The integration of sustainability in the fuzzy front end of innovation within the context of SMEs by Fabricio Astua

FabrĂcio AstĂşa de Moraes MSc Strategic Product Design Graduation Thesis DfS | Design for Sustainability Program Design Engineering Department Faculty of Industrial Design Engineering Technische Universiteit Delft

The Integration of Sustainability in the Fuzzy Front End of Innovation within the context of SMEs

April 2010

The Integration of Sustainability in the Fuzzy Front End of Innovation within the context of SMEs

April 2010

The Integration of Sustainability in the Fuzzy Front End of Innovation within the context of SMEs

Thesis submitted to the Faculty of Industrial Design Engineering at the TU Delft, in partial fulfillment of the requirements of the Master of Sciences in Strategic Product Design

Committee Dr. Ir. Renee Wever David Peck, CEng, MBA Lotta Hassi, MSc.

April 2010

Acknowledgments

First of all, I would like to thank my supervisors for their essential assistance and help throughout the last seven months. Thanks to your help I hope I was able to build and conduct a sound and interesting research project that will be helpful for others in the future. Renee, thank you for always keeping me on the right track and providing me with much needed objectivity. David, thank you for always questioning and for all the hours I would drop by your office for guidance and you were available. Lotta, your help was essential in helping me build and structure the research. Thank you all for a fun and fulfilling experience! I would a like to thanks all the friends I have made here in Delft and those around the world. Without you this journey would not have been as complete and as fun as it was. So thank you Richard, Juan, Tomas, Dori (and Dori), João, Henrique, Fernando and all those with whom I have shared my life here in Delft! Thanks to all my friends back home that have encouraged me to come here and try my luck. Valeu Pedro, Fabíola, Joana, Bruno, Bruna, Felipe, Angela e todos os outros. Obrigado! I would also like to thank my family for their support and love. Thank you Mom and Dad for always being there. It was great to have you so close! As for my brothers, your example was essential to me as well. Thank you Diego, Mariana, Lua, Lourenço, Mathias and Ioana. Finally, I would also like to thank my in-laws Célio and Glória for their cheering! Finally, I want to specially thank my wife Mariana. Without you none of this would have been possible. Thank you so much for your patience, understanding, love and companionship. Obrigado!

April 2010

Ă&#x20AC; Mariana

April 2010

Table of Contents SUMMARY 8 1. INTRODUCTION 11 2. THEORETICAL BACKGROUND 14 2.1 Innovation 15 2.2 New Value Creation 26 2.3 Innovating for sustainability 30 3. PROBLEM DEFINITION 35 4. METHODOLOGY 40 4.1 Contextual approach: SMEs 41 4.2 Research Design46 4.3 Methodology choice and justification 48 5. CASES DESCRIPTION 53 Group A - Industry: Home Automation Systems - Company A1 55 Group A - Industry: Mobility - Company A2 61 Group A - Industry: Furniture - Company A3 66 Group B - Industry: Home Automation Systems - Company B1 Group B - Industry: Mobility - Company B2 75 6. CROSS CASE ANALYSIS 80 6.1 Innovation Strategy 81 6.2 Innovation Processes 82 6.3 Sustainability in the FFE 85 6.4 FFE x Sustainable Innovativeness 87 7. DISCUSSION AND CONCLUSION 92 8. EVALUATION 101 APPENDIX 103 Appendix 1 - DATA COLLECTION 104 Appendix 2 – Case Analyses Tables – 106 Appendix 3 – Interview Protocol – 108 Appendix 3 – Abstract – 111 REFERENCES 113

April 2010

Table of Figures FIGURES Figure 1: Topics covered by the theoretical background 15 Figure 2: Areas and levels of impact due to product innovativeness. 17 Figure 3: Simple representation of the innovation process 19 Figure 4: Stage-Gate Process 19 Figure 5: Development Funnel 20 Figure 6: Product Development Process 21 Figure 7: Delft Innovation Model 21 Figure 8: Delft Innovation Model Base Structure 22 Figure 9: New Concept Development (NCD) model 24 Figure 10: Front End Activities 24 Figure 11: The 4 components of sustainable innovation 36 Figure 12 - SMEs Core Characteristics determinants 43 Figure 13 Research Design 48 Figures 14: Innovation process at A1 57 Figures 15: Innovation process at A1 58 Figure 16: Innovation Process at A2 63 Figure 17: Innovation process at A3 68 Figure 18: Innovation process at B1 72 Figure 19: Innovation process at B2 77 Figure 20: Adaptation of Hassi et al. framework (2009). 98 SCALES Scale 1: Age of companies 81 Scale 2: Formalization of the innovation process 83 Scale 3: Type of companyâ&#x20AC;&#x2122;s culture and role of owner in this culture 84 Scale 4: Integration of sustainability requirements in the FFE phase 85 Scale 5: Importance of FFE phases in the innovation process 89 DIAGRAMS Diagram 1: Importance of FFE phases in the innovation process 88 Diagram 2: Importance of FFE X Degree of Sust. Innovativeness.

TABLES Table 1: Conventional Logic X Value Innovation Logic 29 Table 2: Research into Sustainability within the FFE of innovation 38 Table 3 - Characteristics differences between SMEs & large companies 44 Table 4 - Innovation differences between SMEs and large companies 45

April 2010

SUMMARY

By covering the literature related to innovation processes, new value creation and sustainable innovation, the literature review conducted for this thesis highlights that the integration of sustainability issues in the Fuzzy Front End of Innovation (FFE) is an ill-addressed area in scientific literature. To tackle the problem, the research builds on the framework proposed by Hassi et al (2009). This framework is articulated in the following way: •

At the origin of a sustainable innovation process, there are the strategic reasons that drive a business to innovate sustainably, i.e. Why sustainable innovation is pursued

•

In the later stages, there are a number of design and business tools that enable the embodiment and the optimization of products and services, i.e. How to enable sustainable innovation

•

Between these two steps, there is a crucial question addressed, namely what is the best translation of strategy into products and services, i.e. the goal-finding phase or What to do. Within each organization there are players responsible for articulating these choices, i.e. Who is enabling sustainable innovation.

The ‘What’ phase is precisely when sustainability issues are integrated in the FFE of Innovation. As highlighted by the theoretical background, this is an under addressed area of innovation and sustainable innovation literature. Therefore, the focus of this thesis is to begin providing answers to the questions regarding what to do when pursuing sustainable innovation and more specifically how to optimize the integration of sustainability in early phases of innovation processes. The work is inserted within a wider research effort looking at how these issues are being perceived by a number of stakeholders in business, namely Multi-National Enterprises (MNEs), Design Agencies, Entrepreneurs, Consultancies and Small and Medium Enterprises (SMEs). This thesis looks specifically at the context of Small and Medium Enterprises (SMEs), an important area of focus. According to the EU, they represent 99 % of all enterprises in the EU, directly contributing to entrepreneurship and innovation. It is therefore crucial that sustainable innovation practices within SMEs are mapped and understood. Additionally, available research has focused mainly on sustainable innovation in large companies. Since this area is still under addressed, initial research has to objectively understand how these issues are currently being managed and understood by management and businesses within SMEs. More specifically, it looks to address the following research questions: 1. How (when and by whom) is sustainability integrated in the FFE of Innovation? 2. In what way and how does the company’s view and strategy on sustainability influence their innovation process?

Due to the theory-building characteristic of the research combined with its exploratory nature, the chosen research strategy was to conduct a multiple case study among innovative SMEs. Selected companies were

divided into two groups of three SMEs and paired across industries/sectors: •

Group A: SMEs that communicate their commitment to sustainability

•

Group B: SMEs that do not communicate any commitment to sustainability

To be eligible, SMEs needed to have a product portfolio containing more than 1 product and have introduced a product to the market within the last 24 months. Data was collected through semistructured interviews and the review of companies’ documents and press articles. The main case analysis findings indicate a number of interesting issues: •

The persona of the owner/general manager yields great influence on the outcome of FFE phases.

•

The innovation process and the FFE are very informal and are consistent only within each SME.

•

Time invested in FFE phases is very small.

•

FFE seem activities seem only to start at idea selection rather than at idea generation

•

When integrated in FFE phases, sustainability issues are tackled either under one specific product requirement or as more general guiding principle to the innovation process.

The main implications of these findings are as follow: •

SMEs seem to need to have stronger FFE activities. However, for this to happen, the personas of owners/general managers need to be included and addressed. Therefore, prior to the development of any tool to integrate sustainability in FFE activities, the FFE needs to be strengthened with relevant and appropriate approaches within the context of SMEs. These activities are to be directed to these key players in these organizations if any progress in better integrating sustainability in their early phases of the innovation process is to be done.

•

Within the context of SMEs, the ‘What’ and ‘Who’ aspects are closely linked and seemingly inseparable. The proposed framework by Hassi et al. (2009) would therefore need to be adapted when used in the present context.

1. INTRODUCTION

More than ever before, the globalized world needs to face the complex challenge of sustainable development. The ways of enabling a sustainable society, under a triple bottom line agenda (Elkington, 1997), are at the heart of a debate engaging important stakeholders such as governments, business and society. The challenge of sustainability is a complex one and the solution will likely be complex as well. The international community is failing to reach an agreement on ways and responsibilities in tackling climate change and the sustainable development agenda. The poor outcomes of the COP 15 (United Nations Climate Change Conference 2009) in Copenhagen last year can be seen as a symptom of the lack of consensus around pressing issues. What emerges from these facts is that business has a pressing responsibility in being a channel to achieve sustainable development. The world is currently in the midst of a progression movement that started in the late 1960â&#x20AC;&#x2122;s with the rise of environmentalism and continued in the 1980â&#x20AC;&#x2122;s with governments waking up to the fact that environmental problems were no longer simply local but global (Elkington, 1997, Chapter 3). In the last 10 to 15 years, the world has awaken to a much more complex reality. In this global scenario, where values are shifting, the business world is facing a new combination of pressures that has forced it to embrace sustainability to remain competitive. Among other characteristics, there is a new focus on life cycles and business ecosystems that will hopefully address the environmental and social problems the world is facing. One of the aspects businesses need to optimize to address these challenges is product innovation. After concentrating on environmental processes and management, companies are now looking to ways of integrating sustainability into their product. Increasingly, sustainability will be seen as both a source and a result of product innovation. It is into this logic that this master thesis inserts itself. It looks to address ways to optimize the integration of sustainability into innovation processes. More specifically, it addresses how these issues are currently integrated at the early stages of the so-called fuzzy front end of innovation (FFE). This area, as will be covered, is a rather under researched area of scientific literature. Additionally, this thesis looks at how this phenomenon is happening within the context of Small and Medium Enterprises (SMEs), due to their economic importance and an important role in enabling an entrepreneurial and more flexible approach to innovation. As its main outcome this thesis wishes to contribute to a growing knowledge around sustainable innovation. On the other hand, it also attempts to establish a first set of anchors for further research. This thesis is structured in four main parts. In a first moment, a theoretical background is presented. Three areas of literature are reviewed in this background, to provide the basis for the study and the support the thesis main topic, through a case study methodology. Reviewed areas of literature in the first part are: 1. Innovation literature: In this first section, an overview is given on relevant innovation definitions, models of innovation process and the Fuzzy Front End of Innovation (FFE). 12

2. New Value Creation Literature: An overview on the definition of value and value creating activities is presented in this section. 3. Innovating for Sustainability Literature: In this last section of the background, covered areas of literature are definitions of sustainability and sustainable innovation After highlighting the literature gap in the theoretical background, a second part of the study is covered. In the problem definition, a research framework is exposed, with research problem and questions presented. The third part of this thesis covers the methodology choices made to address the research questions. Topics covered in this part are: 1. The contextual set up of the study, conducted within Small and Medium Enterprises (SMEs) (An overview is given on relevant SMEs definition, important aspects of product innovation within the context of SMEs and the overlap of SMEs literature and sustainable innovation literature). 2. The research design developed to tackle the research questions 3. The methodology choice and justification. The final part of this thesis covers the realized data collection through the detailing of the five case studies. In addition, it details the essential cross case analysis and most importantly, the discussion on the findings and insights gathered in the research.

2. THEORETICAL BACKGROUND

The theoretical background covered in this section is structured around three main topics (see figure 1). The review of these topics establishes a backbone to the study and addresses a gap in theoretical knowledge regarding how sustainable issues are and can be integrated at early stages of the innovation process. The review is structured as follows. First, innovation and how its pursuit has been structured through approaches and innovation processes is examined. Within these processes, attention will particularly be given to its early stages, to highlight how they have been defined, its inherent problems and the advantages for a company to gain proficiency within this area. After this, notions of value creation are reviewed, addressing its importance and issues around strategies for new value creation. Providing focus on sustainable innovation, this review proceeds to understand what can be motivations for companies to engage in sustainability and innovation. Lastly, sustainable innovation and how research on its issues has been tackled will be addressed. Besides providing a theoretical background to this study, this review will highlight an existing gap in research that should be addressed.

Figure 1. Topics covered by the theoretical background

2.1 Innovation Definition of Innovation Companies that wish to survive in ever more aggressive and competitive markets have to successfully launch new products and services. In order to achieve this, innovating is a central aspect of the trade. According to the PDMA Glossary for New Product Development (2006), an Innovation is a ‘new idea, method, or device’ or ‘the act of creating a new product or process’ with ‘The act including invention as well as the work required to bring an idea or concept into final form’. For Porter (1990), ‘companies 15

achieve competitive advantage through acts of innovation. They approach innovation in its broadest sense, including both new technologies and new ways of doing things’. There are four categories of innovation, the 4P’s of innovation (Francis & Bessant, 2005):

•

Product Innovation - new products/services offered by a company;

•

Process Innovation - new ways of doing and delivering products/services;

•

Position innovation - new context in which products/services are introduced;

•

Paradigm Innovation - new approaches in framing what a company does

Regarding technological innovation, Garcia & Calantone (2002) highlight that the definition perhaps framing best the essence of innovation is the one presented in the OECD (1991) study on technological innovation: ‘Innovation’ is an iterative process initiated by the perception of a new market and/or new service opportunity for a technology-based invention which leads to development, production, and marketing tasks striving for the commercial success of the invention. Garcia & Calantone (2002) highlight two important issues that are important to distinguish when addressing and researching innovation. Firstly, innovation includes the technological development of an invention, followed by its market introduction, adoption and diffusion to and by end users. Secondly, the innovation process is iterative by nature and therefore includes the first introduction of a new innovation and the reintroduction of an improved innovation. This results in different innovation types, called ‘radical innovations’ for products at early stages of diffusion and adoption and ‘incremental innovations’ for products at the advanced stage of the life cycle. Garcia and Calantone continue to define the different degrees of innovativeness (the measure of the degree of ‘newness’ of a given innovation) and to propose a typology of technological innovations according to their degree of ‘newness’ and level-impact. As a result, authors define three main typologies of innovativeness (for a more detailed understanding on the areas and level of impact due to product innovativeness, refer to figure 2): 1. Radical Innovations: Innovations that cause marketing and technological discontinuities on both a macro and micro-level. They often do not address a recognized demand but rather create new and previously non-existing demand. They often act as catalyst of new markets and/or new industries. 2. Incremental innovations: Innovations that occur only at a micro-level and cause either a marketing or technological discontinuity but not both. They can be defined as products that provide both new features, benefits or improvements to the existing technology in the existing market. They can also occur at all stages of the new product development process (Rothwell & Gardner (1988) in Garcia & Calantone (2002)) 3. Really New Innovations: Innovations cover the combinations in between these two extremes. On a macro level, a really new product will result in a market or technological discontinuity, not both (as in a radical innovation). On a micro-level, any combination of marketing and/or technological discontinuity can occur. 16

Figure 2. Areas and levels of impact due to product innovativeness. Adapted from Garcia & Calantone (2002)

Models Of Innovation Process The main focus of this study is product innovation and more importantly, the process leading to these innovations, a process being the ‘sequence of steps that transforms a set of inputs into a set of outputs’ (Urlrich & Eppinger, 2004). Von Stamm (2003) acknowledges innovation as the sum of creativity and (successful) implementation -putting ideas into practice- with the latter made up of three crucial aspects: idea selection, development and commercialization. Von Stamm highlights a natural tension between creativity and implementation, where implementation is about being organized, methodic and systematic; and creativity is about being different, thinking laterally and making new connections. She continues to assert that ‘organizations that want to embrace innovation therefore need find ways of reconciling the tension that lies in the juxtaposition of creativity and implementation’. Academia and industry have increasingly concentrated their efforts in understanding, developing and applying ways and paths to innovation. Innovation as a process has since long been researched and studied. This has resulted in a vast number of definitions, approaches and models of innovation processes which have been widely discussed and empirically verified. Covering these models provides the first of a number of theoretical bases that structure and exposes the scope of this study. Defined as ‘A core process aimed at renewal within an organization’, Tidd, Bessant & Pavis (2005) propose, within a certain level of abstraction, an innovation model common to many firms. The process is defined by the authors as having the following phases (see Figure 3): 1. Searching - Scanning the environment for relevant signals about threats and opportunities to innovate 2. Selecting - Deciding which of theses signals to respond to 3. Implementing - Translating the idea into something new to launch in a market. This happens through Acquiring knowledge to enable the innovation, Executing the project, Launching the innovation and Sustaining adoption and long term use 4. Learning - Learning from the steps taken into this innovation cycle in order to improve practices.

