In the context of open innovation, firms must go beyond internal boundaries and expand their scope by collaborating with external partners. The findings of the research consortia showed the importance of firms being attractive to suppliers and collaborating closely with them to get the preferred customer status. This status revealed highly competitive benefits such as privileged treatment or priority in supplier production. Regarding the process, two approaches emerged as a foundation for the implementation of a preferred customer strategy. The first approach focusses on expanding the set of criteria to identify innovative suppliers, while the second one centers on developing a portfolio model by creating a matrix of four possible supplier collaborations.

To identify innovative suppliers the researchers built a clear framework based on 3 different criteria.

First, the “Operational Sourcing Criteria” which goes over the capabilities of the supplier to support joint innovation processes. That criteria can be determined and analyzed through 4 main ways: audit result, supplier’s R&D capabilities, supplier’s product and supplier’s specialization degree.

Second, the “Relational Sourcing Criteria”. It highlights the relationship between the customer and the supplier. Moreover, to define the likely supplier partners you may examine 4 main aspects of the surveyed suppliers: level of trust, prior shared experiences, history of collaboration and smooth communication.

Last, the “Strategic supplier selection criteria”. It concerns the way the organization will carefully develop its relationship with the supplier, to focus on creating a strategic environment where the enterprise will be seen as the preferred customer. Therefore, managers should take 5 aspects into consideration to align with strategic suppliers: technical importance, commercial importance, cultural fit, history of collaboration and key account status.

Becoming a preferred customer is highly important when integrating suppliers into innovation processes. Firms would certainly find it advantageous to analyze their full portfolio of suppliers to identify the suppliers that lead the field and those that will treat them as the preferred customer. The preferred customer matrix allows for the assessment of a supplier’s competitive advantage in conjunction with the firm’s relationship with them, leading to four unique scenarios. Each scenario necessitates a distinct strategy for the firm seeking to collaborate with the supplier

However, it involves its own set of challenges. These include the potential for being resource intensive, the possibility of becoming dependent on the supplier, and the fact that not all suppliers offer the same level of service or quality. These factors underscore the importance for businesses to thoroughly evaluate their supplier relationships, as well as the potential risks and costs associated with attaining preferred customer status. Balancing the advantages of supplier innovation against possible drawbacks is crucial. Therefore, it is imperative for companies to devise strategies that can effectively mitigate these risks.

In summary, this research highlights the importance of strategic buyer-supplier relationships in achieving innovation. Firms must carefully select and manage suppliers using defined criteria to achieve preferred customer status, balancing the benefits of innovation against potential challenges. This approach is crucial for maintaining competitive advantage in a rapidly evolving market.

Additional relevant sources:

Tessaro Afonso, J., Harms, R., Schiele, H. (2023). How startup become attractive to suppliers and achieve preferred customer status: Factors influencing the positioning of young firms. Industrial Marketing Management, 113, 100-115.

Qingyun, Y., Suicheng, L., Hecheng, C., Jiangi, Q. (2023). How does supplier relationship management affect supplier innovation contribution? Interorganizational learning and social exchange theory integrated perspectives. Industrial Marketing Management, 114, 165-180.

(Article) Venkat Ramaswamy, V., Ozcan, K. (2018). What is co-creation? An interactional creation framework and its implications for value creation. Journal of business research, 84, 196-205.https://www.sciencedirect.com/science/article/pii/S0148296317304721?casa_token=YnGkCUChatoAAAAA:aRZ1tNo9le0yodowvxSSSSOIS4jb0LiENQa02LCeo97OXICBaNwGvc23uSel1miDCz9tQhLn
(Article) Cossío-Silva, F., Revilla-Camacho, M., Vega-Vázquez, M., Palacios-Florencio, B. (2016). Value co-creation and customer loyalty. Journal of business research, 69, 1621-1. https://www.sciencedirect.com/science/article/pii/S0148296315004518?casa_token=0gNLKQYhLQcAAAAA:9Gm8qDDXez5I_tlDwQaifOWUnuogsk3uywx08JzZUFPh_RHEk1yGUZVeQkM8Oq3JOXZS-QNT
The first one develops a definition of the concept of “co-creation”. Indeed, a large body of papers are using the term “value co-creation”, but without clear definition and consensus on what « co-creation » is. We chose this reference because indeed, some of us had some difficulty in clearly understanding what the term “co-creation” meant when reading our main article. The second one analyzes the relation between value co-creation and customer loyalty in the framework of services firms, from both the attitudinal and behavioral viewpoint. The results show that a significant relationship exists between value co-creation and attitudinal loyalty. The latter also significantly affects behavioral loyalty.

