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1. Introduction
Small businesses could benefit from external knowledge flows in projects initiated and controlled by themselves and in service sector innovation since these flows come from user-driven knowledge-generating experimentation processes, processes, and prototypes not necessarily in R&D departments. The absorption capacity of organizations through external sources of innovation takes place with lead users, emerging and traditional users, presumers, prosumers and can occur in different ways, such as co-creation, crowdsourcing, networks, communities and ecosystems.
The objective of this research is seeing co-creation as an active, creative and social process, which involves: 1) Connections: interactions between people, such as companies and customers, not just interactions between consumers and products; 2) Collaboration, rather than just participation; 3) Co-creativity, not simply co-construction or co-production (Coates, Roser, Samson, Humphreys, and Cruz-Valdivieso, 2009). As a hypothesis, although the limitations of financial resources and/or intellectual capital of small companies limit the implementation of multifunction teams into project management, the creation of R&D departments, the creation of a specific lab, an innovation center or knowledge-intensive business consultancy, there are innovative collaborative processes with users that small companies can take advantage of.
The chosen literature review methodology highlights organizational innovation and agile and iterative processes to overcome the one-way value flow from the company to customers. Nevertheless, innovation processes of co-creation with the users are applied more in large than in small companies and vary by sectors. The exclusively-with-users open innovation strategy for the development of new services mainly provides innovations of an incremental nature, while R&D with long-term results, although more costly, plays an important role in the radical innovation of services. In the same way, open innovation in networks, and above all in the ecosystem or systemic activity of the actors, can provide different results.
This paper is structured as follows: After the first section, it presents the methodology used; the second section analyzes the issue of service design centered on the human being, including user collaboration, their level of participation, and organizational structures in small businesses. The third section examines the exploration of the environment, immersion, validation of ideas, solutions and prototypes used by Lean and Design Thinking methodologies to accelerate innovation and reduce risks when introducing new products and services into the market. The final section will present the conclusions.
2. Methodology
Although the creation and development of products has been associated with marketing, it is the literature on innovation with users wherein the most interesting theories and methodologies for this research are contained. Firstly, there is innovation derived from the processes of co-creation with lead users; these are the people to first identify the need for a product or service, which initiated with Von Hippel (1986). Subsequently, Prahalad and Ramaswamy (2000) define co-creation as users participating directly, and sometimes repeatedly, in the design, development of products, services and innovation processes. It has Brown’s (2008) methodology’s usage in the company IDEO since 1991 what has highlighted the human approach to innovation consisting of empathy, definition, ideation, prototyping and tests. Ries (2011) refines Steve Blank’s Customer Development methodology and initiates the Lean movement based on product development focusing on building a minimum viable product as quickly as possible and by iterative learning. Finally, Vanhaverbeke (2017) highlights important differences between open innovation strategies in SMEs and large companies.
3. Users, structure and organizational culture in innovation
The innovation of human-centered services is neither anticipated by managers, technologists nor market research experts, but generated by users and the community according to their needs and expectations, Bas (2014). The relevance of iterative processes and organizational structures is that they enable a change from a product- and/or efficiency-centered approach to a user or consumer-centered approach without forgetting the environment and context of the organizations.
3.1. Users
Who would be the ideal candidate users for collaborative activities in innovation management? Research on user profile selection at first focused on the individual client as an innovator (Kristensson, Gustafsson, and Archer, 2004; Von Hippel, 2001) and then moved on to exploring distinct client groups, the community as a peer system (Hienerth and Lettl, 2011; Jeppesen, 2005), crowdsourcing or a multitude of clients (Franke, Keinz and Schreier, 2008; Füller, Matzler, and Hoppe, 2008). The latter approach has been directed towards the concept of network and ecosystem (Hienerth, Lettl, and Keinz, 2014; Gemser and Perks, 2015) in West and Bogers (2013).
It is highly important to choose conventional clients or well-informed and latent consumers, such as presumers (content curators, bloggers, knowmads, and influencers), prosumers, lead users, and early innovation users within the segments to which the company addresses its value proposition. The results of collaborating with conventional consumers, lead users or advanced consumers diverge. Traditional consumers are able to think “out of the box” and provide original ideas when compared to advanced customers and professional developers (Kristensson et al., 2004; Magnusson, 2009). On the other hand, in the literature, there is also evidence suggesting that the use of “average” customers can have a negative impact on innovation outcomes, at least for technology-based products. Other studies suggest that the involvement of “advanced” customers, e.g. customers with lead user characteristics, may increase the novelty of co-created knowledge (Mahr, Lievens, and Blazevic, 2014).
