and finally the dynamics within the railroad industry will be described.
§ 2.2.1 Privatization and liberalization
In the past, the government was the owner and dominant provider of almost all welfare and related services. The aim of these public services was the urgency to provide safety and quality of welfare related services that had a vital importance to the population (Manning & Birley 1992).
The economic crisis during the eighties instigated the need to reduce the government spending, since many governments in Europe were struggling with enormous debts (Van Mierlo 1990). The government owned companies were a major source of the massive public expenditures and the bureaucratic character of the public companies demanded a lot of time from policy makers and public servants. Privatization and liberalization of these companies and markets was, according to many policy makers, the ultimate solution to reduce the expenditure and improve the performance of these companies by introducing/increasing competition (Debrie & Gouvernal 2006).
markets. The main goals of this new policy was to increase the efficiency, improve the market economy and reduce governmental expenditures (Van Mierlo 1990). In order to deregulate the markets properly, several authors indicated two orders of regulation, referred to the process of ensuring appropriate regulations and social and political objectives regarding the interests of the general public (Cox 1999; Genoud & Varone 2002).
The first regulation order is called the ‘economic regulation’ and is required to introduce and maintain competition (Cox 1999). The economic regulation concerns of activities in order to create an competitive environment, through establishing industry standards to sanction anti-competitive behaviour and provide access towards third-parties into natural monopolistic infrastructures. The second order regulation, are political and social regulations to correct the impact of the liberalization and it consist of redistribution mechanisms, provision of public services obligations and the implementation of public policies (Genoud & Varone 2002).
According to literature, privatization and liberalization change the cognitive, strategic, cultural and structural dimensions that are required to support organizational and market transformation. These aspects may induce or expand entrepreneurial actions and innovation (Zahra et al. 2000). Innovation is the foundation of competitive advantage and the key to an organizational change from a state-owned company to a competing company in a market based economy (Hitt et al. 1999). As mentioned by Baumol (1996), the entrepreneurial activities are essential for ‘transformed’ companies, to achieve efficiency, improve productivity, create wealth and foster innovation. Also the freedom to act independently, the flow of modern techniques, assimilation and the institutional and cultural change of a privatized company encourage innovativeness (Zahra et al. 2000; Shane 1995; Morris 1998).
Research also indicated that incumbents (formerly state-owned companies) gain advantages on new entrants, concerning innovation, since they possess the resources to finance and implement innovative projects. However, process and product innovations are principally initiated by new entrants and incumbents are mainly ‘reactors’ in the typology of Miles and Snow (1978) and forced to imitate the innovations. This discrepancy of ‘capable to innovate’ and ‘actually be innovative’, is caused by the cultural change of incumbents. These state-owned companies were used to stable/none competition for a long time and had not many incentives to be innovative in the past, which formed the culture and hampers the innovativeness of incumbents (Stienstra et al. 2004).
§ 2.2.2 Perspective towards innovation in public sector
The government possesses three different positions, they are a social service provider, an investment party and a purchase (tender) corporation. The purchase capability of the government is enormous, the Dutch government for example provides an annual turnover in several industries of tens of billions a year. Through the massive investments, the influence of governmental agencies is extremely high and as purchasing association they can and will set very specific requirements towards their suppliers (Innovatieplatform 2005).
Instead of the awareness of the benefits of innovation, the governmental agencies do not stimulate innovation proactively and actually they are very reserved towards innovation. This is caused by the risk preventing culture and the short term focus. The risk avoiding culture is contributed by the enormous influence of the public opinion, which emphasis extremely on the failures of the governmental agencies (Brown 1986). Another aspect which is essential and explains the focus on predictability, is the lack of appreciation for results, but a strong emphasis on failures (Ross et al.
2004). The final object, which hampers innovation is the bureaucracy within governmental authorities, since each department possess and aims for its own interests instead of the ‘corporate’ interests, the pursuit to stability (the opposite of innovation), and the narrow budgets and time span to initialize ‘new’ procedures or developments (ibid.).
