Developing methodology for supporting SMEs product development

Transcription

1 Developing methodology for supporting SMEs product development Suvi Konsti-Laakso 1, Juho Salminen 1 1 Lappeenranta University of Technology, Lahti School of Innovation, Saimaankatu 11, Lahti, Finland, suvi.konsti-laakso@lut.fi, juho.salminen@lut.fi Keywords Living Labs, SME, methodology Abstract This paper discusses the important topic of how a regional Living Lab can help small and medium sized companies in their product or service development activities. The theory part of our paper discusses living lab methodologies and SMEs innovation activities. As the empirical part we present a case where methodology is adopted from town planning and applied to support companies user knowledge needs. As a result, the methodology provided user knowledge and also supported and enabled company networking. The paper highlights the importance and applicability of the Living Lab approach in traditional industries and the service sector. 1 Introduction This paper discusses the important topic of how a regional Living Lab can help small and medium sized companies in their product or service development activities. SMEs are corner stones of regional economies and the preconditions and support for their success is stressed in regional innovation policies and efforts. Living Labs are often public private partnerships, established to promote and enable user involvement in innovation activities. Research and development or innovation activities in small and medium sized companies (SMEs) are often characterized by limited resources. This applies to most of them although there are different types of SMEs from highly innovative and specialized superstars to supplier dominated companies in traditional industries. On the other hand, SMEs are noticed to be more flexible and faster to adapt to changes in the operational environment. SMEs in general should rely more on external sources of innovation and partnerships (Bessant & Tidd 2007). In small companies in particular, innovations are not necessarily results of formal R&D processes (Forsman 2009) Traditionally, innovation or product and service development processes have taken place inside organizations. Innovation was something that concerned only highly specialized people within research and development organizations. The relatively recent concept of open innovation (Chesborough 2003) highlights the importance of knowledge and resources outside the organization s boundaries. Nowadays, innovation is considered a multiplayer game between different entities: users, companies, researchers etc. However, very few companies possess the knowledge and means to engage users in innovation activities. One bridge over this gap is the Living Lab. The Living Lab approach is originally an R&D concept that aims to create innovations in a multi-contextual real-world setting. Living Labs can be thought of as user-centric environments for open innovation or user-driven innovation ecosystems. (Schaffers et al. 2007, Chesbrough 2003) User-centric or user-driven innovation has many names but the goal is the same: to uncover needs and use knowledge about how

2 customers act, experience and think. The European network of Living Labs offers possibilities for organizations to access user information and involve users in innovation. A Living Lab brings all relevant stakeholders of the value network together in order to develop better products and services. (European Union 2009, Grabher 2008) According to an EU report (2009), Living Labs offer SMEs and micro-entrepreneurs a platform to develop, validate and integrate new ideas and rapidly scale up their services and products to other markets. Living Labs are often related to technology development and especially the field of services and telecommunications products. In these areas, the gap between technology development and user acceptance is wide and user involvement is therefore seen as a solution to enhance the product or service development hit rate. There, is however, a growing need for user driven innovation in other industries and the public sector. e-democracy and e-governance themes have become a hot topic in providing citizens with options to participate in municipal decision-making. (European Union 2009) In general, communication technology has enabled and empowered people (whatever their role; consumer, user or citizen) to participate in and give feedback to all kinds of innovation activities (Prahalad & Rawansmati 2004), not just the development of ICT-based services or products. As the Living Labs are often related to the development of ICT-based services and products, the idea of user involvement is important for other sectors as well, such as traditional manufacturing. In the Lahti region in Finland, the Living Lab approach is applied to fit the conditions and needs of the region. The most important clusters in the Lahti region include environmental technology and wood related industries. The case at hand illustrates how companies operating in the field of outdoor products and services utilize the Living Lab approach and how they benefit from participating in Living Lab activities. 2 Living Lab methods the human touch When knowledge is acquired from outside organizations own competencies, customers are a natural group to aim at because they might possess a substantial amount of important knowledge. User involvement in innovation has been noted as very beneficial in the literature (Magnusson 2003, Alam 2002, von Hippel 2005), especially in the early stages in a development process, in idea generation and evaluation. It is also important to include users in the testing phase and receive information about the prototype. There is, however, a gap between users and companies; the companies do not know how to benefit from user activity, how to involve customers and how to use this valuable source of knowledge and ideas (Kristensson & Magnusson 2005). There are many different ways to tap into the users knowledge. Grapher et al. (2009) identify three approaches to customer knowledge involvement in innovation activities; The deductive approach represents traditional marketing research methodologies, where the customer himself is absent and the knowledge is about the customer. The inductive approach concerns the knowledge of the customer and the customer is physically present. Between these two approaches lies co-development, which is a hybrid community involving a heterogeneous group of customers and professional developers. To include a user in product development, there are several methods found in engineering, such as quality function deployment (Akao 1990) and the lead user method (von Hippel). The methods are applied in a technology context, mainly in tangible product development. The most usual approaches include interviews and surveys. Whilst they are the most traditional and often useful methods to access customers opinions, they are also superficial. From our point of view, interviews and questionnaires are not alone sufficient to create involvement or co-creation.