We identified 4 managerial implications. The first one is that if you are a well-established company and you need to innovate just to maintain your status quo you should opt for a partnership with a related industry company. Depending how much you are investing in it will be an almost certain success. The second implication is that if your company is not solid and you need to innovate to remain in the market and not to fail, you should implement a partnership with an unrelated industry company. It will be harder and more complex to implement but if it turns out to be successful, it will be very likely to have a radical innovation that could put you as top-level company. Third implication is that depending on which are your goals, you can opt for different options. If you want to expand your core business, you should adopt a partnership with an unrelated industry company to gain new knowledge and create innovation in other businesses to implement in your company and expand in other sectors. The last implication is that if your company is competing in various sectors, you should try to implement a collaboration with an unrelated company because you have different field in which innovation can be applied and implemented

We found limitations in some of the managerial implications. The first limitation is about maintaining status quo, so we said that to stay safe, you should partner with a company in the same industry, but it’s not always safe. Some industries are highly competitive, for example the biopharmaceutical industry is really competitive and being in this industry increases the risk of opportunistic behaviors. A manager should really be careful in which industry he operates and if it’s not too dangerous to ally intra-industry.

The second limitations of our managerial implications concern competing in different sectors. In order to compete in different sectors, you form a partnership with an unrelated company but that may lead to a failed diversification strategy. For example, in 1996, Harley Davidson tried to launch a perfume, so they ally with a company specialized in perfume and cosmetic products, but it was a huge failure because the sector they chose to expend in is too far away from their own industry. So, a manager shouldn’t compete in another sector if this one is too unrelated to its own.

The first reference is a scientific article, about the different strategies of companies to start or to maintain an alliance and the different challenges companies have to face to stay competitive. Through this article, we learned that the senior management (the executive/top management) has to structure their alliances as learning platforms to assimilate new technologies and skills to revitalize their core operations and to find new uses for existing skills. The alliances platforms will be useful for all the members of the companies so that everybody knows exactly what this alliance brings in addition to the company. Thanks to this efficient share of technologies and skills, they will be able to innovate though new tools and they will find new uses of existing skills. The biggest challenge is to stay competitive, so the companies have to regularly check the efficiency of the partnership.

The second reference is a more concrete example of those partnerships. It is a speech of Bill Mohri, President of M Consulting. In the second part of the video, he gave a concrete example of a partnership between two companies: Microsoft and Nokia. In 2011, 4 years after the first iPhone was launched, they decided to start a partnership to design the smartphone of the future. They were both big companies and they had the same goal/they followed the same way. But this partnership was a complete disaster: in 2013 Microsoft acquired Nokia but shortly after Microsoft admitted that this acquisition was a complete failure. Through this example he wanted to show that partnerships aren’t always successful, even if it is between 2 big firms.

Sources :

https://www.sciencedirect.com/science/article/abs/pii/002463019390055K?fbclid=IwAR2_K4EqBa7S_VWG1wlSNBqGH3k1901qkqW8PYUGQkpg9i9u8nxnpG8oV_c

Youtube : Partnership Strategy 101

https://www.linkedin.com/pulse/strategic-alliances-success-failures-ron-byron-phd

https://zaemalahmad95.medium.com/the-failure-of-harley-davidson-perfumes-hot-road-catalogue-how-could-they-have-done-a-better-55004badff3a

We have learned in this paper that the size of the organisation can have an important impact on the extent of external learning because it affects the likelihood of learning through formal and informal mechanisms differently.