Bekkers and Korteland (2008) complement these arguments, since they described that the ‘functional’, ‘institutional’ and ‘political’ perspective implies the main dissimilarities in the adoption process of innovations between the public and private sector. First, the ‘functional’ perspective mainly focus on the logic of consequences and the functional characteristics of an innovation and efficiency and effectiveness are the critical parameters. Second, the ‘institutional’ perspective directs to the pressures from governmental institutes and society on an organization to adopt or reject a certain innovation. The final element, the ‘political’ perspective is probably the most important (since this perspective is rather dominant in the public sector), and concerns the question whether the innovation is comfortable with the organizational and political climate.
Currently the tender criteria is primarily focused on economic legitimacy, effectiveness, efficiency, and accountability. These criteria mainly stimulate the competitiveness in industries and does not contribute to the innovativeness of private companies. However, the Dutch government intend to become more and more innovation focused and are willing to provide private parties more space to act more innovative without strict guidelines. An example of these intentions, are DBFM (Design, Build, Finance and Maintenance) contracts, which transfer the responsibility of the entire project from the public to the private sector. Despite of the clear intentions, the Dutch government run behind concerning these DBFM contracts compared with other European countries (Innovatieplatform 2005).
§ 2.2.3 Dynamics in the railroad industry
Due to the privatization and liberalization in the Dutch railroad sector in 1997, the competitiveness within the rail contracting industry increased dramatically. The three main contractors (Company X, Bam Rail and Strukton) derived from the split up of the state-owned company (NS Infra Services), had directly after the privatization almost a monopoly position for several years. This ‘wealthy’ period ended in 2003 with the entrance of several domestic and foreign contractors and aggravated in 2008 by a new concession policy of ProRail under pressure of the NMa (The Dutch competition authorization). The maintenance of the contract area’s (formerly divided among the ‘big three’) were now also tendered by ProRail among all contractors (Swier 2006). These developments increased the competitiveness substantially (overcapacity in the railroad industry) and resulted in plumped prices and ‘vanished’ the profit margins.
Since ProRail specified their tenders very accurately and deviations are not tolerated (contractors will be disqualified for the particular tender) it is very hard for a contractor to distinguish by quality, as ProRail’s tender criteria is primarily focused on the lowest price. This resulted in a clear focus on efficiency and to increase the innovativeness in the rail road sector, ProRail initiated ‘Unsolicited Proposals’ to contract innovative developments. Van der Sluis et al. (2007) define Unsolicited
Acquisition Regulation (FAR) of the United States and they argue that a favourable comprehensive evaluation of an unsolicited proposal does not, in itself, justify awarding a contract without providing for full and open competition.
This innovation gathering procedure is in line with recommendations of the Innovatieplatform (2005), since they advocated that public authorities, should foster innovation by acting as ‘launching customer’. Through the commitment of acting as launching customer, the uncertainty about the adoption of the innovation by the public authority will removed, which will stimulate the innovativeness of private organizations, since the initial risks will be reduced (Van der Sluis et al. 2007).
§ 2.3 Literature conclusion
Existing literature provides extensive research towards privatized and liberalized industries and the consequences these interventions instigated in relation to competitiveness and innovation. Most researches focused on network sectors (like telecom, energy, gas, post etc.) industries with multiple private customers. However, there has been insufficiently research addressed concerning the possibilities to be innovative for organizations operating in industries that are privatized and liberalized, but still have significant interdependencies between public authorities and private organizations.
Vervaart (2007) recognized the importance of the topic and he identified that the concession policy of governmental authorities in privatized industries could elicit competitiveness and efficiency. These aspects should contribute to the urgency of an improved price/quality ratio and an enhanced focus on innovation of private organizations. However, Vervaart (ibid.) mainly outlined the general level of consequences of the privatization and liberalization but do not address innovation within in a semi public chain specifically.