Figure 3. Simple representation of the innovation process - from (Tidd, Bessant & Pavis, 2005)

A model often-referred to is Cooperâ&#x20AC;&#x2122;s Stage-Gateâ&#x201E;˘process, covering the innovation process from the idea generation to the product launch moment (Cooper & Kleinschmidt, 1990; Cooper, 2009). The process consists of five gates and five stages, with a product idea going from ideation stage up to the launch through the phases of Preliminary Assessment, Product Definition, Product Development, Validation and Commercialization (see figure 4). In between these stages there are five gates. They represent the evaluation points that need to be met in order for the New Product Development (NPD) to advance to succeeding phases. These gates consist of a first idea screen prior to the preliminary assessment stage, followed by a second screen gate, a GoTo Development gate, a GoTo testing gate and a GoTo Launch gate. Being familiar with this model largely employed by many industries (and often cited in literature) is important to understand many current approaches to innovation in industry.

Figure 4. Stage-Gate Process â&#x20AC;&#x201C; from Cooper (2009)

The ‘Development funnel’ (see figure 5) developed by Clark and Wheelwright (1993) proposes an integrated approach to new product development (NPD). Decisions are taken from a company perspective. It starts from the business strategy, combined with capabilities assessment and forecasting and market assessment and forecasting activities. Moving along the funnel these assessments define Development Goals and Objectives that in turn define Product Portfolio planning. After exiting the funnel the project enters a Project Management and Execution phase. All of these are undertaken with constant consideration of the company’s capabilities and Product/Market strategies.

Figure 5. Development Funnel - from Clark and Wheelwright (1993)

Ulrich & Eppinger (2004) propose a generic product development process (see figure 6), which is also linear but presents some distinctions from Cooper’s Stage Gate model. The first difference is that model does not present a formal Go/No Go mechanism as Cooper’s gates. Another difference is that the process model proposed is articulated around the roles of marketing, design and manufacturing, because of their continuous involvement. It highlights the cross-discipline characteristic of innovation and the importance of having actors be directly involved and collaborating in the product development process. With those major areas of the firm involved, Ulrich & Eppinger divide the process into six phases: Planning, Concept Development, System Level Design. Detail Design, Testing and Refinement and Production Ramp-Up. This process does not include an idea generation phase, as the Planning phase a receives an idea that will be developed into a concept and later into a product. Finally, although modeled, this process denotes a 20

high level of complexity, especially when considering articulating three areas with different constraints and characteristics such as marketing, design and manufacturing.

Figure 6. Product Development Process. From Ulrich & Eppinger (2004)

Another model is the Delft Innovation Model (Buijs & Valkenburg, 2005) (see figure 7). Buijs describes this model as having evolved from linear logic when first presented in 1978 to a so-called circular chaos in its last update in 2003 (Buijs, 2003). Constructed on a base structure that repeats itself throughout the model (figure 8), the process is built in a circular design, thus implying that in this case, the innovation process has no fixed start or ending point. Using the companies and external environment as contextual feedback, the process is divided in five main phases: Strategy Formulation, Design Brief Formulation, New Product Development, Market Introduction and Product Use. This model differs from the others as it includes Product Use as part of the innovation process, where learning from this phase will feed new strategy formulations. This way, following a circular and apparent chaotic logic (no start, no end), the innovation process would fuel itself again and again. Like Cooper (2009), Buijs & Valkenburgâ&#x20AC;&#x2122;s model has specific Gate moment represented by the â&#x20AC;&#x2DC;Evaluationâ&#x20AC;&#x2122; at the end of each phase.

Figure 7. Delft Innovation Model. From (Buijs & Valkenburg, 2005)

Figure 8. Delft Innovation Model Base Structure. From (Buijs & Valkenburg, 2005)

Albeit differences in structure and phases, the models that were briefly reviewed have, among others, a common trait. Whether Cooper’s, Clark & Wheelwright’s, Urlrich & Eppinger’s or Buijs & Valkenburg’s model, they all include pre-product development phases as an integral part of the innovation process. For Cooper’s Stage Gate, this front-end phase is composed of a ‘Discovery’, a ‘Scoping’ and a ‘Business Case’, all of them linked by two evaluation gates. For Clark and Wheelwright’s Development Funnel this occurs up to the Project Portfolio Planning phase. In Ulrich & Eppinger’s case, this pre-development phase includes Planning and Concept Development. Finally, in Buij’s model, the front end corresponds to the Strategy Formulation and the Design Brief Formulation. As will be presented in the following section, one of the main focuses of this study lies within this early stage of the innovation process. The Fuzzy Front End of Innovation (FFE) The major focus of this study is to understand the ways in which sustainability issues are integrated in the early phases of the innovation process, the so-called Fuzzy Front End of the Innovation process. This ‘Fuzzy Front End’ of innovation (FFE) as coined by Reinertsen and Smith (1991) has been widely researched by academia. Albeit with many definitions and adaptations over the years, there has been a consensus in defining and framing the Fuzzy Front End of innovation as the early stages of the innovation process. As for the whole innovation process, there are also a number of models of the FFE that have been developed. Understanding how this early phase can be modeled is important to provide the basis from which to observe and analyze industry ‘real world’ practices and it is within that scope that models are here covered. Therefore, we will go over a number of acknowledged definitions to set the bases for the areas of study covered by the research presented in this document. The FFE is that period between an opportunity is first considered and when it is judged ready for development (Kim and Wilemon, 1999). Nobelius and Trygg (2002) define it as including the activities performed before the actual start of the project (pre project activities). Koen et al. (2001) see the front end

defined by those activities that come before the formal and well structured New Product and Process Development (NPPD). They refer to it as Front End of Innovation (FEI) because of the belief that FFE incorrectly suggests that unknowable and uncontrollable factors dominate the front end, thus implying that this initial part of the innovation process can never be managed. Koen et al.’s FEI is structured into a New Concept Development Model (NCD) (see figure 9) which is characterized by five key elements that are fueled by a ‘engine’, representing leadership and culture of the organization and influenced by the environment on the periphery (for more details see Koen et al., 2001). The five key elements of NCD are Idea Genesis, Idea Selection, Concept & Technology Development, Opportunity Identification and Opportunity Analysis. These elements may occur in a non-linear fashion, demonstrating the chaotic aspect of the FEI, an aspect that is also widely acknowledged in literature. This FEI will feed the NPD process of the organization. Koen at al., by acknowledging in their model the external environment of an organization, highlight the importance for ‘The entire innovation process (both the FEI and NPPD) to be aligned with the business strategy to ensure an uninterrupted, flowing pipeline of new products and processes with value to the corporation.’ Another interesting issue is the importance of the engine in the model, that is Leadership and Company culture as the fuel for innovation. The Engine, which provides the drive and the leadership for the front end and the culture in which it must operate, is shown to be a critical part of the FEI. What is most interesting in this model is its non-linearity and the fact that frontend activities may start with any of the key elements. This confirms the complexity of the early stages of the innovation process, which is an important aspect that needs to be acknowledged when studying FFE related topics. Furthermore the connection within the key activities and with an external environment frames a holistic understanding of the early phases, another crucial aspect taken into consideration within the scope of this study. Khurana and Rosenthal (1998) define the front end as including product strategy formulation and communication, opportunity identification and assessment, idea generation, product definition, project planning, and executive reviews. Authors detail three activities within this process in the front end. First activities include ‘three kinds of visions - about the business, the project, and the products, which means understanding the link between business strategy and NPD, simultaneously considering the portfolio of product development efforts and objective assessment of the particular NPD opportunities’. Second and third activities involve defining product concepts and feasibility and project planning (for more detail, see figure 10 and refer to cited reference). However interesting, this model, unlike Koen’s et al. is more linear, which may frame the activities with less flexibility thus perhaps less applicability to real contexts.

Figure 9. New Concept Development (NCD) model. From Koen et al. (2001)

Figure 10. Front End Activities. From Khurana and Rosenthal (1998)

What is important to observe is that the importance of properly managing this front end of innovation is more and more consensual among scholars, independently of how it is modeled and whether it is considered fuzzy or not. On this note, although there is relevance to the Koen et. al (2001) assessment of whether the front end is fuzzy, early phases of innovation will be referred to in this study as the Fuzzy Front End of Innovation or FFE. This choice is based on the fact that, especially within the context of the study (Small and Medium Enterprises, as will be later covered), these early phases are indeed particularly fuzzy. However, they are not at any moment assumed as unmanageable. Furthermore, it is also important to acknowledge that within the scope of this study, the FFE will draw on the presented models to be defined more broadly as that moment within an innovation process where a companyâ&#x20AC;&#x2122;s strategy is assessed

and translated into a design brief. In this sense, the presented overview serves as a benchmark rather than a strict framing of what FFE is. According to Koen et al. (2001) the front end of innovation presents one of the greatest opportunities for improving the overall innovation process, which makes it all the more interesting to investigate. Because these front-end activities are the final gate before the team decides to invest in designing and manufacturing the products they need to be well managed (Zhang & Doll, 2001). Khurana and Rosenthal (1998) review literature to highlight that managers and researchers claim that benefits resulting from improvement in activities which typically precede the detailed design and development of a new product are likely to far exceed those that result from improvements aimed directly at the design engineering process. In this sense, a search for better processes in support of the fuzzy front end appears to be called for in order to help firms achieve greater success in their efforts to develop new products (Reid&Brentani, 2004), since a ‘core competence’ in FFE management can be an obvious competitive advantage for companies required to develop important new products (Kim and Wilemom, 2002). Accordingly, this area of research has been greatly focused over recent years. Khurana and Rosenthal (1998) assert that ‘for companies competing on the basis of innovation, the front end of product development has clear significance. And yet the front end is inherently fuzzy because it is a crossroads where complex information processing, a broad range of tacit knowledge, conflicting organizational pressures including cross-functional inputs, considerable uncertainty, and high stakes must meet (...) Making the front end even more effective will continue to require simultaneous attention to matters of strategy, culture, process, and roles, and the need to adapt the process to the product, market, and organizational context.’ Thus, aligning FFE activities with corporate strategy and balancing new product/technology development with system’s existing capabilities is vital (Kim and Wilemon, 2002). However, developing a core competence in Front End practices does not come easy, because of the complexity and diversity of inputs that characterize its fuzziness, making it difficult to clearly define where it starts and where (and if) it ends. The activities in the front end are often chaotic, unpredictable and unstructured (Koen et al., 2001), representing the greatest area of weakness in the innovation process. For Zhang & Doll (2001, environmental uncertainties related to market changes, emerging technological developments, and the evolving competitive situation can also be defined as ``front-end fuzziness''. These environmental uncertainties can cause confusion as to project targets and how tradeoff decisions should be made. Additionally, it is important to consider that within a company, each innovation project has its own characteristics that make it difficult to manage and structure the front-end activities. Nobelius and Trygg (2002) find that even though projects may have the same FFE activities theoretically, not all of them are necessarily carried out. They may also differ in sequence, degree of overlap, relative time duration and perceived importance of individual tasks. In this sense, the authors state that it may be less valuable to chase one Front-end model, but perhaps better to have greater flexibility. This would mean having several co existing front-end routes and using them accordingly in a flexible manner, because 25

activities and sequences are more project-specific than the current state of science assumes (Nobelius and Trygg, 2002). The result is the need for flexibility in a process that is already fuzzy, which does not make the task less complex.

2.2 New Value Creation New Value Creation is the second main topic to be discussed in this review. In the following section of the literature background, the concepts of value creation will be presented. This section will also cover how new value can be created and how companies can set themselves apart from competition through a strategic orientation to value creation. Innovation is about the ability to create value for the company, its partners and stakeholders. This ability is crucial in obtaining competitive advantage, which ultimately determines the performance and survival of a business. The business that is able to create value for its customers, partners and stakeholders is more likely to succeed and set itself higher than its competitors. The real challenge for players in an industry/market reality is finding innovative and unexplored ways to deliver value. To tackle this issue a number of approaches and definitions on how to create this value have been articulated. Definition of Value Before proceeding, the very concept of value creation needs to be defined. Value creation depends on the relative amount of value that is subjectively realized by a target user (or buyer) who is the focus of value creation—whether an individual, an organization, or society—and that this subjective value realization must at least translate into the user’s willingness to exchange a monetary amount for the value received (Bowman & Ambrosini, 2000, in Lepak et al., 2007). Lepak et al. (2007) posit that to properly conceptualize and define value creation, one should embrace a contingency perspective that takes into account how the value is created from a particular source. This means defining the source and targets of value creation and the level of analysis. They propose three points of view: the individual, the organization and society. The organization perspective proposed serves best the scope of this study. Therefore, ‘when the organization is the source of value creation, issues regarding innovation, knowledge creation, invention, and management gain prominence’ (Lepak et al., 2007). New value is created when firms develop/invent new ways of doing things using new methods, new technologies, and/or new forms of raw material (Porter, 1985). The value creation process includes any activity that provides a greater level of novel and appropriate benefits than target users or customers currently possess, and that they are willing to pay for (Lepak et al., 2007)/

Value Creation Activities As previously mentioned, innovating is creating value. To set themselves apart from competitors and explore new markets, companies have to achieve value innovation (Kim & Mauborgne, 1997). Value innovation is about offering unprecedented value and not necessarily unprecedented technologies or competencies. Kim and Mauborgne (2005) state that a way to make competition irrelevant is by ‘creating a leap in value for both the company and its customers’, coined as ‘Blue Ocean Strategy’. This situation happens by tackling market spaces that are currently unknown (in an analogy to an unexplored and vast blue ocean). This ‘ocean’ is untainted by competition, hence a reality where opportunities abound, due to non-existence of competition and yet to be set ‘rules of the game’. On the other hand, in red oceans most industries and markets existing today - boundaries are set and accepted; competition is tough over limited and possibly saturated market share. To create value and avoid competition a company has innovate to reach unexplored markets. To fail to do so may ultimately have negative consequences for a company. Schumpeter (1942) posits that if profits from an innovation are great enough, competitors will find a way to replicate the innovation. Therefore companies, if wishing to maintain an advantage over other players, must remain creative in terms of the value they are able to offer. Christensen (1997) highlights what can occur to firms that stay within existing markets and fail to read the signals to explore new emerging and unexplored markets, despite being successful and playing by the rules. In a major study about players in the hard disk industry, Christensen shows that within a 20 year time frame, almost each player involved in a generation of hard disk technological innovations failed to make a transition towards new market realities and ended up out of the market or out of business. What drove these players to fail was their inability to create new and unmet value in their innovations. This failure made them miss the signals for new emerging markets with very different needs and expectations (Christensen, 1997, in Tidd, Bessant & Pavitt, 2005), Because they were too involved with existing markets and mainstream users, in which they excelled, they did not recognize long term potential of newly emerging markets. New markets do not emerge in clear ways, being rather fuzzy uncertain and risky at first (Tidd et al, 2005). The dilemma the innovating firms face is to be able to focus on new potential value albeit being focused on established markets. Janowrski et al. (2000) propose a framework to define a company’s market orientation, along the dimensions of market structure and market behavior. Depending on how the company operates along these dimensions will define whether it is market-driven or ‘driving markets’, or simply put, reactive or proactive. The value these companies have to offer to customers will be a direct consequence of how these dimensions are dealt with, rather like pursuing Kim and Mauborgne’s Blue Ocean strategy or choosing to remain in a Red Ocean reality. Market structure is defined by the set of players in this market and the roles they play in the market’s value chain. Market driven firms accept market structure. They do not change and/or eliminate the role of players in the industry. By contrast, ‘driving markets’ companies are proactively changing this structure to unlock new combinations of knowledge sets. On the other hand, market behavior is defined by the behavior of all players in market

and industry value chain. Market driven firms conform to these sets of behaviors. ‘Driving markets’ aim at getting customers to focus on previously unconsidered attributes, thus providing real new value. Naturally, this a set of conditions that is not easily met, since it is difficult for a company to move from a perfectly profitable and stable situation to explore a risky one with no guarantee of returns. The real problem actually lies not in finding the new but rather in getting rid of the old (von Oetinger, 2005). To do so, von Oetinger suggests that when looking for new value, companies should creatively destroy the existing, by making the company permeable to new ideas, by breaking those same rules that hinder innovation and organizing accordingly a flourishing creative environment. As highlighted by most of the cited authors, new value creation is closely tied to the way firms enable the exploration of new situations and avoid a sometimes false and biased sense of security represented by a position of success in a market in a specific moment. To create value is to be dynamic, proactive and curious about finding new combinations of knowledge sets to achieve new value propositions. Berghman at al (2006), accordingly to the literature cited previously, define new value creation capacity as the capacity to: 1) create a fundamentally different and/or new business model (including market approach), and/or 2) change the roles and (power) relationships in an industry/supply chain. To find and articulate new value, firms have to structure a strategy that enables value innovation rather than hinders it. To do so, the mechanisms and organizational ways of thinking have to be understood if they are to be changed. Furthermore, because they are potentially anchored in a situation that has become a ‘Red ocean’, companies need the flexibility to articulate two realities. Norman and Ramirez (1993) assert: ‘Successful companies do not just add value, they reinvent it’. Their focus of strategic analysis is not the company or the industry, but the valuecreating system itself, within which different economic actors - suppliers, business partners, allies, customers - work together to co-produce value. Creating value is a matter of strategy. In a dynamic competitive environment, the fundamental logic of value creation is also changing, making clear strategic thinking simultaneously more important and more difficult (Norman and Ramirez, 1993). Whilst being in an established or to be established market reality, companies must also enable this search for new value. According to Kim & Mauborgne (1997), value innovation can be reached through the ability to simultaneously pursue radical superior value for buyers and lower costs for companies. To articulate such an innovation, companies have to differ from conventional business logic along five basic dimensions of strategy, namely Industry Assumptions, Strategic Focus, Customers, Assets and Capabilities and Products and Services Offerings (for detail refer to table 1).

Table 1. Conventional Logic X Value Innovation Logic. From Kim and Mauborgne (1997)

Jaworski et al. (2000) propose three approaches for companies to engage in the ‘Driving Markets’ mode. A first approach is ‘deconstruction’, where the change occurs by eliminating players in the market (whether in the value chain - e.g distributors, suppliers - or by taking out competition) whilst better delivering value. A second approach is ‘Construction’, where with the addition of players in an industry value chain an alternative market structure is built. A final strategy would be to enable ‘Functional Modification’, that is shifting functions performed by players in market to deliver new value. As we have seen, there is vast literature addressing innovation, the fuzzy front of innovation and how to innovate by creating and offering new value. Companies that want to be successful have to be proficient at all levels of the innovation process in order to create new value and sustain themselves. The two covered areas are important to understand the next topic of this review, sustainable innovation. Before defining what sustainable innovation is, we briefly discuss the drivers and strategic motivations for companies to incorporate sustainability issues in their products. We will then proceed to highlight the importance of understanding the process for sustainable innovation, with particular attention to the early stages of the innovation process, the main focus of this study.

2.3 Innovating for sustainability Sustainability The idea of sustainability is a multi-interpretable (Tukker, 2008) notion. It is closely linked with the implications of our current system’s modus vivendi and the way society is living on our planet and the burden and impact it has on the very same. Sustainability can be seen as a value (such as freedom), an objective and/or a factor to be considered and is originally linked to the concept of sustainable development. Originating in the 1980’s, the term Sustainable Development was introduced as a new paradigm with the publication of Our common future, the final report of the Brundtland commission in 1987 (WCED, 1987), where it is defined as ‘development that meets the needs of the present without compromising the ability of future generations to meet their own needs’. This report and the concept provided a way to reconcile conflicting visions of what sustainable development was (in the North it was seen as one more environmental concept and in the south as a way of alleviating poverty and distribute wealth). It did so by focusing on global environmental systems and their absorptive and carrying capacities and by highlighting the interdependencies between north and south (and the existence of shared responsibilities without ignoring inequalities in power, influence and responsibility) (Spangenberg, 2001). From this compromise, debates and conflicting visions arose (linked to economic, social-political and environmental visions), but it succeeded at putting sustainable development at the center of global debate and showing that sustainability is a new way of seeing the world. For the purpose of this report, it will be assumed that the implications of such a view (new ways of looking at production, distribution of wealth, social justice, etc) are known and therefore will not be further elaborated. Sustainability can be measured and evaluated using a number of criteria, such as ecosystem resilience, poverty and income distribution. Based on these factors a number of models of sustainability have been developed and conceptualized. The model presented here (and on which most academic research on sustainability and implications for industrial design are based on) highlights the need for balance between environmental, social and economical imperatives, i.e. achieving economic development by promoting social equity (dignity and quality of life for all) and by reducing and minimizing impact on the environment (ensuring its perpetual existence). Integrating the social and economic dimensions of the agenda of the Brundtland report, John Elkington coined in 1994 the term Triple-Bottom Line, looking for a way to better communicate with businesses and to achieve real progresses with them (Elkington, 2004). As written by Elkington, ‘In the simplest terms, the Triple-Bottom Line (TBL) agenda focuses corporations not just on the economic value that they add, but also on the environmental and social value that they add – or destroy’. People, planet and profit describes the triple bottom line coined by Elkington and the goal companies are to pursue in this new paradigm of development: achieve profit (economic

value created by the organization) whilst ensuring equity for stakeholders – people, and engaging in sustainable environmental practices. The TBL concept positions a company's responsibility vis-a-vis stakeholders rather than shareholders, establishing the new paradigm. The achievement of sustainability lies in balancing these elements. More and more, one of the acknowledged ways of achieving sustainability pertains to evaluating the way companies make and develop products. This happens whether by optimizing manufacturing processes and energy use and/or by looking at the way products are developed, designed and engineered. Over the past 5 to 10 years awareness among businesses about the importance of sustainability has grown, whether from an operational point of view (namely having to comply to tougher legislation) or from an image view (that is showing its stakeholders it has a responsible and active role in building a sustainable society). These are but a few of the aspects that have been raising sustainability issues as a central concern for business. What has been emerging is in fact the importance for companies to include sustainability as a pillar of their business strategies if they are to make the transitions and changes necessary to survive and develop in a sustainability driven scenario. Today more than ever, sustainability will be an integral part of development (Nidomulu et al., 2009). Within this new logic, companies must change and adapt. They need to establish systems to identify and recognize emerging sustainable (new) business opportunities and sustainable ways to create value. This may require a change of tack from ‘risk management’ to ‘opportunity capitalization’ (Charter et al., 2008). This capitalization begins to be set at a strategic level, when companies acknowledge the potential of innovating sustainably. Nidomulu, Pralahad and Rangaswami (2009) complement this view when asserting that ‘smart companies now treat sustainability as innovation’s new frontier’. Larson (2000) study on Kayak manufacturer Walden Paddlers describes a case where a strategic approach towards sustainability, namely considering the entire value chain as a source of opportunity yields an open frontier for innovation and competitive advantage. On a tactical level, this capitalization is enabled when strategies are translated into business and innovation opportunities, whether through product development or business case innovation. By treating sustainability as a goal today, early movers will develop competencies that rivals will be hard-pressed to match (Nidomulu et al., 2009). Sustainable Innovation Sustainable innovation has yet to receive an established definition, but can be seen as a critical dimension of sustainable development and to achieve sustainable consumption and production (Charter and Clark, 2007). Charter et al. (2008) situate sustainable innovation at the interface between sustainable consumption and sustainable production, as an emerging area that responds to the proposing radical change to achieve sustainability. It is also defined as an emerging and fundamental force for change in business and society (Larson, 2000). Charter defines it as “process where sustainability considerations (environmental, social, financial) are integrated into company systems from idea generation through to 31

research and development (R&D) and commercialization. This applies to products, services and technologies, as well as new business and organization models” (Charter and Clark, 2007). In such a definition, we can clearly see a relation to Elkington’s Triple Bottom Line (Elkington, 1997) by the integration in this concept of innovation of financial, environmental and social implications. When a particular product, production process or service is sustainable, a balance has been achieved between the three pillars of sustainable development—‘planet’, ‘profit’ and ‘people’ (Jorna, 2006). Charter at al. (2008) define four tiers to sustainable innovation: 1. Technology 2. Products and services 3. Organizational issues 4. Business issues The stimulation of each level and type will require different approaches. Each of these tiers is the result of complex interactions of both internal and external forces to companies and between themselves. As Ehrenfeld (2008) describes it, ‘Sustainability is an emergent property of a complex system; we can observe it only if all the relationships on which it depends are functioning correctly”. Decisions around these tiers are first dealt with at a strategic level, where organizations decide what is in their best interest and how value offering will be created in the form of products and or services. It is at the front end of innovation for sustainable innovation that these strategic decisions need to be aligned with the innovation process, from its early phases through New Product Development (NPD) and commercialization. In order to achieve this, companies need appropriate organizational and business processes and models to be in place to continuously integrate sustainability into their new product development processes (NPD) (Charter et al., 2008). A balance between these forces and tiers needs to be achieved to reach effective sustainable innovation. Hence, the complexity of this balance calls for a deeper insight and understanding of how companies and organizations deal with these forces. Sustainable innovation can be defined as covering a range of innovations, from incremental to radical. Concurrently, four main levels of innovation can be defined as defined by Stevels (1997) and adapted by Charter and Clark (2007):

• Level 1 (incremental): Incremental or small, progressive improvements to existing products • Level 2 (re-design or ‘green limits’): Major re-design of existing products (but limited the level of improvement that is technically feasible)

• Level 3 (functional or ‘product alternatives’): New product or service concepts to satisfy the same functional need e.g. teleconferencing as an alternative to travel

• Level 4 (systems): Design for a sustainable society.

The main focus of sustainable innovation is in levels 3 and 4, as they are the more likely to generate significant reduction of environmental impact and transform current systemic practices. This enables society and businesses to take bigger steps towards achieving sustainability, as reducing ‘unsustainability’ (mainly through levels 1 and 2) is not the same as creating the sustainability (Ehrenfeld, 2008) more likely to happen through steps 3 and 4. As to the current state of the art of sustainable innovation, according to Charter and Clark (2007) there are still relatively few examples of sustainable products and services achieving major market penetration. So far general application is mainly on a incremental environmental improvement level, with product designers mostly new to sustainable innovation. Among the conclusions gathered from ‘Sustainable Innovation - Key conclusions from Sustainable Innovation Conferences 2003–2006’ (Charter & Clark, 2007), there is an acknowledgment that organizational and business dimensions of sustainable innovation are particularly poorly understood and there is a general need to improve this. Beyond that, Charter and Clark continue to affirm that experience from leading companies suggests that embedding sustainable innovation into existing processes and systems is essential. They identify as among the needs for collaboration in developing Sustainable Innovation Systems (SIS), the need to look at: •

How this innovation is fostered in companies at the creativity stage of product development.

•

How to spot sustainable innovation opportunities.

•

Analyzing the problems, barriers and obstacles to sustainable innovation (associated with existing social, legislative, economic and management systems will highlight new business, organizational and product development models and opportunities).

More and more, research needs to focus on these aspects to assist businesses achieve ‘Sustainability driven’ innovation by leading the creation of new market space, products and services or processes driven by social, environmental or sustainability issues’ (Arthur D, Little 2005) If we focus on the functional level or ‘product alternatives or on systemic innovation (Charter and Clark, 2007), sustainable innovation can be seen as discontinuous innovation. Reid and De Brentani (2004), claim that the FFE for discontinuous innovation is little researched. This becomes particularly relevant if we focus on the FFE for sustainable innovation. The fuzzy front end of the new product development (NPD) process, the time and activity prior to an organization’s first screen of a new product idea, is the root of success for firms involved with discontinuous new product innovation (Reid and De Brentani, 2004). It is at the FFE that companies involved with sustainable innovation are more likely to differentiate themselves and innovate. ‘Activities and decisions comprising the fuzzy front end are the starting point for all NPD processes. It is clear that a better understanding of the activities and decisions comprising this starting point ultimately could lead to competitive advantage’ (Reid and De Brentani, 2004). Furthermore, actions at the FFE give the greatest timesavings for the least expense (Smith and 33

Reinertsen, 1991)1. As already mentioned previously in this review, Charter and Clarkâ&#x20AC;&#x2122;s (2007) definition of sustainable innovation situates sustainable innovation beginning at stages of idea generation, well within the early phases of innovation. This acknowledgement is yet another indication of the importance of understanding the dynamics of sustainable innovation at early stages of the process and the implications of integrating sustainability within the fuzzy front end of innovation. It is at FFE that bigger impact is bound to happen, therefore the importance of integrating sustainability considerations early on. Over the past 15 years, the importance of FFE practices have been widely acknowledged and studied. On the other hand, over the past 20 years or so, sustainability issues have increasingly been at the center of the debate around development and economic growth. This has been especially true when assessing the role of business, government, technology and design in shaping the society we live in. Despite the fact that both FFE practices and sustainability have been widely debated, there are currently few initiatives to understand how sustainability can and is integrated at the FFE. At this point, there is a growing body of literature on sustainable innovation but little attention to how this innovation is born at early stages of the innovation process (Hassi et al, 2009). Understanding the overall concept of sustainable innovation is but a first step moving it towards mainstream reality. An additional crucial step is to shed light on how sustainable innovation is born early in the innovation process. This is all the more important today since there is an urgent need to implement sustainable innovation to address the challenges business and society is facing today. In this review, three main areas of academic literature have been covered. They tackle a number of approaches modeling the innovation process for creating new value. All these models acknowledge the importance of the early phases of the process. On the other hand, there is also an understanding that for better addressing sustainable innovation at all levels, processes have to be better researched and understood, especially at early stages. However, while there is extensive research on the FFE of innovation on the one hand, and research on sustainability strategies and sustainable innovation on the other, research addressing the overlap of the areas is still very much ill addressed. It is this intersection and the existing gap in literature that this study proposes to investigate in order to establish propositions for theory building into how to integrate sustainability at the fuzzy front end of innovation. In the following section, a framework to define and address the research problem at hand is presented, together with a contextual definition and methodological approach.

3. PROBLEM DEFINITION

As discussed in the previous section, there is a gap in the literature when addressing the overlap of sustainable innovation and the importance of FFE activities (when goal finding for sustainable innovation). It emerges that there is a clear need to establish research and theory into these ill-addressed areas. It is within this field that the study presented in this report articulates itself. Before detailing the problem definition and research questions, it is important to clarify the framework in which this research sits. This approach is structured as follows: the purpose of this study, the problem it deals with and the expected outcomes. Framework and Problem Definition Hassi et al. (2009) indicate two ill addressed areas in the sustainability research field. As opposed to the strategic reasons of a firm pursuing sustainable innovation and the tools to realize sustainable products, the authors point out that the activities in the fuzzy front end of sustainable innovation and the actual personas responsible for the innovation, have up to now received less attention from formal research. Hassi et al. combine these four components of sustainable innovation into a proposed framework (figure 11) that integrates: •

Why a firm establishes sustainability strategies;

•

The tools necessary to develop sustainable products (How to design and engineer);

•

The activities that lead to translation of strategy into product (What product/service to develop);

•

The individuals in an organization responsible for fueling the pursuit and achievement of sustainable innovation (Who is the change agent).

Therefore, the authors propose a line of research that focus on the ‘What’ and the ‘Who’ and their importance and interconnection in making ‘the transformational change to sustainability’.

Figure 11. The 4 components of sustainable innovation. From Hassi et al. (2009)

From the observation that knowing what has to be done is easier than actually doing it, the authors begin by pointing that in order to optimize and improve the success of sustainable innovation (and thus begin to tackle all the complex issues that led to its necessity), ‘organizations need to be prepared and design teams need to be equipped with the right set of tools, methods and behaviors’. The previously mentioned framework was set up after a review of literature of product innovation and sustainable innovation. Gathering the definitions of innovation and sustainable innovation in literature, the reasoning lead to the conclusion that the different phases of innovation need to be addressed differently, accordingly to the circumstance. The authors elaborate on the ’Who’ and ‘What’ area of their proposed research, covering in more detail previous findings from literature to construct the direction of their proposed research. The emphasis of the study described in this thesis is on the ‘What’ aspects of the proposed framework, however the ‘Who’ aspects will also be of interest. The ‘What’ Hassi et. al present the ‘what’ issues in sustainable innovation. It is at the FFE that background research about potential new products is done, goals established and decisions made. It is at this phase that sustainability considerations need to be integrated so as to better achieve sustainable innovation. The authors point out that ‘previous research has neglected to sufficiently address how companies could systematically identify opportunities for sustainable innovation, as well as, how companies should determine which product development strategies are most applicable to their existing needs. The study presented in this report is aimed at engaging these aspects through formal research. Hassi et al. emphasize important aspects that determine the approach to new research:

•

The FFE is ‘the breeding ground for all new goods and services’;

•

‘Significant decisions that influence the sustainability impact of the product are made early in the

innovation process’; •

‘The ‘search for better techniques and tools to support bringing sustainability considerations to

the FFE are called for’. Based on this assessment, Hassi et. al propose the establishment of new lines of research for the ‘who’ and the ‘what’.

The study exposed in this report will therefore aim to address the ‘what’ aspect presented above (although the ‘Who’ aspects will be explored) and will establish, as a problem definition, the focus Hassi et al. proposed: To create better understanding of the role sustainability has and could have at the FFE, and to understand how sustainability considerations could be brought upstream in the innovation process. The overall aim of the proposed research framework is to trace typical characteristics and elements of a FFE process leading to sustainable innovation and factors that are considered essential in the successful processes. In addition, the work aims to generate methods to support innovating for sustainability at the FFE - a framework to facilitate sustainable ideation and to support idea selection (Hassi et al., 2009). Before defining the research question to be addressed, an additional aspect needs to be highlighted. This graduation assignment is part of a broader research effort to address the problem. Overall, a group of five researchers (see Table 2) are addressing issues in five contexts around the defined problem. This exploratory study will therefore concentrate on one of these contexts, namely the context of SMEs.

Table 2: Ongoing research into Sustainability within the front end of innovation

Given the lack of research into the defined problem (including the SME context), priority is given to understanding how the overlapping of FFE practices and sustainability occur. It is this priority that will define the research question guiding this study, namely: 1. How (when and by whom) is sustainability integrated in the FFE of Innovation? 2. In what way and how does the company’s view and strategy on sustainability influence their innovation process?

The research design and methodological overview presented in the following sections is built and articulated to provide answers for these research questions and establish hypotheses and research propositions that will enable more research into these under-investigated areas.

4. METHODOLOGY

4.1 Contextual approach: SMEs Before addressing the research design, it is important to provide further clarification into the context. The choice of focusing on Small and Medium Enterprises (SMEs) is based on two important aspects. First of all, according to the European Union (European Commission, 2005), ‘Micro, small and medium-sized enterprises are socially and economically important, since they represent 99 % of all enterprises in the EU. These 23 million SMEs provide around 75 million jobs and contribute to entrepreneurship and innovation’. Therefore, it is crucial that sustainable innovation practices within SMEs are mapped and understood. Available research has focused mainly on sustainable innovation in large companies. It is also acknowledged that SMEs and large companies have different innovation processes. There is a need to understand how to further address sustainable innovation research. Eventually, this can translate into actions for the diffusion of sustainable innovation practices in SMEs. The importance lies in the role and impact SMEs can and certainly have in achieving sustainable patterns of life. Secondly, the contextual focus of this study is part of a wider effort to understand how sustainability issues are inserted at the front end of innovation for sustainable innovation. Given the focus of this study, a number of concepts need to be established upfront. They influence both the set up of the research as well as the analysis of findings. In the next section, a definition and framing of SMEs is covered. Additional relevant topics are differences between SMEs and MNEs, innovation at SMEs, and sustainable innovation within the context of SMEs. SME Definition Although there are many approaches as how to define SMEs, the definition chosen for the purpose of this research is the European Union (UE) definition, valid as of January 2005 (European Commission, 2005): ‘ The category of micro, small and medium-sized enterprises (SMEs) is made up of enterprises which employ fewer than 250 persons and which have an annual turnover not exceeding 50 million euro, and/or an annual balance sheet total not exceeding 43 million euro.’ This definition enables the selection of companies participating in the case studies. Furthermore, since participants are Dutch SMEs mostly active in Europe, the choice is also relevant. A number of SME characteristics are covered and discussed with the objective of providing knowledge into the organizational contexts in which the research presented takes place. Although the literature sources cited might not all consider the EU SME definition, it is assumed for the scope of the study that relevant aspects and characteristics are applicable to the selected companies. It is also important to note that the arguments

concerning relative advantages and disadvantages of small firms in innovation revolve largely around the question of advantages and disadvantages of scale (Rothwell & Zegveld, 1982). Additionally, each industry and sector has their own characteristics and any analysis should be done with these particularities in mind. However, there are a number of generalizations that can be made (Rothwell & Zegveld, 1982). These will be used in this study as a reference when discussing the cases within the research. SMEs can be grouped from an economic perspective. However, this classification does not account for the very diverse nature of SMEs. This diversity can be understood and framed from a variety of points (Nooteboom, 1994). SMEs are varied because they are spread across different industries and markets. Within these there is also a spread in conduct that varies from company to company. Ultimately, this may lead to how innovative a company is. An understanding of the way organizations are run and the motivations pushing these businesses is also an important element in a more in-depth analysis of SMEs. It is also an important consideration when addressing the personas (the Who? question) that run these SMEs and determine the approach to innovation. These personas are the ones that ultimately decide the course of a business, what it will do, how will it innovate and so forth. Despite the variation across industries, markets and forms of conduct and the resulting complexity, it is possible nevertheless to highlight a relevant overall characterization of small business in terms of characteristics and resulting strengths and weaknesses (Nooteboom, 1994; Rothwell, 1982)) especially in comparison to large companies. These core characteristics are born of the combined characteristics of the entrepreneur/firm, contingency context factors (such as market, technology, etc) and forms of conduct (see figure 12)

Figure 12 - SMEs Core Characteristics determinants. Adapted from Nooteboom (1994)

Among the most usual and relevant SMEs characteristics (Nooteboom, 1987) are: •

Intertwined ownership and management

•

Few hierarchical levels

•

Few and simple procedures

•

Direct and oral internal communication

•

Close relations with customers

•

Idiosyncratic perception

•

Few products and/or markets

•

Small volume of production

•

Low level of abstraction

•

Product and technique orientation.

These characteristics will determine the strengths and weaknesses of the company and define dimensions to the core characteristics. The dimensions are small scale, personality and independence. Small scale is a characteristic of the firm and relates to approaches to production, management, marketing and transaction costs. Personality relates to issues such as informality, communication, and procedures but also management, labor and other issues. Finally, independence is refers to degrees of freedom from capital markets, which allows for more idiosyncratic goals and conduct (for more detail, refer to Nooteboom, 1994). Bos-Brouwers (2009) offers an interesting overview of differences between an SME and a large company, other than the number of employees. This overview and its consequences for innovation capacities (see table 3 and 4) confirm that SMEs have different approaches to innovation than large companies and that SMEs have behavioral advantages and resources disadvantages in innovation. Table 3 - Characteristics differences between SMEs and large companies – From Bos-Brouwers (2009)

Table 4 - Innovation Capacities differences between SMEs and large companies - From Bos-Brouwers (2009)

These approaches and characteristics are a consequence of the organizational processes in small firms. In these firms, the characteristics of senior managers (training, experience, responsibilities, external linkages) play a central role as their level of technical and organizational skills will determine whether or not the organization has an ability to develop and exploit firm specific technological advantages (Tidd, Bessant and Pavitt, 2005). Aspects of Innovation at SMEs Hoffman et al. (1998) present important aspects of innovative activities of SMEs across sectors. The authors state that SMEs innovative activities are more likely to involve product innovation than process innovation. These activities are more focused on products for niche markets and will be more common amongst producers of final products rather than components. Furthermore, activities will frequently involve some form of external linkages. These aspects are likely to be important when addressing the cases selected for this study and these are issues that need also to be taken into consideration with focusing on sustainable innovation within SMEs context.

SMEs & Sustainable innovation Currently, there are few studies addressing sustainable innovation within an SME context. Van Hemel and Cramer (2002) made an important addition into this topic when addressing barriers and stimuli for eco-design in SMEs. However the focus given was on eco-design, at a later stage in the innovation process than the early FFE stages. Sustainable innovation in an SME context can be defined by the pivotal role of the owner/manager and the resources (both in material and human perspective) available. The sustainability orientation (motivation and role of the owner/manager), the design of the innovation process (exertion of internal human and material resources) and the cooperation with stakeholders (to overcome resource limitations) are indicators of sustainable innovation practice within SMEs (BosBrouwers, 2009). These are important aspects that can assist the set-up and analysis of this study. The design of the innovation process will determine the role of front-end activities in the innovation process. Additionally, the role of the owner/manager can influence how this process is designed. There are also a number of SME characteristics that do not favor sustainable innovation: resource poverty in terms of capital, knowledge and skilled labor. These can severely limit the sustainable innovation capacity of SMEs. Add to this equation a focus on short-term conflicts, which doesn’t favor the long-term focus of sustainability innovations (Bos-Brouwers, 2009). In addition, a number of forces underscore the emerging opportunities for a proactive involvement of SMEs in sustainable practices (Moore & Manring, 2009):

•

Accelerating cycles of technological innovation

•

Rapid globalization of networked communications

•

Extended and interconnected supply chains;

•

Rapidly changing markets.

In this sense, integrating sustainability into their competitive strategy and obtaining greater profitability (through adoption of intentional sustainable strategies) can help SMEs to optimize their rate of sustainable change. (Moore & Manring, 2009)

4.2 Research Design The research design is structured as a multiple case study. This was designed with the research question within the context of SMEs as a guiding reference. The approach is to frame how the integration of sustainability currently occurs within SMEs that are (or say they are) innovating sustainably and those that are not (or do not say they are) engaging in sustainable

innovation. To fit within the time scope of this assignment it was decided that the multiple case study would be composed of five to six case studies addressing the research questions. The findings cases were then compared and analyzed to generate hypotheses and propositions. Having decided to study six SMEs, a denominator to divide these into two groups is needed. The separation into group A and group B was made according to how these SMEs position themselves regarding their engagement to sustainability and more precisely, whether they communicate having sustainability as a relevant business and/or innovation factor. The chosen source of the communication was the companies’ websites. The discrimination is relevant because the research is based on how the companies position themselves towards sustainability and not how the researcher thinks they might. Therefore the groups into which the SMEs were sorted are:

•

Group 1: SMEs communicating commitment to sustainability issues

•

Group 2: SMEs not communicating commitment to sustainability issues.

To provide the research design additional internal validity (e.g. the possibility of addressing possible contrasting explanations, doing pattern matching, etc.) and external validity (e.g. the use of replication logic), these SMEs (one from each group) are paired two by two into different industries/sectors, resulting in a total of three industries. The choice of industry was done based on the availability of SMEs willing to participate in a same industry. The following step was to define on how to select eligible companies to participate in this study. Considering that the research deals with innovation practices, it was important that participating companies had a continued history of innovation. By that, it is simply meant that these companies are engaged in new product development and innovation activities. Therefore, participants were eligible if they were:

• A Small and Medium Enterprise (the definition of SME will be covered in the next section on the context of the research)

• Having a product portfolio of more than two products • Having introduced in the market at least one innovation/product within the last 24 months With this selection criterion in mind, an initial number of 30 companies were pre-selected from online research and companies that had previously worked and collaborated with the TU Delft and the Faculty of Industrial Design Engineering. Of these 30 companies, 20 SMEs were contacted and as soon as six participants across three different industries were selected, the group and selection was closed. The final research design consists of 6 SMEs divided into two groups (A and B) across three industries/sectors:

furniture, home automation solutions and mobility. For a visualization of the research design, please refer to the figure 13 below.

Figure 13 Research Design

4.3 Methodology choice and justification The research approach chosen has to be appropriate to the nature of the issues at hand. As covered in the theoretical background, the integration of sustainability considerations in the FFE of the innovation process is an ill-addressed area of the design for sustainability literature and research. The choice of methodology needed to be appropriate to establish initial insights into this area, as findings are expected to lay an initial mapping and understanding on the researched topics.

Research Strategy There are different ways of collecting and analyzing empirical data. Yin (2003, p.3-10) asserts that, instead of a hierarchical array of the various research strategies available at hand (e.g. experiments, surveys; case studies, etc), a more pluralistic and inclusive view is needed. Each view can be used for exploratory, descriptive and explanatory purposes. Addressing three conditions makes the distinction between each strategy:

•

The type of research questions

•

Extent of control over the behavioral events

•

The degree of focus on contemporary events (as opposed to historical events)

The research strategy in this study was chosen based on this distinction. The research question addresses ‘how’ is sustainability currently integrated in the FEI. ‘How’ and ‘Why’ questions are likely to favor case studies, experiments, or histories. The other conditions confirm the research strategy. According to Yin, case studies are preferred when examining contemporary events, but when relevant behaviors cannot be manipulated. These conditions are met as a contemporary event is addressed (the integration of sustainability in the FEI) by observing the way this has been done by selected companies on which the researcher has no control or influence. The choice for research based on case studies is justified because the study deals with a research question that is set to understand (how) a situation/phenomena is (currently) occurring (in a set up over which the researcher has no direct control or influence). Criticisms Before continuing to a more in-depth definition of the case study methodology, a number of criticisms around its effectiveness as a research methodology have to be addressed. The choice to do so is to acknowledge possible limitations and controversy and therefore design and implement a sound research strategy and design. According to Yin (2003, p.10), a first concern expressed is around the lack of rigor of case study research. This can happen over set up procedures or through biased views that may influence results. This can be overcome by a rigorous, sound and clear research set up and design, a condition that this research attempts to meet. There is also a concern that case studies may provide little basis for scientific generalization. The best answer for this concern is again expressed by Yin (2003, p.10): “Case studies, like experiments, are generalizable to theoretical propositions and not to populations or universes. In this sense, the case study, like the experiment, does not represent a ‘sample’, and in doing a case study, [your] goal will be to expand and generalize theories (analytic generalization) and not to enumerate frequencies (statistical generalization)”

The goal is to do a generalizing and not a particularizing analysis (Lipset et al., 1956). These defenses of the case study results are particularly appropriate for the aims of this study. The goal of this research is to expand knowledge on the integration of sustainability considerations into the Front End of Innovation, so to analyze situations, gather insights and define possible areas and directions into an area that is ill addressed. The conclusion is that a good case study is a complex task that is difficult to set, a valuable insight for the research designed for this study. The Case Study The choice of the case study is appropriate because it is a relevant tool fitting the research problem at its current level of investigation. Case studies are relevant when conducting exploratory research on complex contemporary social phenomena in real life contexts (Eisenhardt, 1989; Yin, 2003, p.13). On the other hand, within a case study set-up, researchers can observe formal as well as informal processes within an organization and collect a wide array of data (Hartley, 1994). Case study is an inquiry that copes with the technically distinctive situation in which there will be many more variables of interest than data points. It relies on multiple sources of evidence, with data needing to converge in a triangulation fashion, and as another result, benefits from the prior development of theoretical propositions to guide data collection and analysis (Yin, 2003, p.13-14). In the specific areas of business related topics research (strategy, marketing, operations management, etc.), case study research has been viewed by many scholars (Dul and Hak, 2008, p. 24-25) as a useful research strategy when:

(a) The topic is broad and highly complex (b) There is not a lot of theory available (c) The context is likely to be very important. As a comprehensive research strategy, case studies can be explanatory, exploratory or descriptive. Within the context of this research, the study is more of an exploratory nature, as it sets to map and understand an ill addressed area of research. Additionally, the case study(ies) conducted can be defined as a theory oriented research aiming at concluding something about a theoretical statement or proposition (Dul and Hak, 2008). The empirical findings are evaluated primarily as a contribution to the robustness and generalizability of a specific theoretical proposition (or so it is expected). The aim is to contribute to theory development by the formulation of propositions.

Case Study Research Design Considerations When engaging in research, it is crucial to develop a robust design that will allow for optimized chances of establishing plausible answers to research questions and problem definitions. Yin (2003, Chapter 2) describes a research design as logical plan to get from point A to point B. In between are a number of major steps. The author compares the research design to a â&#x20AC;&#x2DC;blueprint that defines before hand what questions to study, what data is relevant, what data to collect and how to analyze the results. There are 5 important components to designing a research approach Yin (2003, Chapter 2): 5. The Studyâ&#x20AC;&#x2122;s question: As mentioned previously, the research question within this study justifies the choice for a case study (multiple) methodology. 6. Propositions, namely the rationale behind the problem definition and the need for the case study. In this case, the development of theory on the integration of sustainability in the Front End of Innovation. 7. The units of analysis. In this case, as presented, the innovation cases within European SMEs. 8. Logic linking of data to the propositions. 9. Criteria for interpreting the data. This methodological overview has been used when establishing the research design for this study. Case studies can be used to contribute to the development of theory. The theory is inductively developed and emergent because it is situated in and developed by recognizing patterns of relationships among constructs within and across cases and underlying logical arguments (Eisenhardt & Graebner, 2007). There can be both single and multiple case studies, each with a rationale behind it. There is a debate within the academic field on which approach is more valuable to generate theory (e.g Eisenhardt, 1989; Yin, 2003, Ch. 2; Dyer & Wilkins, 1991). The choice of not covering these issues should not be read as not acknowledging this debate. However, within the scope of this study, the view advocated by scholars such as Yin and Einsenhardt will be followed, namely the notion that multiple case studies are a more powerful approach to generate theory. Single case studies have different rationales behind its choice (for more details, see Yin, 2003, Chapter 2) and in both situations (single and multiple case studies), case studies can integrate an embedded design, e.g. multiple levels of analysis within a single study. The choice within this study is for a multiple case study approach. Therefore, only the rationale behind this choice will be presented. A central aspect to theory building is the replication logic (Eisenhardt, 1989), where each case serves as a distinct experiment that stands on its own as an analytic unit. Following this same logic, multiple cases are discrete experiments that serve as replications, contrasts and extension to an emerging theory (Yin, 2003, Ch.2). Eisenhardt and Graebner (2007) highlight the opportunities that differentiate building theory from cases from other research strategies and describe some of its common challenges. The research study presented here is based on the identification of a gap in the literature and 51

the research question is aiming at establishing theory-building findings. According to Eisenhardt and Graebner (2007), theory building research calls for theoretical sampling, where cases are selected because they are particularly suitable for illuminating and extending relationships and logic among constructs. The case selection for this study has been done accordingly to this principle. Furthermore, as is the aim within this study, multiple cases enable comparisons that clarify whether an emergent finding is simply idiosyncratic to a single case or consistently replicated (Einsenhardt, 1991). Multiple cases also create more robust theory because the propositions are more deeply grounded in varied empirical evidenceâ&#x20AC;&#x2122; (Eisenhardt & Graebner, 2007), and allow broader exploration of research questions and theoretical elaboration. Another aspect that needs to be considerer when engaging in theory building research is to begin â&#x20AC;&#x2DC;as close as possible to the ideal of no theory under consideration and no hypotheses to test (...) as attempting to approach this ideal is important because preordained theoretical perspectives or propositions may bias and limit the findingsâ&#x20AC;&#x2122; (Einsenhardt, 1989) All of the considerations covered here were used as a benchmark on why and how to design a case study research design that was both robust and could deliver solid and justifiable findings through analytic generalization. A data collection protocol was also carefully developed (for more information, please refer to the Appendix).

5. CASE DESCRIPTIONS

The cases reported in this section were compiled over a period of three months, from December 2009 to February 2010. The data here presented was collected following a specific protocol and methodology (for more detail, please refer to the appendix and the methodology section of this report). The cases descriptions are divided into 5 main topics: •

A context description to clarify relevant aspects of the company’s current situation, such as markets, product portfolio, number of employees, etc.