Through an examination of a sample of startups, it was found that external learning increases with startup size. Regardless of the size of the company, companies learn from alliances. However, regarding mobility and geographic co-location mechanisms, external learning decreases with firm size. This is because as firms grow, they will have more opportunities to access and exploit external knowledge, but their motivation to learn from more informal sources may decrease.

There are several mechanisms that can be used to help the development of knowledge within the company. The first mechanism is the formation of strategic alliances, which means that strategic alliances are agreements between two or more separate companies to collaborate on the manufacture, development or sale of products and services, as well as other corporate objectives. In a strategic alliance, for example, Company A and Company B pool their resources, capabilities and core competencies to generate mutual interests in the design, manufacture or distribution of goods or services. The second mechanism is the mobility of expert, it’s the proportion of scientists or engineers who help the company in its research and development. Obviously the more the better. The third and last mechanism is the appropriation of informal networks. It could be illustarted by geographically mediated informal networks or colocalization, it means that it is a relationship between several companies that is beneficial because the relationship brings added value thanks to a good knowledge of the environment.

We now turn to the limitations of the managerial implications explained. First of all, creating alliances between several companies is not possible for public companies such as the police. Indeed, these companies work with private data on citizens and cannot share them. It is therefore not possible to establish alliances that require the sharing of private information.

Secondly, hiring experts undoubtedly brings added value to companies. However, in highly competitive sectors with high mobility of experts, there are great risks in hiring many experts. Indeed, if they decide to change company and go to work for the competitor, they will leave with all their knowledge and the company will lose its competitive advantage.

Finally, with regard to informal networks such as colocation, it is absolutely necessary that both companies are on the same wavelength. If they share their workplace, it is important that they have the same culture and share the same values. For example, if we take an extreme case, Patagonia and Total will not be able to work on the same site.

The first further reference comes from the International Small Business Journal and tells us that the size of a company influences the number of resources that the company has, which positively influences the success of their projects. The size of the company therefore influences the success of projects.

The second source explains the TBSF (technology-based small firms) strategy. This article highlights the importance of informal relationships for the exchange of information and resources in companies. The article says that social networks can be used as a tool to expand resources and knowledge in the company.

Flynn, A., McKevitt, D., & Davis, P. (2015). The impact of size on small and medium-sized enterprise public sector tendering. International Small Business Journal, 33(4), 443-461.

Martin-Rios, C., & Erhardt, N. (2017). Small business activity and knowledge exchange in informal interfirm networks. International Small Business Journal, 35(3), 285-305.

(1) Mack, T., & Landau, C. (2018). Submission quality in open innovation contests ‐ an analysis of individual‐level determinants of ideainnovativeness. R&D Management, 50(1), 47‑62. https://doi.org/10.1111/radm.12345
(2) Gama, F., Frishammar, J., & Parida, V. (2019). Idea generation and open innovation in SMEs: When does market‐based collaboration pay off most? Creativity and Innovation Management, 28(1), 113-123. doi:http://dx.doi.org/10.1111/caim.12274

Executive Summary

A competitive setting was found to generate more creative ideas (Shalley & Oldham, 1997) yet communicating more was found to foster the development of innovations (Monge, Cozzens & Contractor, 1992). The article tackles the duality between competition and cooperation by doing a survey on innovation contests.

We derived two key insights from their findings:
1. A very high as well as a very low degree of cooperative orientation result in a high degree of innovativeness, while a medium degree of cooperative orientation results in a low degree of innovativeness.
2. Boundary spanners (individuals that have a cooperative orientation) are divided into two sub-types: proactive (driven by curiosity, support or assertion) or reactive (people driven by the improvement of their own work).