Chapter 3 - Methodology
This chapter describes the methodology used to complete this study. This research started with a broad topic around the high failure rate and/or long time to market of innovation projects and issues around the current business strategy of Company X. From this initial problem statement the research has been narrowed to finally a redesign proposal of the innovation process of Company X. The first paragraph consist of the validation of the problem statement, followed by the diagnosis and analysis, section 3.3 outlines the methodology of the redesign and the last paragraph describes the quality criteria of this research.
§ 3.1 Validation of the problem statement
The first part of the research consisted of the orientation of the organization and its processes. Many open and informal interviews were executed with several people from different departments to identify the ‘business’ of Company X and get a clear insight in the turbulent environment of the railroad industry. Besides these informal interviews, observations were used to obtain extra information about the organization, culture and environment of Company X. These observations were executed by attending meetings, seminars and events related to the culture, status and vision of the railroad branch and Company X in particular.
To check the validity of the initial problem statement and the underlying causes, factual information had to be collected. As it was quite hard to obtain factual information about the innovative performance of Company X, interviews were the only source of information acquiring. During the internal orientation the business problem is discussed with important stakeholders within the company. Six interviews were conducted with diverse representatives of Company X: three out of the six concerning directors, the initiator of the new project management structure (see appendix 5), one lean coach and the former manager of the R&D department were confronted with the business problem. These interviews were conducted according a questionnaire with several broad topics (see appendix 6). The main purpose of these open interviews was to add other perspectives to the preliminary formulated problem and to be able to assess the scope (Van Aken et al. 2009).
After the extensive information gathering and interviews with ‘key’ players within Company X, the following business problem of Company X has been identified:
RECENT INNOVATION PROJECTS DID NOT MEET THE PRESUMED (FINANCIAL) OBJECTIVES, WHICH DETERIORATED THE MANAGEMENT PERSPECTIVE TOWARDS (PRODUCT)INNOVATION, RESULTING IN LITTLE/NONE NEW INNOVATION PROJECTS.
§ 3.2 Diagnosis and analyses
To explore the first two research questions (Which innovation process is used and what were the main causes of the high failure rate) qualitative research methods were used. Qualitative methods are according to Van Aken et al. (2009) most suited for exploration these causes and effects, as the validated research questions can be used as starting points for the interviews. The only drawback of qualitative research in the determination of the business problem is the risk of generating results that are superficial opinions by the interviewees. The execution of this multiple case study is done by investigating six innovation projects. Multiple case studies are beneficial, since they provide the ability to gather information from multiple perspectives, to contrast or replicate findings and confront interviewees with statements of other interviewees about the specific case (Yin 2003).
The six innovation projects were investigated by open interviews among people who were closely involved in the concerning innovation projects. The exploration of the causes and effects provided the basis for a fully fledged, integral explanation of the research questions.
§ 3.2.1 Innovation project selection
Before the actual interviews, six recent innovation projects (four failures and two successful) were picked. This was not a random selection, as many individuals within Company X had different opinions about the degree of success or failure of an innovation project. To come up with an objective distinction between successful and less successful projects, short interviews were executed among ten employees of Company X.
There were twelve innovation projects selected with the following requirements, The project should be: initiated in the period 2000-2010, commercial developed and meet the criteria of an innovation (incremental, really new or disruptive). This qualitative research resulted in six innovation projects with, according to the interviewees, dissimilar success as presented in table 2.
Innovation project Type of innovation Outcome
Raildemper Really new Fail
Ultrasonic Impact Treatment Really new Fail
Cliplans Incremental Success
Sonic Samp Drill Really new Fail
Meettrein Incremental Success
Mobiele Werkplaats Really new Fail
Table 2: Innovation projects selected
The interviews, twelve in total, were conducted among two persons per project who were involved and had a substantial influence in the process of the innovation project. The amount of interviews is picked in relation with two factors: first the time available to execute the research and second, potential new information obtained by more than two interviewees per project (after a certain amount of interviews, no new knowledge will be gathered). The measurement instrument, semi- structured interviews was picked to reveal all potential causes of the business problem and not limit the research from one (preferred) perspective.
The interview process started with arranging a meeting of one hour with the concerning interviewee with an attached briefing about the content of the interview. Besides this initial briefing, the
interviews started by a short introduction about the researcher and the aim of the interview and research. The interviews were guided by an open interview list with predefined questions (See appendix 7). All interviews were concluded by the question: What should be changed in future innovation projects? Finally the interviewee was asked if the researcher could ask additional questions by mail and if he or she was willing to cooperate in a latter stage of the research again.
After the individual project analysis a cross case analysis was executed. To comprehend this analysis more open interviews were conducted, especially with directors and managers. The aim of this cross case analysis was to reveal the perspective towards innovation and the main elements which influenced the degree of success of the innovation projects.
§ 3.3 Redesign
The actual redesign is executed by the key activities as portrayed in figure 5. The starting point of the redesign is the problem analysis identified in the diagnose and analysis (chapter four and five). From the problem analysis the design specifications need to be defined to provide a clear ‘playing field’ of the actual redesign. After the determination of the specifications the ‘creative leap’ can started towards a possible solution. In the penultimate phase, the evaluation step should assess the expected performance of the redesigned business system or the contribution of the new tool to the business system. The last step is the actual redesign complemented by a clear implementation plan to provide the ability to smoothly execute the defined redesign.
Figure 5: Design process (based on Van Aken et al. 2009)
Since the redesign process is a rather creative procedure, the phases not have a logical and predefined sequence to become from problem to solution. Many iterations (and possible explorations) are necessary to come up with a creative solution that fits the problem properly (Van Aken et al. 2009).
§ 3.4 Quality criteria for research
According to Van Aken et al. (ibid.) business solving projects can be evaluated on several criteria. Many authors argue that the aim of research is to provide correct conclusions and results (Boeije 2008). The most important research oriented quality criteria are controllability, reliability and
results. Besides the detailed description of the research method, the results of the research should also be presented as accurate and precise as possible. To increase the controllability of this research several procedures are followed and most of these procedures are mentioned in §3.2 Next to this, also the interviewees used in this study are listed with the position they currently hold (see appendix 5) and the questionnaires of the interviews (see appendix 6 and 7) are included in this research. Due to the extensive description of the orientation process and determination of the business problem this research can be easily replicated.
§ 3.4.2 Reliability
The second quality criteria is reliability, which is often hard to define. Reliability relates to the results influenced by coincidence or systematic failures (Boeije 2008) and determines if other researchers can depend and trust on the results of a study. The results of a study are reliable when they are independent of the particular characteristics of that research and can therefore be replicates in other studies. In literature there are four potential causes of reliability recognized: the researcher, the instrument, the respondents and the situation (Van Aken et al. 2009). A study should actually in replication by other researchers, different respondents, different research instruments and in another situation yield the same results.
To increase the reliability of this study three elements are used. First, the researcher was aware of the fact to stay less biased as possible and do not interpret literature and or qualitative research in such a way that they are in accordance with their beliefs. Besides this, the diversity of interviewees was also essential to increase the reliability as they could be ‘coloured’ by the different (personal) interests. For example in the redesign process knowledge principally obtained from internal experts could harm the reliability and the researcher need to gain expertise, ideas and knowledge from experts, intern as well extern, to avoid a ‘tunnel vision’ and get involved in internal politics. Third, all literature and methods used are acquired (via the ‘snowball method’) from reliable and academic sources.
§ 3.4.3 Validity
The final quality criteria is validity, which refers to the relationship between a research result or conclusion and the way it has been generated. Thus, the results and conclusions of a business problem solving research are valid when it is justified by the way it was proposed. Van Aken et al. (2009) discern three types of validity: construct validity, internal validity and external validity.
Construct validity concerns the quality of the measuring instrument in relation with the intended meaning of that measurement. To increase the construct validity, the measuring methods used in this study are evaluated by the researcher itself, multiple experts within Company X, the supervisor of the University of Groningen and by associate students through pear reviewing each others reports critically.
According to Van Aken et al. (ibid.) results of a research are internally valid when conclusions about relationships are justified and complete. This means, that there are proper reasons to assume that the proposed relationship is adequate. Due to the open interviews in the diagnostic phase (as mentioned in § 3.2) and viewing the problem from multiple (theoretical) perspectives, theoretical triangulation is executed and the internal validity of this study is established.
External validity refers to the generalizability of research results and conclusions to external parties, for example, other researchers or companies. As this study is primarily focused on Company X’s business problem it is hard to draw general conclusions on the basis of a single case. However, the
reflective cycle as mentioned in the introduction (and more extensively in appendix 2) contributes to the theoretical implications which can be applied on other cases and which is useful for parties without a direct link to Company X.
Chapter 4 - Validating the business problem
As mentioned before, to check the validity of the initial problem statement and the underlying causes, factual information had to be collected. To assess the validity, the problem statement was divided in two parts. The first aspect was the successfulness of the recent innovation projects and the second aspect was the perspective towards innovation within Company X.
To assess the successfulness of innovation projects, the definition of success needed to be determined. In collaboration with managers within Company X, ‘success’ is defined as: The degree of fulfilment of the initial requirements and or assumptions. As noticed by many people within Company X, results of innovation projects are not documented properly. They argue that there is not a clear overview of the costs and benefits of individual innovation projects, and most of the innovation projects are not evaluated (even financial) properly. Due to this, the possibility to check the successfulness of innovations with factual data is insufficient, which made it inevitable to reveal the success of recent innovation projects through qualitative research. The second aspect, the perspective within Company X towards innovation, is very subjective and debatable which made it hard to define with factual data. The definition of innovation is based on literature and was defined as: “The capability of continuously realizing a desired future state” (Kao 2009).
To assess both aspects to check the validity of the entire business problem, interviews were scheduled with important stakeholders in the organization. To come up with an objective and valid assessment six key stakeholders from diverse departments and with different interests were selected to provide a clear audit of the business problem. The interviews were conducted among: three out of the six concerning directors, the initiator of the new project development structure (see appendix 5) and both lean coaches. One of the lean coaches is the former manager of the R&D department and was responsible for the innovation projects of the last decade.
The interviews, that lasted approximately an hour, were designed to generate clear answers on seven statements and to provide additional background information about the different elements which influenced the innovation strategy and perspective. As mentioned before, the interviews were conducted according a questionnaire, aiming to reveal other perspectives and to assess the scope.
Closed questions Yes No
Is innovation important for Company X 6 0
Is Company X innovative in relation to the competitors 6 0 Innovation necessary within long term vision 6 0
Focus especially on long term 1 5
Focus on process innovation important 6 0
Focus on product innovation important 2 4
Recent innovations successful 1 5
Table 3: Results of statements
The answers on the seven straightforward statements are listed in table 3. This table provides a proper understanding of the perspective of the interviewees towards innovation itself and the successfulness of the recent innovation projects. These results illustrate that each interviewee
indicated innovation as an essential element to distinguish from the competitors and to guarantee the long term continuity of Company X. All six interviewees also argue that Company X is very innovative in comparison with their current competitors. Many interviewees even mentioned that Company X is the most innovative railroad contractor of the industry.
However, despite of the awareness of the importance of innovation, most interviewees stated that Company X’s main focus is on the short term. They argue that Company X is in a turbulent period, with low margins and profits and due to this, the focus is especially on the short term to overcome this ‘crisis’. Some respondents advocate the short term focus, since Company X is ‘fat’ and has to become ‘lean’ through many optimization projects and a few process innovation projects before the focus can be changed from short into long term. A metaphor mentioned more than once, was: “Have you ever seen a fat football player score and win the game?” Also the term ‘fire fighting’ is often mentioned, since several respondents (excluding the directors) indicated that the management of Company X is mainly focused on solving ‘daily’ problems instead of outlining the long term vision of the company.
The respondents all agreed on the importance of the focus on process innovation, as the work processes within Company X could, according to some interviewees significantly faster, better and cheaper. Product innovation in contrary, is less favoured by the respondents since they mentioned that product innovations are very uncertain, risky and much harder to accomplish. Only the CEO and the former manager of the R&D department acknowledge the significance of the continuous investment, even in hard times, in product innovation. Despite of the awareness of the essence of product innovation, the two respondents realized that it is quite hard to persuade people within Company X to invest in risky and uncertain projects, since the perspective towards large investments in innovation is negative in these turbulent circumstances and the massive reorganization with many discharges. Also the negative experiences of former innovation projects contribute significantly to the negative perspective towards innovation projects and all respondents, excluding the former manager of the R&D department who was responsible of the majority of the innovation projects, indicated that the innovation projects were less successful than expected.
These interviews acknowledged the validity of the business problem, namely:
RECENT INNOVATION PROJECTS DID NOT MEET THE PRESUMED (FINANCIAL) OBJECTIVES, WHICH DETERIORATED THE (MANAGEMENT) PERSPECTIVE TOWARDS (PRODUCT)INNOVATION, RESULTING IN LITTLE/NONE NEW INNOVATION PROJECTS.
To clarify the causes of the high failure rate and or the long time to market of the recent innovation projects, the analysis of this study will focus on the factors that influenced the innovation projects negatively. With the determination of the ‘success’ factors, prospective innovation projects could be approached differently to increase the degree of success which will influence the perspective towards innovations positively.
Chapter 5 - Analysis
This chapter provides the results of the extensive diagnosis, which consist of six thoroughly investigated innovation projects. As mentioned earlier, six innovation projects were picked with dissimilar success to reveal the critical success factors which contributed positively or negatively to the end result. First, four projects, identified as failures by many representatives throughout Company X, followed by two innovation projects which became a success and had a short time to market. The six innovation project were investigated by open interviews among people who were closely involved in the concerning innovation projects. Paragraph 5.1 discusses the results of each individual innovation project, followed by a cross case analysis (§5.2) and the management perspective towards innovation (§5.3).
§ 5.1 Innovation projects analysis
In this paragraph all six innovation projects will be discussed individually and the most important aspects will be outlined. In appendix 4 the specific relationships of these variables will be explained in a cause and effect diagram per specific innovation project.
§ 5.1.1 Mobiele werkplaats
The ‘Mobiele Werkplaats’ (MW) is initiated by Company X to challenge in a competition opened by ProRail. The purpose of the contest was to come up with an idea that contributed to maintenance of the railroads without reducing the availability of the track for ProRail. Company X’s MW won the contest, as the MW was capable of executing maintenance of the track safer, with more ‘convenience’ for the operational workers (less heavy, better equipped etc.), and increasing the availability of the rails. The MW is a moving workplace which make it possible to work on a track and the adjacent track still remains in service, so disruption to train traffic is kept to a minimum (normally it is not allowed to work in a track when the nearest track is still in process). The MW also contributes to the safety of the operational workers, as the MW provides a ‘guarded’ working place and protects against weather and even more important, trains with a pace of 140 kilometres per hour in other tracks.
The development process of the MW is partially financed by ProRail and after the first MW was completed, Company X build two more MW’s. The development process took a while, as many concerned individuals within Company X had different ideas and interests in the MW. Also the decision making process was according to an interviewee dawdling, for example, a risk plan was executed completely by an external party and still it took quite some time before management agreed to continue to the next step.
In the start of the process there was little acceptance/support by the operational workers of Company X, because it was a complete new work process. Despite of a lot communication and many pilots It took 1,5 year to convince the operational workers of the benefits of the MW. Since the launch of the MW, the degree of usage did not equal the expectations on forehand of the implementation. Among the business units of Company X (Utrecht, Deventer, Alkmaar) there is a major difference in the utilization of the MW. In Deventer the MW works properly, with significant results, but in Utrecht the MW is used sporadically. Overall the utilization of the MW is minimal and the MW is often used for other purposes than it actually was meant for (in possession) only to meet the targets.
According to many people within Company X the main cause of the minimal use of the MW is the resistance of the employees of ProRail who are responsible and provide access to the tracks (Verkeersleiders). These ‘traffic controllers’ do not cooperate, because they do not benefit directly of the MW on the track and it provides additional work and risks. While there is an enormous shortage of traffic controllers, they possess a lot authority and it is very hard to influence them positively with regard to the MW (even the management of ProRail cannot ‘force’ them). Besides the resistance of the traffic controller, the diversity within ProRail does not contribute to the pace of change in the work processes and or mental model.
Next to the resistance of ProRail, which is an overall problem, there are two other reasons causing the differences in usage between the business units. The first reason is the intensity of traffic on the railways in the different areas, in Deventer (which is responsible for the Northern and Eastern region of The Netherlands) it is less complex to enter the track than in the high density environment of Utrecht. The second cause mentioned by an interviewee is the urgency and initiative within Company X’s separate departments. He stated that employees in Deventer put more effort in the struggle with ProRail to utilize the MW than in other business units. Another interviewee argues that Company X could not speed up the implementation process and that they did everything they could to influence ProRail positively.
The prospective of the MW is questionable, as two interviewees gave contrary answers. According to one interviewee, “it is just a matter of time”, and the other is doubtful and mentioned that Company X should maintain their pressure on ProRail to overcome the last barrier and make the MW a success.
Conclusions
Despite of the early involvement of ProRail in the innovation process (they even initiate the contest), not all departments within ProRail cooperate to make the MW successful.
Company X never checked if it is actually possible to use the MW in high density areas, like Utrecht. Overall there was a shortage of market research, which cause many problems. There is an powerful internal resistance towards change, since Company X have a very
conservative culture.
A narrowed business model, as the initial focus was only on usage in the Netherlands. § 5.1.2 Ultrasonic Impact Treatment
Ultrasonic Impact Treatment (UIT) is a method which provides energy of ultrasound into metallurgy through surface impulse contact. This process changes the stress profile and geometric discontinuity at the weld and postpone the metal fatigue. In 1972 ultrasonic impact technology was developed and is been perfected by a team of Russian scientists under the leadership of Dr. Efim Statnikov for use within the shipbuilding, submarine manufacture and aerospace industries.
In 2004 Nick van den Hurk encountered this technology on a fair in the US and Company X bought a licence to use the technology in the railroad sector in Europe. As they were very enthusiastic about
process they discovered that the three conditions stated by Applied Ultrasonics were not ‘completely true’, as they had less references and a shorter lead list than pretended. It was also not a completely proven product, since the system was not extremely reliable and they faced several complications in the start of the process.
The adoption and acceptation of the UIT in the railroad market and other markets concerning governmental authorities was disappointing. ProRail did not include the UIT in the standards for contracting companies and it was hard to convince potential customers of the benefits of the UIT. This because the benefits of the UIT are on a long term, and postponement of metal fatigue is hard (expensive) to prove. This resulted in sales figures that deviates enormously from the figures stated in the business case. Besides the poor sales, Applied Ultrasonics did not meet the financial conditions, which result in a litigation and the adjourning of the joint venture.
The patents of the UIT are accommodated under the ITM (Industrie, Tram en Metro) division of Company X. Company X did not invest in the UIT any longer and only completed the requests of customers, but there was no proactive sales anymore. Recently (after four years) public works and water management (Rijkswaterstaat) acknowledged and included UIT treatment in their standards.
Conclusions
A deficient market research (lack of upfront homework) A narrowed business model
Technology push, without sufficient market orientation (think for customer without checking customers urgency)
Too rose-colored perspective. From experience they should have known that it took a long time to convince governmental authorities (expectations too high)
Lack of patience (short term vision)
Customer involvement start of the process § 5.1.3 Tuned Raildemper
In cooperation with Corus and the institute of sound and vibration research of the University of Southampton, Company X developed the Tuned Raildemper. The Tuned Raildemper reduce railway noise at the source, and the introduction of the Tuned Raildemper has eliminated the need to construct obtrusive and unattractive noise barriers alongside the tracks. The reduction in noise can also mean an increase in capacity on the track.
In 2001 Company X (in collaboration with Corus and the University of Southampton) won the innovation of the year award of ProRail. However, despite of the award the Tuned Raildemper was not very urgent for ProRail. Several years later Van der Worp (subsidiary of Company X) created a dedicated team to implement the Tuned Raildemper, but it took a long time to market. The interviewee mentioned that this long time to market is hard to influence positively as he quoted: “The railroad sector is the second most conservative/bureaucratic sector behind the pharmaceutical sector”. The acceptation and adoption of innovations is always a long process within governmental authorities and ProRail is not an exception. Next to this, lobbying was necessary to require subsidiaries which made the execution financially possible. The third aspect which delayed the global implementation of the Tuned Raildempers, were the differences of types of tracks, profile, securing system and or distance between sleepers.
In 2006 the project team initiated five strict targets: Speed up the pace of installation, provide a 25 years guarantee, reduction of minimal 3 dB, new process of attaching, and assemble automatically instead of manually. At this point the opinions of the two interviewees differs dramatically. The first interviewee defines the development of an automatic Tuned Raildempers assemble machine as a fail, because he was responsible for developing a Raildemper machine without any conditions (budget, pace of assembling, time, market etc). Company X collaborated with an engineering agency, which cost a lot time and effort and resulted in a design of a machine of eight million Euros. Company X’s management was not willing/capable to invest eight million and determined the budget on a half million Euro. The sunk costs of the design of the ‘first machine’ was €200.000,-. With the determined budget the machine should be build internally by M&L (Materieel & Logistiek) and the interviewee argues that it resulted in a ‘houtje-touwtje’ machine which still needs many human interaction and face several problems with the requirements of other countries.
According to the other interviewee it was a successful process, as within 14 months all the five targets were reached with approval of ProRail. He mentioned that the Tuned Raildemper is one of the most successful innovations of Company X and that the Tuned Raildemper contributed significantly to the continued existence of Company X in Germany.
Conclusions
A insufficient and narrow business model Short term focus
Involve customers in early stages of process and share (financial) risks Lack of market orientation/marketing
Company X should have more patience (a longer vision), as innovation project takes a lot of time
§ 5.1.4 Sonic Samp Drill
The Sonic Samp Drill (SSD) is developed internally by adjustment of an existing sonic product into a product that is capable of measuring the quality of ballast (crushed stones). The SSD use high frequency drills to measure the subterranean composition of the ballast and underlying surfaces. The automatic measurement increases the accuracy, reproducibility and reliability enormously in regard to manual ballast measurement.
After the development of the SSD, pilots should be executed, however Company X’s management team insisted that the pilots had to be financed by ProRail. ProRail, in contrary did not directly agree and it took a long time before the first pilots were established. The pilots showed that the measurements of the SSD were significantly more accurate and reliable than manual measurement and ProRail was very enthusiastic. In spite of this enthusiasm and the proven reliability of the SSD, the automatic ballast measurement should still perform uniform to the manual measurement protocol (which include an x amount of measurements per kilometre). Due to this, the SSD became more expensive than manual measurement which decreases the urgency of ProRail.