•

A description of innovation processes characteristics, including FFE practices.

•

An assessment on the role and importance of owner/managers in the organization and the innovation process.

•

A description and assessment on how sustainability issues are integrated in the FFE of Innovation in the organization and how particular views on sustainability may influence the innovation process.

•

A summary of important aspects

Transcripts and analyses (as well as the methodology for these) are available in the appendix. Case descriptions are divided by group, industry and company number: •

Group A – Home Automation Industries – A1

•

Group A – Mobility industry – A2

•

Group A – Furniture Industry – A3

•

Group B – Home Automation Industries – B1

•

Group B – Mobility industry – B2

It is important to remind that originally, this study aimed at realizing 6 case studies, as described in the research design. Time and availability limitations only allowed for 5 cases, with company B3 being excluded from this report. Resulting constraints are addressed in the discussion and conclusion (chapter 7)

Group A Industry: Home Automation Systems Company A1

Case Description 1. Context With around 20 employees, company A1 is a young and dynamic SME, founded in 2006 and based in the Netherlands. The company is active in the European market and recently tackling the US market. Offering solutions for business and consumer customer on how to save and manage energy use at home or the office, the company has been expanding its product portfolio. Among the stated objectives of the company are raising awareness through insight (by measuring the use of energy), allowing action by remotely switching on and off connected appliances and enabling savings on energy costs and reducing CO2 emissions. Product development, as will be seen further on, is structured around these objectives. As other explicit information to the public on their website, these objectives (and more specifically the reduction of emissions) communicate a commitment to issues around sustainability. Whether this commitment occurs and to what extent will be covered in following sections of this case report and analysis. Consisting of 5 main products (each presenting variations and incremental changes depending on the market covered), the portfolio can be characterized as the expansion of a system around the innovative

solution/idea and later product that led to the founding of the company and the development of its business case. It is based and developed on a wireless energy management system allowing domestic and commercial users to gain detailed understanding of their energy consumption where they see it: at the plug on the wall. Existing and ongoing innovations within the company characterize the business case, built around the offer of products and services that help customers to save energy. The ‘first’ product innovation, although new in a niche market, is more of an incremental than a radical nature. Following innovations are incremental as well, especially if considering the fact that what the company’s markets is a system rather that individual/independent products. In this sense the expansion of the product portfolio is about updating and upgrading the system. Both the company’s first product and following innovations can be characterized as market driven, because they are/were born out of observation of market needs rather than creating news needs and new markets. Drivers for new innovations are a combination of sales/marketing’s input; customer needs feedback and identification, regulations and management vision.

2. Characteristics of the innovation process The innovation process at the company is structured; especially once an idea/concept/suggestion is inserted in the company’s innovation management system that works as Stage-Gate process, with 2 formal go/no go decisions (see figure 14 and 15). Throughout the process, steps are clearly defined. The process has elements of FFE activities throughout it: in idea input especially. There is also the possibility of iteration if idea/concept at this phase needs to be better defined and with more information. Other FFE activities, such as creativity and idea generation do not seem to have significant weight in the process. This happens because ideas come from the market and from management (that is the owner/founder of the company). This, as will be seen, reflects in the innovation process and in the integration of sustainability. Decisions (made by the product development team – through its manager and management – namely the owner/general manager) are made based on cost of development, final cost and general manager ‘gut feeling’. Decisions, driven by regulation, market and customer inputs & management vision occur when each of the 2 evaluations is made: 1. 1st decision: Internal to Product Development Team (decision based on opportunity presented by the following criteria: category of innovation; impact of the presented idea; priority perceived in taking the idea forward; any other available info) 2. 2nd decision: Joint decision between management (owner/founder of company) and Product Development: assessment of necessary functional specifications, field research and cost estimates 56

Figures 14 and 15: Innovation process at A1

3. Role and/or influence of owner/general manager The owner/founder at A1 is central figure in the innovation process and the decisions made. Ultimately, it is the owner that makes key decisions regarding whether a project will be continued, put on hold or killed. Furthermore, business partnerships are established based on the owner’s network and kept without possibility of change or competition, a factor that may hinder innovation’s development. 4. Sustainability Issues How/when/by whom is sustainability integrated in the FFE of Innovation at A1? Sustainability comes as a ‘consideration’ in the very beginning of the innovation process, at the FFE and throughout the development of the innovation. Sustainability is used as a ‘guide’ and ‘final function’ provided by the innovation. In this sense, sustainability is always integrated, as a ‘way of life’. This is evidence that apart from the overall idea that the product has to fulfill a function, sustainability is not really integrated, not in the innovation process, or in the FFE. Sustainability is integrated by the way the innovation is structured and was originally set as an input of the question ‘how can I save energy and see where to do it?’ Another interesting point is that there is not an established use of documents that could be characterized as a design brief (the result of FFE process). At the most there are documents of technical nature and planning that do not have any sustainability integrated. In what way and how does the company’s view on sustainability and orientation influence their innovation process? Sustainability is viewed as business opportunity, because market is at the moment open to this sort of product/offering. Therefore any innovation should enable a payback within 5 years, which can indicate a rather short time orientation. Furthermore, sustainability is embedded and only in the function their products provide. Combined with the fact that product development is driven by market/customer demands and regulation has outcomes such as: Only one aspect of sustainability is considered as sufficient (the function: if it is a saving energy product and affordable, then it is included in the portfolio). This can hinder the consideration and/or inclusion of others aspects/options of sustainability at the FFE, such as the use of materials and components. Additionally the fact that the company is working with the same supplier may not contribute to changing this reality;

New innovations are a part of a growing system (around the first product marketed by the company) and therefore incremental and within the product/innovation cycle of the initial idea that originated the founding of the company. This also hinders the integration of sustainability in other forms. Furthermore the company sees future opportunities in the function their products can have within a PSS, where combined within a smart grid, people/users could benefit from the function provided by the product. Sustainability is introduced in the process through direct input collected from the market and external sources. Stakeholders influencing this input are foremost users/customers. Before actually entering the innovation cycle, these are translated into proposals for products, by stakeholders within the company, ranging from the product development team to the sales/marketing teams. The value existing is in the function provided by products and the economy that results for users, whether corporate/professional or at home level. It has value because it allows businesses to better manage their sustainability performance and home user by saving energy and make them feel as a part of a bigger picture whilst saving money. 5. Summary of Important Aspects

Innovation Strategy

Innovation Process Organization

Sustainability Issues

Market driven

Owner is a central figure in the

1. Sustainability as ‘way of life’ & ‘goal’

Incremental

company and in the process

2. Is embedded within the function

Tied to owner/manager

entrepreneurial vision

Process structured and systemized (FEI & NPD)

provided by product/innovation 3. Only one approach to inserting

Short time orientation

Documentation is technical

Value delivered through the

Sustainability is only inserted in FEI

4. Seen as a business opportunity today

as goal to be fulfilled by the product

5. Seen as business opportunity in the

function of the product

sustainability

future, which leads to the possibility of new business models > PSS offer with partners in network

Group A Industry: Mobility Company A2

Case Description 1. Context A2 is a company manufacturing electric bikes and electric scooters, or Light Electric Vehicles. Founded in 2005, the company currently has 14 employees working in their Amsterdam headquarters. Designing bikes and scooters, the company deals directly with dealerships as their customers, although it provides technical support for users. All the design and engineering of their products is done in house and manufacturing is outsourced to China. The product portfolio integrates a total of 11 products, sorted in two main categories: it has a line of electric bikes and one of scooters. Electric bikes use available frames in the market and the company customizes them for an electric engine and specific solutions. They offer medium to high-end models. One concern in these designs is to minimize parts and components and increase comfort. The scooter line has two types of models. The first, as for the bikes, uses available chassis in the market with adapted solutions designed by the company. On the other hand, they have designed a scooter that is on the market, for which they hold patents and designs. Furthermore, they are currently engaged in developing products with a C2C approach. The companyâ&#x20AC;&#x2122;s products are seen and marketed as sustainable mainly because they provide the same function as a car (mobility) while being environmentally friendly. The company portfolio addresses a gap/niche in the market by providing short distance urban mobility

alternatives. As a growing market based on the need for mobility and a growing awareness of customer for sustainable and economic solutions, sustainable mobility is also marketed and branded as a lifestyle choice. The company positions itself as an advocate of sustainable mobility and their products insert themselves into this logic, as providers of solutions for mobility without CO2 emissions and a solution for mobility problems in urban areas. As will be seen in the case description, product development is conducted under this â&#x20AC;&#x2DC;northâ&#x20AC;&#x2122;. 2. Characteristics of the innovation process The innovation process at A2 is not explicitly formalized, nor under a process nor in any other way of setting steps and phases. Nevertheless there is a structure to the process (see figure 16). The product development team and management (namely the owner/founder/CEO of the company) are involved stakeholders in the innovation process. The lack of formality in the process is seen as a reflection of the young age of the company and the lack of financial and time resources to set up process. The innovation process is informal, being characterized by little documentation produced or archived as such (there are no briefs, no phases evaluation, etc.). Furthermore, the little amount of documentation that exists is scattered, not systemized and unstructured. This is the result of a highly iterative and dynamic process. Within the process, there is neither formal nor explicit decision making mechanisms and evaluations are done informally or at a product level (as opposed to a process evaluation) only when a product is being upgraded and/or updated. The process begins by identification of gap within their product portfolio, market observation and research, which establishes their main FFE activity. Idea generation is then based on those observations, and quickly done by product development team and management, without any specific creativity exercise. The FFE portion of the process is very quick, leading straight into NPD and is said to be constant from start of idea to end of product development, meaning that any information or decision (a new idea, a market need, etc.) can lead to a change in the product development direction. The NPD part of the process can be characterized by product development itself, prototyping and adaptations based on user input & feedback

Figure 16: Innovation Process at A2

3. Role and/or influence of owner/general manager The company manager is acknowledged to be the initiator of the innovation process by explicating a need, a gap to be fulfilled and determining the type of product to be developed. Furthermore, although there is a product development team and an R&D manager, upper management supervises closely the innovation process, thus likely influencing its outcome. As in many SME scenarios, the owner/founder/entrepreneur persona is central and influential in guiding the innovation process. 4. Sustainability Issues How/when/by whom is sustainability integrated in the FFE of Innovation at A2? Sustainability is integrated in FFE activities by the choice/requirement of the energy source- electrical motors - as it is the core of the business case (light electrical vehicles). Other than this approach, there are not other ways in which sustainability is integrated. Sustainability comes into the process because of customer/marketâ&#x20AC;&#x2122;s demands. Mainly management and the product development team interpret the input for these demands. They define upfront, following tacit decision making, which product will be developed. There is a communicated will to start using sustainable materials, still in a research phase. There is the set up of an R&D effort into sustainable materials alternatives and applications, through external government funding and a partner collaboration network. Ultimately, sustainability is integrated only through one consideration. At this point, what results from this innovation process is an incremental improvement of the existing business case and product portfolio. In what way and how does the companyâ&#x20AC;&#x2122;s view on sustainability and orientation influence their innovation process? Sustainability has to be economically viable to be integrated and it is under this light that this is occurring. Sustainable mobility is seen as a niche to be exploited. There is a recognized demand for sustainable urban mobility alternatives and innovation is developed under this direction. Drivers for this approach are a perception of societyâ&#x20AC;&#x2122;s needs (ultimately the customer) that create a niche in the market. In their view, the products they offer are sustainable because they fulfill a sustainable need by offering alternatives to the use of car, and thus help reduce CO2 emissions. Sustainability is always embedded in 64

their products because of the technology used in products (electrical motor), so indirectly reducing CO2. Sustainability is viewed as being about energy and materials. In this sense, sustainability has been steering their innovation process, since the use of sustainable energy sources is at the core of their case and the use of sustainable materials is under research (with other partners involved and external financing). There seems though to exist an acknowledged need to be part of a network with partners to be more sustainability driven to have a final product that is more sustainable. In relation to the innovation process, sustainability comes as an input at the beginning of the process, as sort of a given and accepted aspect of the product itself. However, the view on sustainable innovation, at this point, does not seem to go beyond this (e.g. business models, PSS, etc). So there is not a wider approach towards sustainability that could generate more innovation. 5. Summary of Important Aspects Innovation Strategy

Innovation Process Organization

Sustainability Issues

Market driven

Informal and not systemized

Addressing a growing niche in the

Dynamic & iterative

only in beginning as the 1st

market

Very scarce documentation

requirement for the innovation

Tied to owner/manager

FEI quickly covered

entrepreneurial vision

Acknowledged need to better

3. 4.

Interested in different approaches to sustainability

formalize process 6.

Is embedded within the function provided by product/innovation

No time/financial resources to formalize process

Sustainability integrated in FEI

Only one approach to insert sustainability

Will to be more sustainable (research into materials and C2C)

Sustainability has to be economically viable

Group A Industry: Furniture Company A3

Case Description 1. Context With around 200 employees, A3 is 40 year-old company (founded 1971) and active in the office furniture industry. Positioning itself as a ‘versatile’ company, A3 is really focused on following trends and adapting to market needs, thus being very market and customer driven. Holding a very diversified product portfolio ranging from desks, chairs to wall systems, the company offers a large number of products, all of which with incremental differences and characteristics. It describes itself as contemporary, flexible, atmospheric, efficient and orientated towards both small and large organizations in various sectors: offices, care, education, cultural institutions and more. Among the cases in group A, A3 is the company that communicates its involvement with sustainability the most. With an entire section of their website dedicated to their commitment to sustainability, the company states that while important, financial performance reflects only a ‘limited vision’ of business: there is the ‘need to combine a good company return with protection of the environment, with making the most of our employees’ talents, and with making a contribution to the stability of the society in which we work’. Hence a reference to Elkington’s Triple Bottom line. 66

With almost 200 employees, A3 has a core small product development team composed of two industrial designers overseeing the product development process. 2. Characteristics of the innovation process A3 has an informal innovation process, a characteristic that is seen by the company as strength. Involved stakeholders in the process are management and the design team. The process is started by management, by providing input, and based mainly on the observation of the competition and trends. The main driver is meeting the customersâ&#x20AC;&#x2122; needs and making products that are easy to sell and appealing, which can be seen as a very generalist definition of product requirements/objectives. This â&#x20AC;&#x2DC;followerâ&#x20AC;&#x2122; approach is market driven and results in incremental products and innovation. The cited phases within the process are, after the initial management input, a phase of idea and concept development, a moment of decision making (on design team) and finally a phase of design/product development (with significant importance given to prototyping). The most important phases are product development and following adjustments. The FEI part of the process is addressed very quickly as the input coming from management sets beforehand a number of criteria. Activities covered are competition analysis, criteria setting and idea generation. This step is very informal, with no specific techniques. The FEI is not evaluated. The product development team decides then on design and material issues, enforcing management strategic decisions. There is no fixed time frame or priority for projects. The only priority is for customized projects for clients (paying customers), which sometimes leads to an overload of work volume and unpredictable time frames. Design briefs are very general and basic documents containing general requirements such as family (product line), dimensions, features and functionalities. There are no sustainability aspects included in the document.

Figure 17: Innovation process at A3

3. Role and/or influence of owner/general manager The perceived influence is by management. It is responsible for most input of ideas and for decisionmaking.

4. Sustainability Issues How/when/by whom is sustainability integrated in the FFE of Innovation at A3? Sustainability issues are integrated in the innovation process and the FEI only indirectly as they are more process driven. The considerations are related to energy and material waste. On a product level, there are some considerations relating to the design/construction of the product and its lifecycle. There is no mention of sustainability in the briefs and early discussions around a product. These considerations are only discussed in the product development phase, with an eventual discussion over a material choice, for instance. Sustainability is not integrated at the FEI, but rather at a product design level. Currently the company is willing to attempt a C2C approach, although also more on product development level. In what way and how does the company’s view on sustainability and orientation influence their innovation process? The integration of Sustainability is a recent issue in product development, a result of a change of mindset (mainly market driven), brought forward by management. Sustainability is perceived as a growing requirement, as a result of growing pressure from stakeholders in the form of market practices and customer’s opinion. The underlying logic is that not complying is bad for business. The company is also attempting to work with sustainability driven suppliers (materials mainly), however there is an acknowledged difficulty in integrating sustainability at product leve 5. Summary of Important Aspects Innovation Strategy

Innovation Process Organization

Sustainability Issues

1. Market Driven

1. Informal and unstructured

1. Sustainability is process driven

2. ‘Followers’ approach

2. Very basic documentation

3. Will to be more sustainable on

3. No integration of sustainability at the

product level

FEI

(reduction of energy and material waste) 2. Not integrated in product development 3. Awareness of triple bottom line and of company’s social and environmental 4. Willing to integrate sustainability on product level

Group B Industry: Home Automation Systems Company B1

Case Description 1. Context B1 is a young and dynamic SME in the home automation business. Founded in 2003, the company offers ‘to remedy the inadequate integration of systems and disciplines, by developing products and services which contain state-of-the-art technology as well as strong attention on its users’. The business case was established on the idea that homes integrate more and more smart devices (management systems, solar panels, alarm system...) and that existing integration systems are expensive and difficult to use, leading to the question: ‘why not an easy, plug and play, and affordable solution?’ B1’s business model is to develop products & services but market these as white labeled so clients/partners can put on their own brand. This allows the company to skip branding efforts, distribution, etc. The company does the concept development and the design of both hardware and software (adapted to each company/buyer). They aim at 3 types of customers: energy companies (large customer bases and need for new services), telecom companies (also want new home services) and manufacturers. Although they see themselves as mainly a software company B1 makes the casings and the actual product design (‘we do it because we want our software to run on a nice device’). They try to make sure that product/software are

compatible with most automation devices existing in the market and main clients are global companies such IBM, Cisco, Philips and energy companies in Europe. The first product released, in 2005, was a universal board computer for homes. The company offers altogether 4 products in their product portfolio. 2. Characteristics of the innovation process The innovation process at B1, although rather organized and obeying a structured logic, is neither systematized nor formalized. Within the innovation process 3 main phases can be distinguished, namely a FEI phase, an NPD phase and NPC/Market introduction phase. The FEI phase begins with an insight/idea brought forward by management. There are no idea generation tool/techniques being employed. This idea is then refined into a product idea, leading to research into the idea and finally to Concept Development. The decision around concept development is done after research (market/customer). The Front end of innovation is seen as the 1st phase in innovation characterized by research, the preparation and confirmation of having a business case. It is seen as a trial and error process with no set and clear evaluation processes and decision-making mechanisms. It is also acknowledged that there are no criteria for decision-making, just intuition. The NPD Phase is characterized by a product development phase, followed by testing, prototype and piloting (where the input of user/usability is very important). After these phases there is a market introduction phase. Innovations are Market/Customer oriented. The company is undertaking an attempt to formalize the innovation process by setting steps (project control board & roadmap â&#x20AC;&#x201C; planning + Project Initiation Document) and formalizing the screening of ideas, 1st decision-making and briefing documents.

Figure 18: Innovation process at B1

3. Sustainability Issues How/when/by whom is sustainability integrated in the FFE of Innovation at B1? Sustainability issues are integrated in the FFE when researching/deciding on materials and how much energy is used by a product. This happens during concept development and product definition. These issues are seen as a focal point of decisions for deciding on developing new products and are driven by the importance given to it by the opinions of the company’s stakeholders (e.g. customers, markets). Although the attention to sustainability issues is verbalized as a requirement existing prior to any NPD activities well before any FEI activity, it comes in only when deciding on materials. There is no other stated approach to make the product sustainable and the approach is still ad-hoc. In what way and how does the company’s view on sustainability and orientation influence their innovation process? The company’s view on sustainability influences the innovation processes on many levels. First, because of the acknowledgement of the importance of the topic for the business, especially in a future business scenario, the integration and use of sustainable materials is encouraged, although currently it is also seen as a barrier into the process (as it requires convincing clients of the potential of using such materials). Management sees sustainability as an issue that needs to be integrated now so as not to fall behind competition. There is a forecast that this decision is an engagement that will pay off in three years time. Furthermore, there is a perceived need to create awareness and culture of sustainability in the company. An interesting point is the fact that commitments to sustainability are not yet communicated officially as part of the company’. This occurs due to a lack of time and a B2B approach, where business partners are fewer. This leads to a closer and verbal relationship with clients. This is how the topic is approached The view and integration of sustainability considerations do not seem to contribute to more open and innovating ideas (more ‘radical’) as it is inserted into embodiment decisions related to materials and components, which results in incremental changes to the product features. Overall, sustainability is seen as an area that will increasingly articulate business opportunities (e.g. endorsing the use of sustainable packaging with business partners).

5. Summary of Important Aspects Innovation Strategy

Innovation Process Organization

Market & customer driven

Structured but informal

Linked to customers/partners

Long development time

needs

Recognized need to formalize a

Products, software & services

Incremental

Sustainability Issues 1.

into and actions taken towards 2.

process 4.

Not communicated but looked When possible integrated in process

The use of sustainable material is a

Business opportunity

requirement in the FEI

Acknowledged strategic need to integrate sustainability as a mentality (as soon as possible)

Product combines sustainability in material & function provided

Group B Industry: Mobility Company B2

Case Description 1. Context The context situation of Company B2 is particular as it can be divided into two distinct moments. The company was founded in 1930 and has been manufacturing child seats since 1934, giving it a history of over 70 years in the business. However, this traditional supplier of child seats had failed to make product innovation, which led in the early 1990s the loss of market leadership to a younger and more innovative competitor. In 2007, the company was approached and taken over by the current owner/CEO, a trained industrial designer (a fact that certainly influenced how the company currently approaches innovation). Since 2007 the company has repositioned itself as an innovative company focused on product innovation and developing a new product range. New ideas, innovative materials and changing safety requirements have been seen as new opportunities for the future as well as for continuing to provide the best in the field of carrying children safely and conveniently on cycles. The new generation of seats is marketed as easy to use and install. The seats have been certified in accordance with the most stringent European safety standards and carry the quality seal of the Dutch TNO institute for applied sciences research. Safety and durability are communicated as a first priority and are tested and checked regularly.

The take over, other than signifying a new approach towards product innovation, also meant a new organizational structure. The company went from having approximately 15 to 4 full time employees, with production outsourced to China and Taiwan and product development developed by a partner design agency under close supervision of the company’s CEO. The current product portfolio consists of two lines of products, namely a discontinued line of seats existing prior to the change of management and the new, more innovative, and design & innovation award winning line of products on which this case is built on. There is a clear intention in differentiating the company’s products from competition, through the articulation of USP and product innovation. Furthermore, the communicated aspiration is to be a future a provider of mobility solutions rather than just child seats for bikes. 2. Characteristics of the innovation process Innovation projects at the company follow a clear and planned process. This can be influenced by the fact that the process is led by the CEO/general manager (also an industrial designer) and the design agency. Albeit the process is clear, it is also informal and quick. The process is distinctly divided into FFE activities and NPD activities, with clear key points. Among FFE activitiesare market research, assessment of the company’s current situation, idea generation, and Concept selection. The FEI is the base for briefing and is mainly based on the concretization of business plan (NPD, branding, sales, marketing). The direction of the (future?) brief and the research that leads to it is strongly tied to the entrepreneurial vision of the manager. Furthermore the FEI quickly and intensively covered. It consists of markets, materials, competitors’ research and also multiple inputs and high interactivity and early sketching. There is no customer input, a conscious decision by management to limit planned development time and the support the strategic goal of speed to market. At the end of the innovation development time, there is no evaluation on the process.

Figure 19: Innovation process at B2

3. Role and/or influence of owner/general manager The fact that the owner/manager of company B2 is a trained designer should be taken into account. First of all, his choice of partnering with an external design agency to tackle product innovation is likely to have influenced the innovation process. Furthermore, since the company is reduced to 4 direct employees and that the CEO is also supervising product development and future innovations, he is largely responsible for making choices, setting priorities and approaching partners and decision making, thus directly influencing innovation and approaches to innovation. 4. Sustainability Issues How/when/by whom is sustainability integrated in the FFE of Innovation at B2 In the steps that are mentioned in the planning documents or in the phases’ presentations, whether within the FFE or NPD phase, there is no explicit consideration of any sustainability issue. However sustainability is said to be have been considered by the design team in the early stages of the FFE activities, when the possibility of doing a C2C product is seen. The idea of the C2C approach was put forward by the manager/CEO of the company. The consideration was quickly left out (put aside?), as it is not a priority but more of an extra added value. In this sense, the lack of sustainability communication is consistent with the company’s approach towards and integration of sustainability in the innovation process, whether at the FFE or later on. In what way and how does the company’s view on sustainability and orientation influence their innovation process? In the company, sustainability was considered only briefly at the beginning of the innovation process through the idea of having a C2C approach. However while acknowledged as a future business opportunity, for the current and discussed innovation, the sustainability aspect was just another requirement quickly discarded because it is not deemed a priority. In this sense, if any sustainability is achieved in the product, it is seen as an extra added value. In the company’s view the drivers for considering sustainability are social and environmental responsibility. The company’s does not see its products as particularly sustainable (although acknowledging that the choice for EVA and product durability could be to some extent marketed as such) because the products are not designed for disassembly, thus suggesting that there is a consciousness of how to be sustainable by design. This ends up resulting in the fact that sustainability is still not seen as source for innovation, yet.

A barrier in the implementation of sustainability lies in the companyâ&#x20AC;&#x2122;s view that because there is no clear, widely accepted standard of what makes a product truly sustainable, it is complex to make products sustainable and market them as such. This could be accomplished through a wide value chain analysis to understand what the impacts of the products truly are. The simple fact that sustainability is not viewed as a priority in the company explains the lack/non-existing integration of related considerations in a more consistent way. 5. Summary of Important Aspects Innovation Strategy

Innovation Process Organization

Sustainability Issues

1. Structured, planned w/ clear goals, but

1. Sustainability only considered quickly at

Steered and determined by manager/CEOâ&#x20AC;&#x2122;s entrepreneurial

beginning of FEI

vision

2. Fast and objective driven

2. Acknowledged as a business opportunity

Closely conducted with design agency

3. In FEI, emphasis on research (market,

3. Driven by social and environmental

partner 3.

not formalized

Company wants to regain market

competition)

responsibilities

4. Sustainability only integrated as a

4. Do not see themselves as sustainable

leadership through product

possibility, not priority > quickly

because their products have not been

innovation

discarded

designed with that in mind 5. Sustainability is not seen yet as a source of innovation 6. A barrier to sustainability: complexity of defining what is sustainable enough and how to get there

6. CROSS-CASE ANALYSIS

The cross case analysis presented in this section looks at important similarities between the case study findings. It addresses innovation strategies, innovation processes and the integration of sustainability in the FFE. The analysis focuses on interesting aspects of these issues that can be combined for further insight. Interesting differences between groups A and B are also highlighted when relevant.

6.1 Innovation Strategy The innovation strategy influences how companies tackle innovation and indicate how processes are established. Combined with contextual aspects such as age of the company, type of market and others, the topic is addressed to help build a context in which the research questions are perceived and understood. Overall, within group A and B, all the companies can be characterized as market driven and innovating incrementally. They all position themselves as addressing market needs, with most clearly stating that they innovate in reaction to what the customer and market needs. For all companies, the product portfolio is a reflection of these factors. A1

Age

Young

Older

Development Stage

Growth –

Growth – dynamic;

dynamic; fast

fast

Niche

Growing; not

saturated

Nº of employees

Approx. 15

Approx. 200

Innovation &

In house

In House

Partnerships w/

In house

Market

Product

Large market; Saturated

Design Agency

Development

•

Apart from A3, all companies (A1, A2, B1 and B2) can be characterized as young (3 to 5 years old) and dynamic. As seen in the scale below (scale 1), companies founded towards 2009 are the youngest and companies founded towards 1970 are the oldest. A1, A2, B1 and B2 rank therefore as young companies. Interestingly, these companies are in a fast growing moment of their development

Scale 1. Age of companies

•

The number of employees ranges from 4 to 20 people for A1, A2, B1 and B2.

•

A3, on the other hand, employs approximately 200 employees. A3 is the only company in a long established and saturated market.

•

Of the companies competing in a niche market, A1, A2 and B1 can be characterized as operating in a growing and not yet saturated market segment

•

Mostly, the companies are responsible for the design, engineering and marketing of their products, with dedicated in house teams. The only exception is B2, which develops new products in association with an external partnering design agency.

Therefore, the dynamic and developing SMEs (A1, A2, B1 and B2) have up to 20 employees, up to 5 years of age and compete in niche markets. On the other hand, A3 is the oldest company (40 years old), has a bigger structure (up to 200 employees) and operates in a saturated market.

6.2 Innovation Processes The comparison between innovation processes whether within or between groups yields interesting analysis. Overall, and independently of the companies’ positioning towards sustainability, these processes can be characterized as informal, consistent, with rapid progression through the FFE and subject to great influence by management/owner, whether at the beginning of the process or at key decision-making moments. A1

Formalization of the

Systemized

Informal

High degree of

Informal

High degree of

Innovation Process

innovation process

Consistency

Consistent

FFE Activities

Clear front end

activities in the

informality;

process

Role of

Direct Influence of

No clear Influence

Direct Influence of

Influence of

owner/manager/

owner in decision

of manager/CEO in

owner in decision

management in

Entrepreneur

making (within

decision making

making (within

decision making

FFE)

(within FFE)

FFE)

(within FFE)

With the exception of A1 that presents a more systemized innovation process, especially into the early phases, the other SMEs all operate with informal yet rather established and consistent innovation methodology. The formalization of the innovation process in companies is represented in scale 2 below. It

is based on the information gathered from the case studies and the researcher best judgment on the available data. The data used to determine companies’ placement ob the scale draws on interviewees’ testimonials on the respective company’s processes and the existence of formal documentation and process outlines.

Scale 2. Formalization of the innovation process

The informality is characterized by a non-written and established methodology, a very small quantity of written documents (such as design briefs, for example) and a tacit knowledge about ‘the way we do things’ which, even for A1 and its more systemized front end, is a recurrent reality in the explored case studies. There is a degree of informality that may be addressed. This degree may be seen by the way companies describe and refer with accuracy to steps throughout processes: •

A2 and A3 are the companies that show the most informal approach to innovation, both acknowledging that too much formality may be a barrier to innovation.

•

A3 considers the lack of formality as a necessary flexibility. Interestingly enough, A3 is the biggest of the studied SMEs and perhaps the one with a less formal approach to innovation. It is also the oldest and the only company competing in rather saturated market.

•

Companies B1 and B2 also have informal approaches but seem to acknowledge more the eventual need of gaining more formality as a consequence of growth. In this sense, A1 and A2 also foresee this need for more formality. This is only logical as these companies are fast growing and sense the need for formality as next step to remain competitive.

The lack of formality must not be confused with lack of consistency. For each company, a specific innovation case was discussed as a way to benchmark innovation processes. All participating companies saw the discussed examples as representative of their innovation process. Simply put, this means that although not written down, in general the same steps were followed for each innovation, in a tacit but established way of doing things. Furthermore, if modeled into a process (as done in each case), innovation processes follow a linear logic, generating little feedback into the beginning of a new process. This may be the consequence of an overall lack of evaluation of these processes, which seems only logical, as they are not formalized.

Regarding the FFE parts of the processes within studied SMEs: •

All companies, whether group A or B. have a clear front end phase in their innovation process. In most cases, the front end emphasizes more on the selection and development of proposed ideas rather than a more creative aspect of coming up with new ideas.

•

The FFE is generally a phase that is moved through quickly, resulting in longer NPD where many adjustments have to be done. This is the case especially for A1 and A2.

What is highlighted in this first segment of this analysis is that: Although informal, studied SMEs have a consistent, tacitly organized innovation process. In most cases, the figure of owner and manager has an influence in decision making within FFE activities. In scale 3 below, described below, the type of company’s culture and the role of the owner in this set up are mapped. The mapping is based on the researcher judgment on the information gathered from companies’ case studies and particularly on the account interviewees’ give on how key decision-making is made in their company. This gives important feedback into company culture and enables the mapping in scale 3. Therefore A1, A2, A3, and B2 and to a lesser extent, B1 seem to score towards being companies with rather ‘authoritarian’ cultures (i.e. the owner/general manager tends to make all important decisions). In most cases, strategy setting, decision-making and innovation input is concentrated around the persona of the owner/general manager of the SME. This hints towards the importance that organizational culture has in the management and operations within SMEs.

Scale 3. Type of company’s culture and role of the owner in this culture

In these companies (arguably less for companies A3 and B1), the owner is the person that has the final world about go/no go decisions. In studied cases, the whole organizational process seems highly centralized and dependent on the figure of the owner/entrepreneur/senior manager. Companies A1, A2, B1 and B2 can be characterized as small, fast growing and competing in niche markets. Within that group of companies, innovation processes are intertwined with the personas of owners, suggesting that aspects of

What and Who (as exposed in this research’s framework) are highly linked and with processes and resulting innovation dependent to a high degree to the decisions made by the owner. Thus a second point to draw from this cross analysis is that within studied SMEs, especially among smaller, dynamic and entrepreneurial companies: Aspects of ‘What’ and ‘Who’ are closely linked and very difficult if not impossible to dissociate

6.3 Sustainability in the FFE The integration of sustainability within the FFE is the principal motivation of this study. Across cases, whether from group A or group B, companies integrate at one point or another sustainability as a consideration in their FFE and differ in the way that it is done. Scale 4 below represents to what extent companies integrate sustainability in their FFE. More specifically, it establishes whether companies do not have any sustainability requirements in the FFE (‘No requirements’) or have a FFE approach that integrates sustainability in a holistic way (‘Holistic Approach’). A holistic approach means integrating sustainability by considering not only environmental issues but also social and economic ones. Furthermore it means considering sustainability from more than one aspect (for example, the use of a specific sustainable material) but rather from the combination of different factors (for example, function of product, materials used, life-cycles, business models, etc.). As in other scales in this analysis, scale 4 is established based on the information gathered in the case studies resulting in the researcher best judgment around the investigated issues.

Scale 4. The Integration of sustainability requirements in the FFE phase.

Within group A (companies communicating a commitment to sustainability) companies integrate sustainability differently: 85

•

A1 address it as a guiding principle of innovation. Therefore, this is a requirement set before engaging in any FFE activity and throughout the innovation process.

•

A2 inserts sustainability by the choice of using electrical engines. It is those that make their product sustainable. It is also a decision made prior to any FFE or Innovation activity.