There is a category of consumers who are endowed with a unique capability called emergent nature and are therefore able to generate forward-looking ideas and to evaluate and refine concepts from a logical and analytical point of view in a synergistic process (Hoffman, Kopalle, and Novak, 2010). The consumers who meet this profile do not have to be experts in the product category but count with a special ability to visualize how concepts can be developed in a way that will bring success in the marketplace (Hoffman, Kopalle, and Novak, 2010). Kumar and Steenkamp (2007) refer first and foremost to the willingness of consumers to buy new products and brands at an early stage rather than staying with previous choices and consumption patterns.
Lead users are another category at the forefront of market trends, who expect benefits from a solution to their advanced needs in a specific domain (Von Hippel, 1986). Lead users anticipate the benefits of obtaining a solution to their needs are at the forefront of relevant trends in the market under investigation and therefore have needs that will later be experienced by many users in that market (Von Hippel, 1986). In addition, lead users are more likely than other customers to modify products and find new uses for them (Berthon, Pitt, McCarthy, and Kates, 2007). Von Hippel (1986) pointed out the importance of the ability to ignore existing thought patterns and creating disruptive innovations, as collaborative processes without lead users would only lead to incremental innovations.
Von Hippel’s (2004) methodology firstly observes how the market adopts the new innovations by these users and at the same time explores the activities that occur in the peak of a trend through the information that the very user generates in the network with his conversations. The next step would be to select an important and specific market and trend and then use a Brainstorming methodology with lead users. Within that target market, what kind of people or companies have needs at the forefront of trends and which have a high incentive and resources to solve their peak needs? Outside the target market, what kind of users in other fields and applications face a similar need, but in a more demanding way? Lead user search techniques include screening, which is a questionnaire to identify people who meet a certain profile; pyramiding through recommendations from other people with higher levels of experience; and signaling through advertising to evaluate answers from potential lead users, (Brem and Bilgram, 2015).
Researchers have identified two key mechanisms that encourage the creation of innovation outside the company’s boundaries. The first is to encourage external innovators by offering effective incentives, either monetary incentives (extrinsic benefits) such as innovation prizes and contests (Terwiesch and Xu, 2008) or non-monetary incentives appealing to intrinsic motivation as often found in open source software (West and Gallagher, 2006). The second mechanism is the establishment of formal tools and processes that provide a platform for external stakeholders to produce and possibly share innovations (Gawer, 2010).
3.2. Organizational Structures
Creating a new product or business model requires a new organizational approach, i.e. adaptive innovation that involves operating simultaneously in both learning and creation modes to find solutions and even disrupt itself before competitors do (Gupta, 2013). For Kotter (2014), the solution is an organization that works with a dual system: a traditional hierarchy that focuses more on efficiency that coexists with a network operation focused on innovation as a startup. Another well-known solution is ambidextrous organization. According to Duncan (1976), an ambidextrous organization can combine the exploitation of existing capabilities with the exploration of emerging opportunities. As a result, a company can be creative and adaptable and pursue incremental and discontinuous innovation (Tushman and O’Reilly, 1996). The ambidextrous organization is able to combine multiple organizational structures and cultures according to whether it pursues short or long-term goals.
Anca and Aragon (2014) coined the category of new tribes, which function as independent teams coordinated to meet specific needs. There are capable of can recombining in different ways within the organizational structure and are characterized by openness, mobility and renewal of ideas, co-organization, internal and external collaboration, voluntary membership, multiple identities and a common interest. For these authors, the organization can create an environment within these tribes and they can be monitored by reacting quickly to their needs.
In order to develop new business opportunities, the relevance of knowledge management comes in terms of creation, learning and sharing/transferring regarding relational knowledge (Zack, 1998) and the use or exploitation of knowledge as a set of social and dynamic processes that need to be managed (Landoli and Zollo, 2007). The decision to look for external sources of innovation would normally lead companies to look for the necessary skills to make this strategy effective. Du Chatenier, Verstegen, Biemans, Mulder, and Omta (2010) used exploratory interviews and focus groups to identify organizations’ collaborators’ individual skills, including interpersonal skills, project management-related and the ability to manage the collaborative innovation process. West and Bogers (2013) refer to the integration of innovations as one of the four steps in innovation-creating processes, along with interaction, external sources and marketing.
3.3. Benefits
The co-creation of value for small companies allows the creation of dynamic capacities in the development of new services, through Design Thinking and Lean methodologies in the exploration, ideation, and validation of ideas co-generated with the client, creation of prototypes and tests. Additional benefits are competitive advantages (faster time to market), process efficiency, lower project costs (Tranekjer and Søndergaard, 2013), high product variety (Al-Zu’bi and Tsinopoulos, 2012), premium price (Franke and Piller, 2004), reputation (Fuchs and Schreier, 2011) and the leadership and adaptability of the organizational culture.
Co-creation of value for consumers brings benefits that are tangible such as the possibility of being early users, getting discounts, royalties, career opportunities and customization with products tailored to their own needs (Franke, Von Hippel and Schreier, 2006); or intangible, namely, enjoyment, feeling of achievement (Franke and Schreier, 2010), knowledge, social relationships, status, history to share, sense of community (Nambisan and Baron, 2009) and “emotional ownership” (Berthon, Pitt, Kietzmann and McCarthy, 2015), in West and Bogers (2013) . Stock, Oliveira and Hippel (2015) are of the opinion that the utilitarian motives of the user positively influence the usefulness of the developed solution, while, on the contrary, the hedonic motives of the user positively affect the novelty of the solution.
3.4. Small Businesses
Open innovation in small companies is different from open innovation in large companies. Vanhaverbeke (2016) argues that the open innovation framework based on Chesbrough theories is not appropriate for SMEs. He argues that small companies have neither a portfolio nor large innovation projects teams (in fact, innovation is managed by the entrepreneur/founder), moreover their activities are not limited to an innovation funnel. Open innovation is the result of strategic changes in the company and goes hand in hand with its entrepreneurial spirit; on the contrary, Vanhaverbeke (2017) thinks that open innovation research in small companies only makes sense within the broader framework of a(n) (innovative) business model.
As for the limitations to innovate in small companies, these are the lack of absorption capacity (Cosh, Bullock, and Milner, 2007), insufficient knowledge retention (Chen and Fan, 2013), the inability to promote the exploration of new knowledge and the lack of maturity in experiences and commercialization models (Zhang and Chen, 2014), lack of managerial skills and techniques for their effectiveness (Rahah, Rah, and Chen, 2014), lack of managerial skills and techniques for their effectiveness (Rahman and Ramos, 2010) and lack of resources and access to up-to-date scientific excellence (Abouzeedan, Kloften, and Hedner, 2013). Egbu, Subashini, and Renukappa (2005) highlight that the knowledge generated in SMEs is tacit in nature for a variety of reasons. In the context of SMEs, some elements of knowledge management are practiced but in an “ad hoc” way.
Regarding the interaction of SMEs with innovation sources, Hemert, Nijkamp, and Masurel (2013) demonstrated that it is important not only in the initial phase of the innovation process but also in its final phase for the successful commercialization of a product or service. However, other studies suggest that collaboration for SMEs is more important in the commercialization stage than in the early stages of innovation (van de Vrande, de Jong, Vanhaverbeke, and Rochemont, 2009; Hemert, Nijkamp, and Masurel (2013). It is true that this perspective represents a conception of the importance of users as participants in later stages of the innovation cycle, and not being so important in the early stages of innovation or front-end for the ideation and validation of consumer insights.
As for the type of collaboration, Parida, Westerberg, and Frishammar (2012) emphasize that for small businesses; vertical collaboration is connected to radical innovation, while horizontal collaboration is applicable for incremental innovation. Wynarczyk (2013) believes that SMEs with an open innovation strategy tend to collaborate for the launch of new products, while closed innovation SMEs do so for incremental changes in their existing products. Spithoven, Vanhaverbeke, and Roijakkers (2013) noted that the collaboration of SMEs with external agencies increases their chances of launching products and services. Small business collaboration goes beyond science and technology and includes partnerships in the value chain that bring about new knowledge that can be easily absorbed.
4. Innovation processes
4.1. Capacities
Dynamic capabilities can be defined as routines within the management and organizational processes of a company seeking to obtain, free, integrate and reconfigure resources (Teece Pisano and Shuen, 1997) to create value. In a changing environment, Teece refers to detecting, capturing and reconfiguring assets that involve exploring the environment and responding to opportunities detected with open innovation. Dynamic capabilities have been researched mainly in product-and technology-related contexts, but seem particularly useful for service innovation (Fischer, Gebauer, Gregory, Ren, and Fleisch, 2010; den Hertog, van der Aa and de Jong, 2010; (Kindström, Kowalkowski, and Sandberg, 2013), in Ojasalo, Koskelo, and Noinenusia (2015).
Payne, Storbacka, and Frow (2008) suggest restructuring the architecture of knowledge management with systems built around processes and customer experiences rather than products. Value is created in conjunction with customers as a source of competitive advantage (Karpen, Bove, and Lukas, 2012). According to Michel, Brown and Gallan (2008) what defines innovation is the modification of value as defined and used by the customer, not value in production and exchange. The management of knowledge exchange and development becomes an essential part of innovation management and thereby a part of strategic management (Liebowitz, 2012).
4.2. Processes
In the initial phase of innovation management, SMEs can use several classic market research methodologies such as ethnography and in-depth user interviews. Then move on to the latest techniques for problem-solving in the development of new products and services such as Customer Journey Map, netnography, Coolhunting, as well as dynamic group sessions for innovation games, Design Thinking sessions and workshops for storytelling and prototyping.
Anticipation and customer trajectory mapping help identify and select users in different activity cycles and several tools for mapping customer processes are mentioned by Payne et al. (2008) and include process and customer activity cycle mapping, service-blueprinting and customer-company contact point analysis. At the level of Coolhunting future trends can be identified at different levels: at the macro level, at the sector-specific level and at the level of a particular service according to Holopainen and Helminen (2011). Trends are defined as long-term changes signaling conditions that will probably have to be dealt with in the coming years and that represent a deeper change than a passing fad (changes that happen very quickly), (Evans and Sommerville, 2007). There are tools such as content analysis, defined by Evans and Sommerville (2007) and Bell (2009) as a systematic and objective study to identify emerging trends by collecting and analyzing information from sources such as the Internet, newspapers, television, speeches, etc. Digital immersion with social networks, websites and mobile applications will also help to detect customer expectations for subsequent comparison with their perceptions of the service experienced.
The ethnography involved in immersion and observation makes it possible to perceive the needs of clients by understanding users every day through the observation of their behavior in real situations (Moritz, 2005). Silverstain and DeCarlo (2009) reckon that the best way to gain a deep understanding of the client is through ethnography, observation and empathic methods. The empathy map consists of analyzing what the user thinks, feels, sees, hears, says and does to detect needs and frustrations (Gray, Brown, Macanufo, and Benítez, 2010). Empathy is about seeing the world through the eyes of another person, and this ethnographic approach does not try to discover a particular problem in an existing product or service but rather constructs a tacit sense of what another person is like, what they value and how they experience the world (Kolko, 2015). According to Denzin and Lincoln (2000), the broad perspective of actors in a context is captured and analyzed primarily through observation and in-depth interviewing that uses open-ended questions to understand reality. In-depth interviews are an effective way to generate perceptions about customers, behaviors and needs, and to discover their values and opinions (Polaine, Lovlie, and Reason, 2013).
4.3. Skills
Creating value with users involves a physical and/or virtual space environment and the tools, in addition to those mentioned above that include storytelling, value proposition canvas, prototypes on paper, sketches, drawings or 3D prints. In this context, the competencies and capacities of managers to drive this process may be more important than trying to find users with specific or desirable skills (Kambil, Friesen, and Sundaram, 1999). As Iglesias (2013) points out, unlike some companies assume, creativity does not depend on recruiting the most creative people, it is rather the result of the participation and interaction of all project members. In this sense, the role of the moderator is essential. Successful projects have very active moderators who without interfering with the functioning of the community, stimulate creativity through questions and activities. The contributions of psychology, consumer behavior and marketing are extensive regarding the profile and identification of users for the co-creation processes but need to be developed in terms of creativity, motivation and skills for the facilitators of the organization to manage co-creation projects. These skills are decisive for the dynamic Gamification group sessions and conclusive Design Thinking for prototyping and testing.
4.4. Design Thinking & Lean
Design Thinking is a method that involves visualization, narration and facilitates engagement with users in experimentation with prototypes, models. Brown (2008) defines Design Thinking as “a discipline that uses the designer’s sensitivity and methods to adapt to people’s needs with what is technologically feasible and that a viable business strategy can turn into customer value and market opportunities”. Design Thinking as a method for innovation and problem solving, driven by creativity, customer empathy, ideation, iterative learning and the prototype approach, is a customer development process, which along with the Lean method that tests the hypothesis and in the pivoting allows adjusting and readjusting concepts, the vision and roadmap of innovation processes, finds solutions that fit the market. The test phase determines whether the company is delivering service design and standards that match the value proposition.
With the Lean method the goal of the MVP approach, the minimum viable product, is speed without wasting time on irrelevant or unnecessary efforts. However, services require additional effort, as they must be considered as a user experience in the context of a system. The iterative and measurable Lean method works around three core principles: building, measuring and learning, and it can be improved with the applied qualitative feedback of Design Thinking. For their part, “tests in Design Thinking are mainly carried out qualitatively... Therefore, the control mechanisms that enable the quantitative measurement of user feedback must be implemented in the Design Thinking process” (Mueller and Thoring, 2012).
5. Results
In general, innovation programs lack a strategic mission and methods of collaboration due more to insufficient resources, to the organizational culture and the absence of innovative user-centered processes. In most cases, the priorities for companies are the search for and development of efficiency and quality processes through access and exposure to the latest technologies. Although innovation processes of co-creation with users are applied more in large companies than in small companies and may vary according to sectors, for collaboration to develop and establish quality relationships, there is a set of factors such as users - driven by extrinsic benefits or intrinsic motivation - and skills, tools, capabilities within the reach of companies regardless of their size. The research highlights a set of organizational design, team building, agile and iterative processes to overcome the one-way value flow from the company to customers. Several factors have increased the potential for seeking innovation in external sources, which are faster and reduce costs, globalization, and technologies such as the use of 3D printing, software, social networks and Information and Communication Technologies (ICT).
6. Discussion
The contributions of psychology, consumer behavior and marketing are extensive in profiling and identifying users for co-creation processes, but scarce in the abilities of facilitators to manage co-creation projects in the organization such as creativity, proactivity, curiosity, visual thinking and emotional learning. Since the value in services is directly related to providing the experience of interaction and simultaneity between production and delivery, the relevance of user journey mapping and points of contact in the co-creation process is a field that has research implications and needs to be further developed. For that to happen it is necessary to create feedback mechanisms and co-creation processes to help the company continuously improve its operations and strategy.
To some extent, this research focused on the strategy of open innovation exclusively with users which enables ideation, validation, prototyping, testing and soft launching for developing new services is mostly limited to the role of incremental innovation. In the same way, more studies are needed on open innovation within a network of partners and, above all, on the ecosystem or systemic activity of the actors and the competitiveness of small businesses. It is also interesting to note the extent to which small companies can derive greater benefits from open innovation than larger ones because of their reduced bureaucracy, greater willingness to take risks and ability to react faster to changing environments, as suggested by Parida et al. (2012).
7. Conclusions
Nevertheless, the open innovation framework in small companies is different from that of large companies; dynamic capabilities can be acquired through organizational design and through collaborative innovation projects especially regardless of the size of the companies. Co-creation requires identifying users and facilitators within an innovative culture of organizations that in turn favor innovations at the level of consumer-centered processes. Organizational innovation is not a sufficient condition, but process innovation is necessary for the development of new services, even though innovation programs may not be fully developed. Scanning, immersion in the environment, dynamic gamification group sessions, Design Thinking, storyboard workshops and prototyping have a practical implication and are capable of driving the development of innovative services and new business models in small businesses. These methods are different from the usual practices in creating and developing new products from Robert Cooper’s Stage Gate linear methodology and in the passive cooperation of users in providing information. The ultimate goal of direct value co-production, through pivoting, is to build, test and learn. Small businesses could take advantage of the value of user contributions at a higher level and a good part of these methods could be attractive to users.