Out of the 73 innovation contests, 50 were conducted by firms. This is why we’ve looked further into the managerial implications if a manager were to apply these concepts inside the company.

We first advise the manager to estimate the employees’ cooperative orientation with surveys or personality tests. If they are found to be cooperative, making them work in teams might lead to high degree of innovativeness.

We then suggest to the manager to create a work environment that pushes collaboration. Practical solutions are brainstorm-focused meetings and open space offices.

Finally, if the employees are found to be more innovative in a competitive setting, we recommend focusing on the design of the rewards, as to not make the competition to intense therefore unhealthy (Steinhage, Cable & Wardley, 2017).

We have identified three limitations related to these implications.

First, “given the relatively short run time of an innovation contest, this effect is expected to be even stronger than, for example, in a long-standing organization setting”. Therefore, a low cooperation in the long term would not be possible in the long term.

Secondly, employees can be resistant to change (Strebel, 2009). So even if the workplace is made to be a cooperative environment, employees with a higher competitive orientation could prefer to stay competitive.

Finally, managers could be torn between cooperation and competition because trying to implement one could lead to the other. We use the example of Silicon Valley where open spaces were implemented, yet it is a competitive environment.

A. Steinhage, D. Cable, D. Wardley. (2017). The Pro and Cons of Competition Among Employees. Harvard Business Review. https://hbr.org/. Accessed 25 Nov. 2020.

L. Kaufman. (2014). “Google got it wrong. The open-office trend is destroying the workplace.” The Washington Post, https://www.washingtonpost.com/. Accessed 25 Nov. 2020.

Monge, P.R., Cozzens, M.D. and Contractor, N.S. (1992). Communication and Motivational Predic- tors of the Dynamics of Organizational Innova- tion. Organization Science, 3, 250–74.

P. Strebel. (2009). Why Do Employees Resist Change? IEEE Engineering Management Review 37(3).

Shalley, C.E. and Oldham, G.R. (1997). Competition and Creative Performance: Effects of Competitor Presence and Visibility. Creativity Research Journal, 10, 337–45.

The first implication of this article is that a company’s technological competence is not the
only factor in the success of its innovations. Success depends as much on internal technological
strength as on the ability to access the essential technological resources of others through interorganizational relations. In the network economy, increasing attention must be paid to the
capacity of a company to interact with its environment, otherwise it will be limited to its
internal resources (consultants, audits, etc). For example, the partnership between UCL and
Kaneka Eurogentec to accelerate innovation in the field of biomedicines enabled UCL’s
knowledge and Kaneka’s expertise to be combined. The second implication indicates that the
relationship between business strategy and innovation success is not significant. This result
highlights the fact that it is not enough to claim technological leadership. The success pursued
comes from converting strategy into action. A clearly formulated strategy must include the
importance of skills development because it is precisely these skills that will lead to successful
innovation.

Regarding the limitations, this paper looks at the sources of innovation in terms of
technological competences and network competences. However, other factors play a role in a
company’s innovation success such as internal management processes for new product
development. An interesting design theory for product development is modularity because it
subdivides a system into smaller parts called modules, which can be independently created,
modified, replaced or exchanged. By including these factors, we can develop a broader frame
of reference, which would allow further insights into the mechanisms that trigger innovation
success. Another limitation is that the article presents innovation success as the only contributor
to corporate success. Even if innovation success is one of the most important, the manager
should not forget that other sources of corporate success need to be considered at the same
time. We have identified 3 additional sources contributing to corporate success : stakeholder
integration, rapid adaptation to change and sustainability integration.

Further references

Thanasopon, B., Papadopoulos, T., & Vidgen, R. (2016). The role of openness in the fuzzy
front-end of service innovation. Technovation, 47, 32-46.

Martín, G. (2015). Knowledge management and innovation in knowledge-based and high-tech
industrial markets: The role of openness and absorptive capacity. Industrial Marketing
Management, 47, 143-146.