3 Mulder & Stappers (2009) presented the current knowledge about the user involvement methodology used in Living Labs. In the service / product idea generation phase, traditional methods like focus groups and surveys etc. are common. There exist also virtual or online versions (CWE- methods) of methods like a focus group. Mulder and Stappers (2009) also stated that the living part of the Living Lab is missing, which can mean that direct contact between the developer and the user in a real-life context is missing. Direct contact between the user and the developer is considered rather important as it reduces the bias and sticky information (Grapher et al. 2008) 3 Case Study: Metsäkangas Tour In this paper, a case study approach is used. The empirical data is gathered using observation, interviews and project documentation. Lahti Living Lab, hosted by LUT Lahti School of Innovation, is a regional initiative to promote user involvement in innovation activities. Soon after the project s web site was launched, the project manager was contacted by a small local firm, which manufactured bicycle stands and shelters for smokers. The company wanted to know more about user involvement in product and service development. Together with the Living Lab project manager, they asked four other companies to join the project. The company profiles are presented in table 1. Number employees of Table 1. Company profile Main product or service Company A 4 Outdoor products like bicycle stands Company B 1 Garden planning and building Company C 230 Maintenance of parks, streets, etc. Company D several thousands Town planning Company E 14 (local) Media & communication Three of the companies were large companies and 2 were micro companies, employing fewer than 10 people, so the group was extremely heterogeneous. The three large companies were represented by local units, which can be characterized as small companies. Company C is a local large company and operates only in the Lahti area. All the participating companies have the same clients (i.e., the municipalities) but different services or products. The context where all the companies operate is the suburbs and they offer products and services related to such environments. The main idea of the project was to enable and cultivate interaction between the producer and the user. The end-users in this case are ordinary citizens for example in suburbs or residential areas. By creating links to end-users, the companies can better serve their client and justify their products or services. Due to the nature of suburb development, the method applied was selected from the town planning tradition. The Gåtur method is originally developed for involving residents in town planning and is used in interaction between public authorities and citizens. Kyttä & Kaaja (2001) write that Gåtur is suitable for the project starting phase or post-evaluation. This type of walk has been also used as a part of method collection for building evaluation (postoccupancy evaluation) (Preiser & Rabinovitz &White 1988). The idea of the Gåtur method is to perform a walking tour with residents along a predetermined route. During the tour, questions and opinions are asked for about the

4 surroundings. After the tour, the participants have a session where they discuss and sum up the outcomes. The Gåtur method was tailored to better match the needs of the companies. Firstly, many companies wished that young people can participate. And there was a concern about how the older people could participate if they are not able to walk long distances. These problems were solved by offering the possibility to perform the tour with a small, tractor pulled train. Besides the train tour, there was also a walking tour. The traditional Gåtur method ends with feedback session lasting for a couple of hours. Due to lack of time and the decision to emphasize the number of participants, it was decided to forgo such a session replace it with intense documentation. The tour was intended to be easy to participate in for citizens, No strings attached. The company representatives placed the questions and topics they were interested in. The companies were interested in information about needs, preferences and solutions. Questions concerning problem solving such as how would you solve this... or where would you place this were also asked. The company representatives lead the tours and members of the LL project team were documenting and writing down the answers. The Living Lab team (project manager and researchers in this case) organized and promoted the event. The participating residents were also rewarded with local bakery products. The tour was advertised on local bulletin boards for two weeks before the event. A local school was asked to produce drawings and essays about the issues in the area and how it should ideally look like. These drawings and essays were collected in an exhibition in a local grocery store taking place a week before and after the actual Tour. A box was provided for collecting feedback about the thoughts provoked by the exhibition. The actual Tour took place during three hours on a weekday afternoon. The walk and train rides started once every hour. Participants were divided into groups of 5-10 people. In addition to the participants, each group consisted of a researcher taking care of documentation and 2-3 representatives from the companies asking questions. The documentation included taking notes, photographs, map drawings and voice recordings. The walks and rides could be described as semi-structured interviews in a natural context. After the Tour, the results were summarized and analyzed by three researchers. Each researcher highlighted the most common subjects or opinions. The summarized results were presented to the participating SMEs. At the same time, the representatives of the SMEs had an opportunity to give feedback about their views on the usability of the method and the event in general. 4 Findings The resulting information was qualitative and quite general by nature. The companies questions were mainly answered but some more detailed questions were not answered. Even though the event gave insights for SMEs about the issues and needs of the users, the lack of a clear focus may make utilizing the collected information difficult for companies. However, the importance of face-to-face interaction between the developer and the user cannot be overestimated. Altogether 50 people participated in the walks and train rides, which was considered a fairly good result. The ages of the participants were not recorded but were approximated to vary from One of the most important successes was that teenagers were interested in this event. They are an otherwise difficult group to reach for companies and they possess a lot of valuable information on their environment.