•

A3 on the other hand, tackles sustainability mainly through their process (waste and energy use minimization) and sometimes the choice of a more sustainable material (there are no precisions as what kind of material).

Both A1 and A2 make sustainable products not because of the products themselves or a new business model, but because of the function these provide. Therefore the integration of sustainability occurs mainly as guiding principle and nothing else. There is no reference to any other sustainability related requirement throughout their FFE and innovation process (e.g. the use of materials) All companies indicate the will to be more sustainable: •

A1 through the possibility of partnering into Smart Grids initiatives

•

A2 through the research for use of more sustainable materials and

•

A3 through the possible future development of tools for eco design.

What comes across about all companies within group A is that none of them really integrates any sustainability consideration into their FFE (and into their innovation process for that matter). When it is coincidentally done, it is not in a holistic way. Within group B (companies not communicating commitment to sustainability), companies have different approaches to sustainability: •

B2 acknowledges having considered quickly a C2C approach when researching on their new product line but it was quickly dismissed because not seen as a priority.

•

B1, interestingly, integrates sustainability in the FFE through two approaches. First by the decision to make products that deliver a sustainable function – saving energy in a household, like A1, and by establishing a requirement within the FFE that developed products should be sustainable. Therefore B1, although not communicating sustainability, is the only company within the set of studied companies – groups A and B – that has a more holistic approach to integrating sustainability in the FFE.

The first sustainability aspect of the cross analysis is therefore: Within the SMEs, sustainability is mainly integrated in the FFE under one requirement rather than in a holistic approach. An additional interesting aspect is that mostly all companies see some sort of business opportunity in sustainability. Motivations behind this view are mostly financial. Participating companies acknowledge that sustainability is increasingly a topic that needs to be addressed and incorporated into business practices to achieve a competitive advantage. What differs among companies is how this issue is being addressed. After observing what the cases indicate, it is also interesting to combine these observations between them to gain further insight. Only the relevant combinations are being reported.

6.4 FFE x Sustainable Innovativeness In this combination (see diagram 2), two dimensions are combined and crossed: â&#x20AC;˘

The degree of importance of the FFE in the innovation process (1) and

â&#x20AC;˘

The classification of the studied cases in terms of sustainable innovativeness (2)

(1) The degree of importance of the FFE phases in the innovation process is given by taking a subjective overview of the feedback across cases regarding the amount of time spent on FFE phases in the innovation processes and the type of organizational cultures existing in the companies (see scale 3 in section 6.2). The resulting crossing presented in diagram 1 (see below) indicates that the more time spent on FFE phases combined with a more team oriented type of company culture is likely to result in a stronger and more important FFE phase in the overall innovation process.

Diagram 1. Importance of FFE phases in the innovation process.

â&#x20AC;˘

B1 has been positioned as having the stronger FE influence because the process in the company appears to have less influence of the owner/entrepreneur. On the contrary, decisions are said to be made by the both management and product development team manager. Additionally, the innovation process is consistent and gives importance to front end activities. Finally, the company is currently looking into formalizing its innovation process.

â&#x20AC;˘

B2 and A1 appear overall on the same position in the ranking. Both appear to have a strong influence of owners/entrepreneurs in the decision making and have consistent innovation processes with attention to the FFE

â&#x20AC;˘

A2 and A3 rank as having the weakest FFE influence because both have strong management/owner influence, informal yet consistent innovation process but with little apparent attention to FFE activities, which seem to be covered rather quickly

To enable crossing the importance of the FFE with the classification of sustainable innovativeness (presented below in (2)), scale 5 (see below) is proposed from a regression of diagram 1.

Scale 5. Importance of FFE phases in the innovation process.

(2) The classification of sustainable innovativeness is based on a scale ranging from a company’s meeting of a single bottom line to achieving system innovation. Placing the companies on this scale was based on the assessment of the case studies relevant information, namely the clues given on how the studied products could be defined as sustainable by the companies themselves.

•

B1 ranks closer to redesign mainly because it has been integrating the use of biodegradable plastics to the design of their products, improving the sustainability of the product (the energy saving function provided);

•

B2 ranks only as compliant because no sustainability integration has been inserted in the product

•

A1, A3 and A2 are ranked in between incremental sustainable innovation and redesign because innovations mainly consist of small and incremental improvements to existing products.

When crossing (1) and (2), an interesting insight (see diagram 2 below) emerges:

Diagram 2. Importance of the FFE phase in the innovation process X Degree of Sustainable Innovativeness.

The combination of a strong front-end influence and higher innovativeness is likely to create products that are sustainable and have a lesser impact: •

B1 is the company has the best position in this scale. It has a stronger front-end influence and is currently products that are more sustainable that the other companies. Additionally, the company is currently formalizing its innovation process and setting sustainability as a stated requirement in future product development. This indicates that it may be improving its position in both scales, therefore moving further towards delivering products that are more sustainable.

•

B2 is only compliant to its industry regulations and does not have any elements that can characterize it as moving towards innovating more sustainably. On the other hand, it has a rather established innovation process with influence of the owner/entrepreneur.

•

The same occurs with A1. It has an established innovation process with great influence of the owner/entrepreneur but has a more sustainable product mainly because of the provided function. The fact that the company is trying to establish new business models may improve this position.

•

A2 and A3 are only innovating incrementally in terms of sustainability and rank low in front-end strength. However, both companies are looking into integrating more sustainability issues into their product development

In addition, diagram 2 yields an interesting insight. What emerges is that most SMEs in the study have rather poor FFE activities. This may occur because the processes are informal, FFE activities are really short in the overall process and because the decision-making is done by the persona of the owner/general manager. Therefore this indicates that FFE within these SMEs is not so influential and that owner/general managers are. In terms of future actions to enable more sustainable innovation, this may indicate that in order to achieve it, either the FFE needs to be more formalized, the company culture needs to evolve to a teamwork orientation and/or the owner need to be influenced to make relevant decisions. What remains to be seen is whether this are relevant actions, whether they are realizable within the SME context and finally what they would imply in terms of tool development. Another interesting finding is that the best performing company is B1. This company does not position itself as sustainable but integrates in its practices elements that enable this performance. The company acknowledges more and more sustainability as an important business factor and has inserted it as requirement in its innovation process. So far, it seems, the company sees this as enough, since delivering good products with added value is good for business. Companies from group A have incremental sustainable innovations but do not perform as well perhaps because there is a weak front end in which sustainability issues are only integrated on the surface. It appears that positioning the company as sustainable is not the same as being sustainable. More importantly, remains the suggestion that companies really integrating sustainability in a systematic way may not necessarily be positioning themselves as sustainable. This specific â&#x20AC;&#x2DC;hiddenâ&#x20AC;&#x2122; group may have a lot to contribute on how to put in practice sustainable innovation.

7. DISCUSSION & CONCLUSION

The research developed in this study was motivated by asking how sustainability is currently integrated in the FFE of innovation within SMEs and in return, how these SMEs views on sustainability influenced their innovation processes and FFE activities. The empirical findings show that the organizational structure and culture of the SME is likely to have a strong influence on the innovation process and in this case, on the integration of sustainability in the FFE. Findings also point to whether the framework used to tackle this research should be reassessed to better address the SME context. The discussion developed in this section elaborates on the findings and insights gathered in the case studies and the cross-case analysis. Among items addressed are SME organizational and innovation characteristics, relevant conclusions on the FFE of innovations processes within SMEs and a reflection on the framework used to tackle the research questions. Additionally, limitations of the study and its setup are acknowledged. Finally, a conclusion is drawn on the discussed topics to suggest directions for further research and future tool and methodology development to address the integration of sustainability in the FFE of innovation within the context of SMEs. SME characteristics The improvement of the product environmental performance is a complex management task for SMEs (Noci & Verganti; 1999). The analysis of cases in this study suggests a similar assessment. Noci & Vergati (1999) add that `green' product innovation is strategically relevant for SMEs. Simply recognizing this relevance can turn some of SMEs constraints into opportunities. However, other limits still remain. They make the management and implementation of `green' product innovation extremely complex in SMEs. Companies within this study acknowledge that integrating sustainability in their product development processes is needed to be able to compete in the market, whether today or in a nearby future. In 1999, Noci and Verganti stated that in the case of SMEs the need to integrate sustainability was already clearly seen by companies. This certainly remains a relevant fact. Increasingly, SMEs have to act quickly to create value before competition does. As covered in the theoretical background Christensen (1997) highlights what can occur to firms that stay within existing markets and fail to read the signals to explore new emerging and unexplored markets, despite being successful and playing by the rules (although Christensen is referring more to larger companies with different dynamics that SMEs). Most of the companies are fully aware of the importance of sustainability for their innovation processes. Mostly because of this awareness, at this point there seems to be plenty of room for optimization of innovation processes. Before discussing innovation and FFE practices within the SMEs and possible implications, it is important to highlight a specific aspect. The cases suggest that to optimize this integration and tackle any strategic management issue within most SMEs, the organizational culture must be addressed. This occurs 93

because in most SMEs studied, there is a strong influence of the owner and general management. Nooteboom (1987) and Bas-Broweurs recognize SMEs as having intertwined management and ownership with a dominant role of the entrepreneur/owner. Therefore addressing processes requires addressing the strong personas influencing these processes. Further research needs to assess in what ways this can be done, what barriers exist and what the implications for the SMEs and their innovation processes would be. The cross case analysis suggests that the SMEs have consistent yet informal innovation process. This is also a characteristic found previously in literature. Nooteboom (1987) finds, among other common characteristics, that SMEs usually have few and simple procedures, with direct and oral communication and low level of abstraction. Additionally, Bas-Brouwers (2009) finds SMEs to have a low degree of formalization. Therefore, dealing with innovation processes is indeed a complex issue, as it implies dealing with tacit and non-formalized ways of â&#x20AC;&#x2DC;doing thingsâ&#x20AC;&#x2122; (in addition to the strong influence of owners/general managers in SMEs). Addressing possible ways of better integrating issues (whether sustainability or others) calls more for an organizational and company culture approach than a simple methodology development. Innovation and FFE processes The case study suggests interesting conclusions about the innovation and FFE practices in SMEs: For all companies there are improvements that could be done in FFE and innovation processes. The activities in the front end represent the greatest area of weakness in the innovation process (Koen et al., 2001). Within studied SMEs, the FFE is a phase that is moved through quickly. According to Smith and Reinertsen (1991), actions at the FFE give the greatest timesaving for the least investment. However, this seems not be occurring in the studied SMEs, as many times, the lack of investment in the FFE (whether in time or finances) may be leading companies to make unnecessary investments and costly iterations and adjustments in NPD phases. Additionally, this phase seems to present other interesting characteristics. Mostly, companies do not present explicit idea generation phases into the FFE. As a consequence, sustainability would not be considered at this phase since companies do not address it. Ideas are only evaluated in the FFE and not generated. An interesting implication of this aspect is that if any tool or method is to be developed for the SMEs to better integrate sustainability, it would have to target more idea selection than idea generation. Additionally, if the decision-making were done by certain key personas in the organizations, the way of addressing this integration would be by addressing these key figures, by activities such as workshops for instance, rather than with a more formalized tool. This insight therefore hints for further investigation into this suggestion to uncover possible implications, barriers and relevance. 94

When integrated in the FFE, sustainability only comes in under one requirement, whether the use of a material, a component or, interestingly, as a guiding principle. SMEs could integrate sustainability in more holistic approach. This will likely result in a more complete FFE, i.e. finding more options for competitive advantage thus creating more value (i.e. sustainable innovation). As previously highlighted in the theoretical background, there is an acknowledgment that organizational and business dimensions of sustainable innovation are particularly poorly understood and there is a general need to improve this (Charter & Clark, 2007). Beyond that, Charter and Clark assert that experience from leading companies suggests that embedding sustainable innovation into existing processes and systems is essential. Ultimately, this could represent the development of innovations that are more than incremental. On the other hand, independently of not having an explicit idea generation process, most of the SMEs see sustainability as a ‘core principle’ (and thus a guiding principle for their innovation process). This indicates that sustainability becomes a company ‘belief’ or ‘value’, and thus a very interesting starting point to address the integration of sustainability into the FFE phases. It is at this point where the sustainability issues can well be integrated into the DNA of the company, as a motivational organizational value that can inspire and foster innovation. Sustainability as a core belief of the company can be used as more than ‘mission’ and be translated into approaches to effectively guide innovation and integrate sustainability in a more holistic way. By combining the considerations on the characteristics of the SMEs organizational culture and their FFE practices a few important points have to be emphasized. First of all, the cases suggest that the persona of the owner/general manager yields great influence on the outcome of FFE phases. On the other hand, the innovation process and the FFE are very informal and are consistent only within each SME. Finally, time invested in FFE phases is very small. Therefore, if there is any improvement to be made towards achieving more sustainable innovation, the emphasis seems once more to have to be on influencing the key personas in the organization and the companies’ cultures. Finally, a point to be addressed in this discussion on the integration of sustainability in the FFE relates to the findings about company B1. The cross-case analysis interestingly suggests that of all companies, the company that better integrates sustainability in its product development is company B1 (from the group of companies that do not communicate any commitment to sustainability). This may be a confirmation that most innovative SMEs (whether communicating it or not) are really looking for ways to address sustainability. More importantly, it may also suggest that research has to look more at companies that are not explicitly communicating their commitment to sustainability. Whether because they do not presently feel the need to do so, or simply because they are just making quality products and that itself is a guarantee of ‘good business’, the fact is that there may be a number of SMEs having the same approach. Surely, there can be interesting observations to be made, especially if considering that B1, by approaching and integrating sustainability into its innovation strategy, is delivering products that can be seen as more 95

sustainable. Therefore, being sustainable and making sustainable products may simply be the result of sound strategic innovation management and the transformation of these issues into competitive advantage, as with many issues before sustainability. The presented case study shows SMEs having structured yet informal innovation processes. As highlighted, when integrating sustainability into the FFE, this is done only under one requirement or as a guiding principle and not in a holistic approach. Furthermore, the FFE is moved through very quickly and is likely subject to a great influence from the owner/general manager/entrepreneur. Combined with the fact that most SMEs are market driven, a possible consequence is that most resulting innovations are incremental. This does not generally allow for significant change as sustainable innovation as defined by literature results in radical changes in functions and systemic aspects. On the other hand, the current situation is already positive in that there is sustainability awareness and an initial number of actions addressing this in innovation processes and FFE activities specifically. However, further understanding of the potential of sustainability by SMEs is needed. These companies need to better grasp what kind of options they have available when translating sustainable strategies into opportunities and further product development. What is highlighted in this discussion are some initial points that can be better understood to enable further change as the current set up may represent an obstacle to achieving true sustainable innovation at functional and systemic levels. The SMEs being able to incorporate and address sustainability in their innovation processes may well be moving from market driven to driving markets (Jaworski et al., 2000), especially those who operate in niche markets. Von Oetinger (2005) suggests that when looking for new value, companies should creatively destroy the existing, by making the company permeable to new ideas, by breaking those same rules that hinder innovation and organizing accordingly a flourishing creative environment. The question that emerges at this point is how do you make the SMEs retain their entrepreneurial, growth oriented development and incorporate some sort of process or methodology to better integrate sustainability; thus eventually achieve real sustainable innovation as currently needed by society? Tool development Findings indicate concrete directions when addressing ways of better integrating sustainability into the FFE within the SME context. What is highlighted is that SMEs tend to give weaker importance to the FFE. One option would be to find ways to strengthen these early phases before integrating sustainability, short of not having any effect. However what is seen is that in order to strengthen the FFE, the company culture has to first be addressed. Therefore, the integration of sustainability has to contemplate working and addressing the key personas in these organizations, whether the owner or general manager. Developing tools for a weak FFE phase seems not be an appropriate approach at this time. Working with the central figures in SMEs will allow for a change in companyâ&#x20AC;&#x2122;s culture that in turn may result in a stronger FFE. Owners/general may need to be the motor of change within these organizations, so as to 96

allow for better business processes and therefore better possibilities for the integration of sustainability. Framework Hassi et al. (2009) proposed a framework to trace typical characteristics and elements of a FFE process leading to sustainable innovation, and factors that are considered essential in the successful processes. This framework, used in this study, separates the ‘what’ and the ‘who’ when tackling the activities that lead to translation of strategy into product. It may be that typical characteristics within SMEs are not currently fully integrated by the framework. The cross case analysis indicates that the separation of personas and activities is difficult to observe, at least within the context of SMEs. The evidence is that ‘What’ and ‘Who’ may be closely intertwined. To observe and act on one aspect is likely to depend on the other. According to Bas Brouwers (2009) ‘The ‘why’ and ‘how’ of sustainable innovation practice in an SME context is defined by the characteristics of SMEs as opposed to large companies, more particularly, the pivotal role of the owner/manager and the resources (both in material and human perspective) available. Thus, the sustainability orientation (motivation and role of the owner/manager), design of the innovation process (exertion of internal human and material resources) and cooperation with stakeholders (to overcome resource limitations) are indicators of sustainable innovation practice within SMEs. If a further step is taken, it can be said that in SMEs, the design of the innovation process (ultimately, the ‘What” aspect) is a consequence of the pivotal role of owner/manager and the resources (especially the human ones). Additionally, another interesting circumstance in the study is that many of the SMEs are young and in a growth development stage, probably a result of the entrepreneurial orientation of owners and/or general managers. This can also suggest that when dealing with SMEs ‘in formation’, the ‘Who’ aspect gains considerable importance and therefore needs to be addressed, if not before, together with the ‘What’ aspect. According to Noci and Verganti (1999), when dealing with what they call ‘green’ product innovations, these have to be managed at a strategic and cross-functional level, directly involving SMEs' executives. These are owners and/or general management. Altogether, it seems that within the SME context, the ‘What’ and ‘Who’ are somewhat not separable. Therefore, it may be interesting to further adapt the framework to the context it is applied (see figure 17 below). What is also implied by this adaptation is that to act on innovation processes, one has first to understand and reach the personas behind these processes. In this adapted framework, special attention will be needed in defining beforehand to what extent further research is dealing with the ‘what’ and the ‘who’ aspect, as it can influence the set up and conducting of study.

Figure 20: Suggestion of adaptation of Hassi et al. framework (2009) to tackle the intertwined role of organization and goal finding within the context of SMEs.

This study also confirms that the framing of SMEs as a relevant research category is appropriate (for more detail refer to chapter 3). However further research would have to consider the stage of development of these companies and their size as this is likely to influence the ways processes are set and formalized. Overall, SMEs can be clustered as a group that has different characteristics and dynamics than larger companies and design agencies. Contributions to theory This study aims to contribute to theory in optimizing activities in the FFE of innovation when pursuing sustainable innovation. It is believed that at this stage actions are likely to have bigger impact downstream in the innovation process. The study is framed within the context of SMEs. It is also important to reiterate that research into this area is currently in development, thus findings and contributions here presented here are only at an initial phase. The multiple case study is a first step in building knowledge in the area. The contributions enabled by the research are as follow: •

Validation of the adopted framework for the SME context: when addressing the SME context and FFE practices more specifically, the proposed research framework needs address the ‘What’ and the ‘Who’ aspects simultaneously rather than independently. In fact, it may be that to address ‘What” issues within the context of SMEs, any tool, methodology or research approach has to address the ‘Who’ issues beforehand.

•

When integrated in the FFE, sustainability issues are tackled under one requirement rather than under multiple requirements, in a more holistic approach. Some SMEs seem to tackle sustainability more as a guiding principle than actually integrating as a requirement in the FFE phase of their innovation process. This can actually be developed into an approach to better

integrate sustainability in the FFE. Such initiative has to first address the particular aspects of the SMEs culture to then address their processes. If the organization (and the innovation team) are embedded with this view, they may likely be more open to adopting methodologies to integrate sustainability more holistically into FFE practices. Khurana and Rosenthal (1998) find that the greatest success comes to organizations that take a holistic approach to the front end. This results in a successful approach to the front end effectively linking business strategy, product strategy, and product-specific decisions. The authors suggest that firms employ two general approaches for achieving these links. Some companies rely on a formal process to lend some order and predictability to the front end. However, as indicated in this study, SMEs have informal FFE. Therefore, SMEs are likely to be part of the second approach to achieving a holistic front-end. This is defined by Khurana and Rosenthal (1998) as a group of companies that strive to foster a company-wide culture in which the key participants in front-end activities always remain focused on the following considerations: business vision, technical feasibility, customer focus, schedule, resources, and coordination. Sustainability to be better integrated may have to be seen as an additional key consideration central to the organizational culture of the SME and a culturedriven innovation approach. Limitations and recommendations for future research The first point that needs to be acknowledged is that the findings discussed are based on a case study methodology. Therefore any conclusion drawn is to be seen as a proposition and basis for hypothesis. The study was built through a qualitative approach, based on the empirical findings gathered from 5 case studies and the cross analysis between these 5 cases. Originally, the research design was intended to tackle 6 companies instead of 5. Due to the limited time scope, it was not possible to conduct more case studies, an addition that would certainly have allowed for more construct validity and better internal and external validity. It would also have been interesting to replicate the study across a larger number of industries, to uncover possible differences and insights. Furthermore, the qualitative aspect of the research may have allowed for biased findings and interpretation of data. Finally, it has to be remembered that all participating SMEs were Dutch, possibly limiting findings to the studied contexts. However, the limitations of this research, more than invalidate it, provide directions for possible further research. The main goal of this study was to begin mapping an under addressed area to build theory. The research design used to tackle this research was helpful in gathering insights and specific characteristics of SMEs and the way they currently integrate sustainability into their FFE of innovation. The findings suggest that to better address this issue, the ‘What’ and ‘Who’ topics need to be addressed together as one topic rather than separate, simply because within SMEs, there seems to be a strong relationship between the organizational culture, the informal approach to innovation and the integration of sustainability issues in its early phases. Therefore, future case studies should be developed under this consideration. 99

Furthermore, the cases also suggest that sustainability is not integrated in a holistic approach, which could represent an interesting improvement in achieving sustainable innovation. However, this study does not allow verifying more extensively these hypotheses. This is mainly due to the qualitative approach taken and its inherent limitations, as seen in the methodology overview of this report. The reflection on the empirical findings here discussed contributes to establish a number of directions for further research. These recommendations are quickly covered and need further investigation to really be valuable directions for further research. Because of this project’s limited time scope, recommendations here presented here are only addressed in a superficial way. The relevant recommendations are: 1. The set up of a research construct to validate and confirm the findings here presented, namely the idea that the ‘What’ and ‘Who’ issues within SMEs context are more effectively addressed together. However, this allegation should be better addressed in a more qualitative approach to gather further understanding of the dynamics and implications of this adaptation of Hassi et al. framework’ 2. The validation of the idea that SMEs that integrate sustainability in a holistic way into the FFE can optimize their innovation processes to achieve real sustainable innovation. In this sense, integrating sustainability in a holistic way would have to be defined to enable a research construct to test this hypothesis. Additionally, an interesting point would be the comparison of companies with different degrees of importance of given to FFE activities and different degrees of holistic sustainability integration within front ends. This could provide insight into where these companies are evolving from and how they are progressing in moving towards achieving sustainable innovation. 3. The research, development and set up of a FFE approach to better integrate sustainability in the FFE of innovation within SMEs. This set up would have to take into consideration specific characteristics highlighted by this study, such as the importance of cultural context in SMEs. The context is more difficult to address because of such issues as contextual constraints and pressures and the informal approaches. Furthermore there is great variation within other SMEs characteristics, which is very likely to make it difficult to have one tool for all SMEs. Therefore, any developed approach has to be adaptable to SME context: size, industry, and organizational structure. For instance is not the same to concentrate on a larger SME with a more formalized process and decision-making structure than aiming at a smaller company where the owner makes the decisions.

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8. EVALUATION

A number of points around the research study that resulted in this thesis should also be quickly evaluated. This evaluation is useful to highlight was what was learned throughout the span of the graduation assignment and in what ways this study could have been improved and optimized. The research design for this study paired SMEs across three different industries. The choice of which industry to address came as a direct consequence of the eligibility and availability of SMEs to participate in the study. In future similar approaches, whether in context or in the research design, this topic should be addressed more thoroughly. Some industries may be more sustainability driven than others, which in this case (namely the furniture industry) resulted in barriers to find suitable SMEs to participate. A longer assessment of the industry would have possibly reduced these barriers The preparation of the topics to be covered may have been to narrow in scope. As a result, interesting issues that would help address the research questions were not initially seen. This is the consequence of questions that were not asked. Perhaps the review of SME literature and SME management could have been done in more depth to allow better outcomes. Because of the nature of the research and methodological approach, the conducted semi structured interviews were key in the data collection. It would have been interesting to develop a full case pilot instead of just a pilot interview. This would have allowed the researcher to test interviewing skills, the relevance of all the topics and the validity and relevance of the theoretical background used to prepare the case and the interview protocol. A likely result would be the optimization of content, time span and relevance of the conducted interviews. Finally, an important aspect to be reminded of in the future is that this methodological approach, although sometimes appearing to be more open ended, is only really effective through a clear attention to detail. It is this very â&#x20AC;&#x2DC;open endâ&#x20AC;&#x2122; aspect that may ultimately undermine the proper answering to the research questions and the defined problem.

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APPENDIX

Appendix 1 - DATA COLLECTION Case studies typically combine data collection methods such as archives, interviews, questionnaires, and observations. The evidence may be qualitative (e.g. words) or quantitative (e.g. numbers), or both (Eisenhardt, 1989). Each of these sources of evidence has its particularities and advantages. Interviews are targeted, focus directly on case study topics and allow for insightful perception of causal inferences. On the other hand, these can be biased (poorly constructed), inaccurate (poor reporting) and allowing reflexivity (situation where the interviewee gives what the interviewer wants to hear or biased by the view the interviewee holds). As for documents they can be reviewed repeatedly and allow for broad view on fact, but can also be biased. Due to the context in which the studies were conducted and the topics at hand, the data sources of choice were a combination of semi structured interviews, companyâ&#x20AC;&#x2122;s documents and websites and press information. The choice to have whenever possible more than one interview and interviewee and other formal documentation is made to minimize as much as possible any biased view. These considerations were taken into account when choosing and preparing data collection. Operatively, it was chosen to do up to 2 interviews per case (whenever possible) and complement findings by the analysis of documents such as product development briefs (these being the result of FEI phases and a likely source to see how sustainability is being integrated at early stages) and companyâ&#x20AC;&#x2122;s websites and press articles (to provide extra insight and context). A semi-structured interview was prepared. Interviews are highly efficient way of gathering rich empirical data (Eisenhardt, 2007). A guideline was prepared to allow an overview of the topics investigated and a logical way of introducing them and discussing them with the interviewees. Within each topic, a number of possible questions and directions was prepared, serving the purpose of providing flexibility. The main topics covered in the interview were: 1. Understanding the innovation process at the particular company; 2. Understanding the views of the interviewee/company on early phase of the innovation process/FEI at the company 3. Establishing key players and their roles in the organization (vis-Ă -vis the innovation process) 4. Understanding the integration of sustainability issues in the (early phases) of the innovation process 5. Establishing the he views of the interviewee/company on sustainability topics.

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Preparing properly a case study is an essential part of assuring it will prepare sound and robust findings. For this purpose a case protocol was designed as it is a major way of increasing the reliability of the research and it served as guide to the researcher in carrying out the data collection (Yin, 2003, Ch.3). This protocol covered issues such as establishing a theoretical framework for the case study (see section 2), data collection procedures, an outline of the case study report and the actual case study questions and issues at hand. The protocol is also available in detail in this appendix of this report. A relevant additional step is the conduction of a pilot case study. For the purpose of this study, this pilot was limited to the conduction of an interview with a participant that was not included in the final case selection.

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Appendix 2 – Case Analyses Tables – For the cases analyses tables for the individual cases, please refer to the enclosed pdf files. Each file corresponds to one case: •

Group A – Company A1

•

Group A – Company A2

•

Group A – Company A3

•

Group B – Company B1

•

Group B – Company B2

•

Group B – Company B3

Each case contains interview transcripts and analyses, document and press articles analyses. Audio recordings and the original documents will not be included for confidentiality purposes. For access to the material, please contact the author.

The set up of the tables and analysis was inspired on existing qualitative analysis software existing in the market such as Atlas TI. Each table was divided in 5 columns: 1st Column: Contains the transcribed interviews, documents and press articles. 2nd Column - Keywords: Contains keywords extracted from the documents, transcripts and articles. 3rd Column – Main points: Summary of the main points extracted from the sources 4th Column - Insights: Insights and conclusions are made and research questions are addressed 5th Column – Full Text: An overview narrative of the findings and the analysis is given

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In each case, 4 main topics are addressed across rows. These topics correspond to the structure of the interview and the issues covered: •

Background of the company

•

Innovation Process at the company

•

Fuzzy Front End activities at the company

•

Integration and view of sustainability issues

The resulting case analysis is described in chapter 5 in the Case Analysis Descriptions.

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Appendix 3 – Interview protocol – Questions & Topics 1. Understand the company’s innovation process • Can you please think of an industry project/case in which you have been involved? • It may be for example the last one you have been participating, one that was especially interesting for you, or perhaps one that dealt specifically with sustainability related issues. • With that in mind, which would be a project you would like to discuss? • In this project you chose, could you now please tell me what were steps taken along the project? (In terms of innovation process) • (Take out sheet & pencil) Would you mind roughly drafting this process in this sheet? What the company’s organizational chart • Guide me through these phases in the process • Approximately, can you tell me how long do these phases last? • For each phase, were there goals and results? Can you tell me about that? How does it work? 2. Establish what is the interviewee conception of ‘front end of innovation’ • What does the ‘early phase of the innovation process’ mean to you/in the company? • How do you understand the theme? 3. Look into the structures; phases & importance of FFE for the company • In the project you chose as a case for our talk, how would you describe the nature of the early phases? • How did the project start? What was the driver for the innovation process? How long did the early phase last? How long did the whole project last • Was this project something completely different from prior products? • What activities happen in this early phase? Are there key activities? How were they linked/integrated among them? Was there an order for these activities? Was it pre-established? • How are go/no go decisions taken? Is there a criterion for that? • And what about the generation of ideas and the product definition? • Is there a systematic documentation/reporting practice on the results of the early phases of the project, like a brief, a business case? * Could I access these? • Is there an evaluation of this process?

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• Regarding the innovation process we’ve been talking, how many individuals in the company were involved? * • Can you tell me who were the key players (individuals; titles, location, responsibilities) • Among these, who were the initiators of the process/project? • Who was responsible for designing the product? And who was responsible for the whole innovation process? How was their collaboration, of what nature? • Did this organization of the work itself had and influence on the project itself (facilitated, constrained?) • Is this set up recurrent when developing projects here at firm? *Link later with cultural question

•

Determine the integration of sustainability into processes & practices; drivers & barriers fro

innovation Did sustainability issues come into consideration during this project? YES • What were these issues? • When did this happen (at what point of the innovation process) • How so (under what form)? At which phase? • By whom? (Who was/were responsible(s) for the consideration?) • How were these issues perceived/received in the company? • If yes: is this view of sustainability communicated to staff in company? What about to external stakeholders? • What were the drivers that lead you to consider sustainability? Why was it considered? (Legislation; customers; intrinsic; motivation?) • How would a sustainability innovation most likely be born in your company • Is there a process for sustainable innovation? • What are the considerations taken into generating, selecting and conceptualizing this project? • Is sustainability of the areas you look into for innovations? * Do you identify opportunities with sustainability in mind? How so? • How is this overall process aligned with the company’s business strategy? • Do you feel there is change needed in the way innovation is approached for sustainability to be better integrated? • If there was change, how was the adaptation from the previous situation? • Looking ahead, how do you see yourselves integrating sustainability into your projects? Do you have plan for that, an approach?

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NO • Do you feel these considerations could have been integrated to the process? How? • What are the barriers that prevented you into doing so? • What do you feel would have changed this situation?

• More generally, how would you define is sustainability taken/viewed in the firm? • Would you identify anyone in the company as the ‘champion for sustainability’ • What about yourself, how do you see sustainability? • Do you see any/further business opportunities in sustainability? How? Within what time frame? When is it going to happen? 5. General questions • Do you feel that the case we have been discussing is representative of the innovation and projects developed in this firm? • Can you tell me how so? • Are there existing similarities and/or differences? • Can you cite other project(s) that exemplify this? In your industry... • How do companies take sustainability into account • What do you consider an inspiring example of sustainable innovation (in your industry or outside • Do you see or think companies have a systematic method on how to search for sustainable innovations?

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Appendix 4 – Submitted Abstract – The following abstract for a conference paper based on this thesis has been submitted to the European Round Table on Sustainable Consumption and Production / Environment Management for Sustainable Universities (ERSCP-EMSU) – 25-29th October 2010 – Title: SUSTAINABILITY WITHIN THE FRONT END OF INNOVATION IN THE CONTEXT OF SMEs Author: Astua de Moraes, Fabricio (1) Co-author(s): Hassi, L. (2); Peck, D. (1); Wever, R. (1) Topic: 2C. Sustainable innovation in firms, networks and supply chains ;

(1)Technische Universiteit Delft - Faculteit Industrieel Ontwerpen, Delft, The Netherlands (1)Aalto University School of Science and Technology, Helsinki, Finland

Keywords: fuzzy front end; sustainable innovation; goal finding Abstract Within general product innovation literature the early phases, often referred to as the fuzzy front end (FFE), are seen as the point where decisions have the greatest influence on the final outcome. In this phase, which roughly ends with the formulation of a design brief, the strategy of the company is translated into a specific project proposal. Within design-for-sustainability literature this early phase of the product innovation process is ill-addressed. This paper explores how small and medium sized enterprises (SMEs) deal with sustainability issues in the FFE. The analysis is based on six case studies with Dutch SMEs, regarding a specific and recent product innovation. Each case is studied from multiple information sources. The cases span a range of consumer products and also distinct between companies explicitly marketing their product as sustainable and companies who do not. Preliminary findings indicate that, independent of how SMEs market their products, they all recognize a business opportunity in sustainability and in its integration into product development. The cases present typical SME characteristics, with predominantly market-driven and informal innovation processes, resulting in incremental innovation. Within the FFE, sustainability is mainly integrated as a general concept guiding innovation or as a requirement in the use of sustainable materials and/or energy sources. Findings indicate that the FFE in SMEs is a very diverse and informal process. The incorporation of

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sustainable innovation activities in the FFE is not effectively facilitated by the application of academicallygenerated generic tools.

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