Saebi, T., & Foss, N. (2015). Business models for open innovation: Matching heterogeneous
open innovation strategies with business model dimensions. European Management
Journal, 33, 201-213.

We selected three main implications of the effect that lead users have on development.
Firstly, companies should integrate lead users as a variable for the development of a new product. Indeed, lead users adopt in an easier way the new products than the other ordinary users. Therefore, the companies should integrate these users before the launching of the product for example during their test phases such that he helps to find what the customer want and are attending. But also integrate them after the launching in the view that these users could help to improve the product.
It can also be interesting to analyze and find what is the profile type of the lead user in the market where the company is competing and why they have this tendency to adopt faster than the other customers.
Finally, these users have also an impact as opinion leader role. In fact, if they adopt the new product and do not have any improvements to do, they can so give arguments to other consumers to buy after them the product. There are two often ways to do that: via the social display by bringing knowledge to other consumers or also via legitimation in the view to present the security of the new product and reassure the clients.

About the limitations, concerning the development of a new product, in reality, the number of lead users in a specified market can be very small. By the definition explained before, you can well imagine that this type of users isn’t so frequent. It can be difficult for the firms in research of innovation to find them because these users are not going to work in all the companies.
We also explained that these users could help companies promoting their product by bringing knowledge to other consumers. However, a lead user is not necessarily an influencer. Indeed, they don’t have all the visibility to promote new products and to give feedbacks widely to potential consumers. Moreover, some people will be happy with the new product but won’t necessarily do word of mouth with other people. A solution for the firms could be to provide visibility and to encourage lead users to promote the new product more easily.
Finally, the implications are based on the assumption that « lead users are ahead of an important marketplace trend » but, it’s very hard to make the difference between lead users and individuals who feel another need than others. It is only over time that it has become clear what really has become a trend and what has not. Companies should probably not start to innovate something with someone that “just” has a good idea if there is no real sign that a trend will follow. Or at least should know that they are taking a risk. They have to balance the risk of missing out on something or investing in something that only a minority is interested in.

Further references

Hienerth, C. & Lettl, C. (2016). Perspective: Understanding the Nature and Measurement of the Lead User Construct, The Journal of product innovation management, 34(1), 3-12.

Korreck,S. (2018). Opening up Corporate Foresight: What Can We Learn from Open and User Innovation?, Journal of innovation management, 153-177.

Stockstrom, C., Chester Goduscheit, R., Lüthje, C. & Hoj Jorgensen, J. (2016). Identifying valuable users as informants for innovation processes: Comparing the search efficiency of pyramiding and screening, Research Policy, 45(2), 507-516.

However, those implications have limits. The first implication focuses on having a well-functioning interaction between technology development and product development but this could be a real challenge if the company does not work on technology development. For example, phone fabricants can not have a great interaction with the development of 5G since they are not involved in its process.
The second implication which advice to have worldwide collaboration but in the long term, it could weaken the strong links between the research component of R&D and the company. It can also be a problem when the law does not accept collaboration. Those policies prevent collusion.

In order to have some further insight into this R&D topic, it could be interesting to look at these three different articles:
“Learning from R&D outsourcing vs. learning by R&D outsourcing”, by C. Annique Un, Alicia Rodríguez. This article talks about how R&D outsourcing could have an influence on product innovation.
Retrieved from : https://www.sciencedirect.com/science/article/pii/S0166497217309057
“There’s No Good Alternative to Investing in R&D”, by Anne Marie Knott. This one explains how important it is for big companies to make long term investments in R&D.
Retrieved from :  https://hbr.org/2018/04/theres-no-good-alternative-to-investing-in-rd
“Measuring R&D Effectiveness”, by I. Robert Szakonvi. This one gives a new approach to measuring R&D effectiveness and allows R&D managers to identify which activities their department needs to improve and how it needs to improve.
Retrieved from : https://www.tandfonline.com/doi/abs/10.1080/08956308.1994.11670966