5 As the user knowledge may affect the future product and service development of the participating companies, some companies benefitted more than others. Company C adopted the whole method for the purpose of interacting with its major client. This means that actual process innovation is on its way. This was probably the most visible result of the tour. Table 2 summarizes the motivations and expected outcomes of participating in the Living Lab activity. The feedback is assessed in the last column based on the feedback the companies gave in a workshop after the Tour. Motivation Expectation of outcome (beforehand) Company A Enhancing R&D from proactive to preactive Company B Company C Company D Company E Networking Specific expertise for suburb development Better use of taxpayers money New ways to involve residents and social interaction in development projects We don t know why we are here but we know that we have to be involved New business Networking Concrete benefit from network + New concept to take care of environment New methods for accessing user knowledge New concept, new channels for users and service providers Table 2. Summary of results How the method fit for expectations /- +/- Though the companies had their own product or service development agendas, they organized the event together. The important result is that the preparation of the Tour also enabled company networking, which is an important goal for companies. This networking was embodied in that the companies decided to donate some bicycle stands for the school that produced the drawings for the exhibition. The companies planned how they could jointly perform the donation by adding their core product or service to donation: one company provides the bicycle stands, one installs, one plans the environment etc. The whole project was carried out in a spirit of co-creation between the companies: the LL team never offered any ready solutions or answers for companies. The companies decided together about the methodology, they planned and managed the whole event by themselves. The role of the Living Lab was just to facilitate the cooperation, provide information about the possibilities and methods and set up the Tour. 5 Conclusion The method served both of the companies motivations: to network and to gain user knowledge. However, there could be some improvements from the methodological viewpoint. The possibility to include some creative techniques will be investigated in order to receive more precise and developed ideas. The documentation should also be improved so that the results could be gathered faster and easier. A semi-structured interview might be one

6 possible solution. Precise documentation methods such as maps, photographs and drawings should be used more intensively. The companies literally stepped out to the field and asked questions from their actual users. The Living Lab s role was to facilitate and let the companies do the work. This co-creation approach led to many positive effects, although the quality of the data gathered could have been better. A Living Lab can promote networking between very different sized companies. The stage to building commitment to the network is under way. Cultivating and enabling business networking has been on the agenda of regional policy makers for a long time and now it seems that the Living Lab can be a useful tool to build company networks. The Living Lab approach brings companies to the threshold of a common client and in this way opens new possibilities to build new business offerings as a network. Acknowledgement The authors wish to thank the European Regional Development Fund and the Regional Council of Päijät-Häme for the opportunity of presenting their research at the 16 th International Conference on Concurrent Enterprising in Lugano, Switzerland, June References Akao, Y.A. (1990), Quality Function Deployment - Integrating Customer Requirements into Product Design, Productivity Press, Cambridge, MA Alam, I. (2002) An exploratory investigation of user involvement in new service development. Journal of the Academy of Market Science, 30 (3), Bessant, J. & Tidd, J.Innovation and entrepreneurship. John Wiley & sons, Ltd. Haddington Chesbrough, H. (2003) Open Innovation: The New Imperative for Creating and Profiting from Technology. Harvard Business School Press. Boston European Union Information Society and Media. (2008)Living Labs for user-driven open innovation. Luxembourg: Office for Official Publications of the European Communities. Grapher, G. Ibert, O. Flohr, S. (2008) The neglected King: The Customer in the New Knowledge Ecology of Innovation. Economic Geography. Vol. 84 No. 3. pp Kristensson, P & Magnusson, P.R. (2005) Involving users for incremental or radical innovation A matter of tuning. Paper presented at the 12th International Product Development Management Conference. In Copenhagen, Denmark, June Kyttä, M. & Kaaja (2001). Vuorovaikutteisen suunnittelun ja ympäristön tutkimuksen metodipaketti, Yhdyskuntasuunnittelun tutkimus- ja koulutuskeskus YTK. Available: (in Finnish) Magnusson, P. R. (2003), Benefits of Involving Users in Service Innovation, European Journal of Innovation Management, 6 (4), Mulder, I. & Stappers, PJ. (2009) Co-creating in Practice: Results and Challenges. Proceedings of the 15 th International Conference of Concurrent Enterprising. Available at: Prahalad, C.K. & Ramaswamy, V. (2004).Co-creation experiences: the next practice in value creation, Journal of Interactive Marketing, 18 (3), Preiser, W.F.E., Rabinowitz, H.Z., and White, E.T. (1988). Post-Occupancy Evaluation. New York: Van Nostrand Reinhold.

7 Schaffers Hans, Guerrero Cordoba Mariluz, Hongisto Patrizia, Tünde Kallai, Mertz Christian, van Rensburg Johann: Exploring Business Models for Open Innovation in Rural Living Labs. Paper presented in 13th International Conference on Concurrent Enterprising, Sophia-Antipolis, France, 4-6 June von Hippel, E. (2005) Democratizing innovation. MIT Press. Available: