Corporate practices to deploy user-driven innovations

Размещено на http://www.allbest.ru/

National Research University Higher School of Economics

Institute for Statistical Studies and Economics of Knowledge

MASTER THESIS

CORPORATE PRACTICES TO DEPLOY USER-DRIVEN INNOVATIONS

Student Margarita Igumnova

Group М ИСИЭЗ МУН141

Supervisor Vitaliy Roud

Submission date 16th of May, 2016

Moscow, 2016



Table of Contents

List of Abbreviations

List of Tables

List of Figures

Summary

Introduction

1. Methodology and Approach

1.1 Background and scope of the research

1.2 Research question & methods

2. Findings

2.1 Advantages and limitations of users' involvement

2.1.1 Advantages

2.1.2 Limitations

2.2 Trends & perspective spheres for users' involvement into innovation process

2.3 User-driven innovation deployment process

2.4 Corporate practices trends

2.4.1 Interview methodology

2.4.2 Interview results

Discussion and Conclusion

References



List of Abbreviations

ICT - information and communications technologies

R&D - research and development

EC - European Commission

OECD - The organization for economic co-operation and development

SOC 2010 - Standard Occupational Classification 2010

ISCO-08 - International Standard Classification of Occupations 2008

DE.P - Department of Energy. Phillipines

NRCan - Natural resources Canada

ARFVTP - Alternative and Renewable Fuel and Vehicle Technology Program

IoT - Internet of Things

IOC - Intelligent Operations Centre

ILO - International labour organization



List of Tables

Table 1: User in the innovation process concepts summary.

Table 2: User's contribution activities at different stages of the innovation process

Table 3: Interviewees criteria

Table 4: Interviewees profiles

Table 5: Interview questions

Table 6: Users role in the innovation process by experts' opinion

Table 7: Availability of corporate policy promoting user-driven innovations deployment approach

innovation user drive practice



List of Figures

Figure 1: Summary of user-driven innovation process concepts

Figure 2: Organizational structure example

Figure 3: Research Methodological framework

Figure 4: Dynamics of the biggest companies included in Global Top 100 ranking

Figure 5: Major negative movements in oil and gas, telecommunications, and utilities industries

Figure 6: The user-driven innovation-process matrix



Summary

This research explores the corporate practices and procedures to deploy user-driven innovations. The study discusses key terms of the user-driven innovation approach based on the strong analysis of research papers and various concepts comparison. It considers that the distinctive feature of the user-driven innovation is the users' contribution to a solution development based on the proper understanding of their needs. In spite the fact that the users' contribution is critically important, the key role in the user-driven innovations deployment process belongs to a company who determines the necessity, initiates and leads the project. Therefore, the innovation project's success depends heavily on companies' ability to accurately manage the process. That explains the practical importance of the conducted research.

The research provides the findings on how companies actually govern user-driven innovation deployment process. Firstly, the research determines advantages and limitations of the users' involvement into the innovation process. The findings are based on the comprehensive analysis of the literature. They are useful for companies because the understanding of specific features of the approach is essential for accurate user-driven innovation process management. Secondly, the paper discusses which industries are perspective in terms of users' involvement into the innovation process. These spheres were identified through the literature review and the largest innovative companies' portfolio analysis.

Thirdly, the study offers the user-driven innovations deployment process description that is represented in the developed process matrix. The proposed matrix is based on the analysis and synthesis of the relevant research papers and corporate reports. It describes the key process stages and defines the role of job functions in each stage of the user-driven innovation process. Moreover, it defines the relevant job families in accordance with international classifications. Research findings are actual for big corporations with multifunctional and multilevel organizational structures because the projects' efficiency significantly depends on the appropriate organizational management.

The empirical part of the research identifies the user-driven innovations corporate deployment practices trends. The results are based on the conducted semi-structured interviews with representatives of marketing, R&D and design functions. The strict interviewees selection criteria and received recommendations allowed to find the experts who has real experience in collaboration with users and in relevant projects implementation. The empirical research showed that companies consider user-driven innovations approach as a part of their innovation strategy. It allowed to determine corporate attitude to users' role in the innovation process, to find out the key features of the user-driven innovation process and to define the critical issues for successful projects' realization in accordance with experts' opinion.

KEYWORDS: innovating user, Lead user, user-driven innovation, user-driven innovation process; cross-functional collaboration; commercialization of user innovations



Introduction

Currently technological development allows to mechanize lots of manual duties that are foremost referred to physical activities. That resulted from the technical plant and machinery industry evolvement as well as from ICT rapid diffusion. One more driver was the labour costs increase, while machine production became much cheaper and mostly more efficient than manual labour. However, people in developed economies suffer from lack of time as they are concentrated on intellectual labour activities. The result of such dynamic way of living is the increased public demand for multi-functional, smart and high-quality devices as well as for high-speed proper services.

Many people with high level of income are ready to pay more to be sure their requirements are fully satisfied. In return for their spendings and choice of the producer, a customer expects to get time-saving, ease of use and reliability.

The imperfect market that cannot fully satisfy rising human needs leads to the growing trend of users' active involvement. This vision is supported by the opinion of Eric von Hippel who mentioned in his research that "Users may innovate if and as they want something that is not available on the market …" [von Hippel, 2005].

Nevertheless, companies currently face strong competition and strict budgetary conditions. Such rough conditions encourage business to look for the alternative course of action instead of investing heavily in R&D and holding the internal team for R&D activities. While searching for better solutions companies realized the benefits of customers' involvement.

The favorable effect of innovations was acknowledged by researchers long time ago [Dewar & Dutton, 1986; Carter &Williams, 1957]. The researcher and the manufacturer were considered to be the major initiator, founder, and creator of innovations [Nelson, 1959]. Shumpeter explained the function of industrialists as carrying out new combinations [Shumpeter, 1912]. Thus, innovation is generally thought to be a significant driver of competitive expansion and economic dynamics. According to Shumpeter, consumer's favors are already known and can't arise spontaneously. That means that user was assigned a passive role in innovations fostering and in economic development as a consequence.

At the beginning of the 2nd part of the 20th century, only a few authors mentioned supplier as a possible source of innovation. Indeed lots of innovative products development case histories described in literature when the manufacturer or government played a significant role by initiating R&D aiming to design the new product [Bozeman & Rogers, 2001]. The strongest examples are taken from the strategically crucial industries such as space manufacturing and military industry. Nevertheless, users develop not only consumer products but industrial as well. The contribution of the independent innovator is highlighted in the papers by Jewkes [Jewkes et al.,1969]. Corey in his research described cases with "suppliers of new materials" acting as initiators of the innovation development process [Corey, 1956]. Moreover, Freeman studied chemical manufacturing and argued that lots of such authorized processes were designed with user-firms engagement [Freeman, 1968].

Von Hippel's research on users and their role in innovation process turned around the concept of innovations and attracted researchers' attention to the given problem. Understanding of innovation development as the process beyond the enterprise became an important peculiar feature of this approach.

Eric von Hippel was the first scientist who considered that innovation process can be initiated by a user. In his research, the author was inspired by the findings of AcMadelis who argued that precise understanding of customer's needs is an important feature that distinguishes commercially successful innovation from the failure [AcMadelis et al., 1970]. This approach had a significant impact on von Hippel's research objectives. He raised the question of the actual source of information for innovative firms and further developed his concept considering the role of a user in the innovation process from various aspects of the matter [von Hippel, 1976 (A)]. Because of its meaningful importance, the research on user's role in the innovation process is being studied till now and has extended to different research streams. The hypothesis that user - is the possible source of innovation was acknowledged by many authors focusing on firm or industry studies [Riggs & von Hippel, 1996; Thomke et al., 1999]. Concerning the country level, the research showed that 7,8% of Russians are being considered as user-innovators [Zaytseva et al., 2013].

In early research von Hippel strictly defined the innovation process into "manufacturer-dominated process" and "user-dominated process' - when a user performs all of the innovation-related activities through to product commercial manufacture [von Hippel, 1976 (A)]. He developed the concept of User innovator - an individual user or individual user firm who develops innovative products or services for their own use, without the involvement of the manufacturers [von Hippel, 1988]. In evidence of users' engagement, he threw the light on several innovation cases from machine-building, petroleum refining, chemicals, automotive industry and integrated electronics. The analysis of these cases allowed establishing a significant user's role in the creation of essential innovative processes and associated equipment [von Hippel, 1976 (B)]. However strict division into manufacturer- and user- dominated process smoothened while concept developed. It transformed to a combated process that is based on comprehensive collaboration between a company and a user.

In actual, while in user-dominated concept the user acts more ambitious in innovation process than a producer, there are practices in which companies proactively involve the users [Thomke et al., 1999]. That is important to distinguish user-driven innovations from corporate innovations that were generated by the companies on their own or with the involvement of external contractors. The distinctive feature of user-driven innovations is the users' contribution to a solution development. The distinctive feature of the user-driven innovation process is that insights that are being gathered from the user reflect are not only about its needs but solutions as well. As a result of such cooperation, the company can bring unique and qualitatively new products to the market and receive first mover advantage.

One more breakthrough idea was the differentiation of the Typical user and the Lead user. According to von Hippel the Lead user is being at the leading edge of major trends on the market and anticipate to gaining profit from innovating [von Hippel, 1986]. Thus, Lead user involvement into the innovation development process can be profitable for companies as Lead user needs and expectations can become general for the average consumers in the nearest future.

Moreover, Lead users are usually familiar with the product or service that is subject to exploration. So they can generate the solutions that are ahead of typical user's requirements. That explains why companies should source those customers who are able and willing to undertake innovations aiming to satisfy its desires. At the same time, the Lead user expects to receive benefits for its' solution and it is not infrequent that he makes experiments to adopt it on his own. According to Lu?thje the user should also receive benefit from the innovating process itself [Lu?thje, 2002]. They can have fun experimenting by applying their knowledge and demonstrate creativity in order to gain satisfaction. Similarly, von Hippel argued that users' satisfaction becomes much higher as they can innovate freely without being restricted to certain options [von Hippel, 2007].

A bit different approach was proposed by Lu?thje, who distinguished innovating users from non-innovative users [Lu?thje, 2002]. He identifies the major characteristics of innovator assuming that an innovative user should fill new needs being dissatisfied with available products and services, they should set sights on financial returns, enjoy the innovating process and obtain product-related knowledge [Lu?thje, 2002; Tierz et al, 2004].

The Lead Users concept became a frequent practice but the improvement of Lead users revealing process is still an open question on which many researchers focus their efforts [Churchill, 2009; Mдkinen et al., 2013]. The researchers proposed several solutions that can be applied for market research while identifying Lead users. Nevertheless, that is a qualitative and very time-consuming research and primarily depends on market intelligence specialists competencies. But appropriate cooperation between customer and Lead user is of prime importance as it should result in advantageous for both parties.

One more direction in user innovations theory was the development of "user toolkits for innovation method" [von Hippel, 2001]. This approach is applied to achieve maximum involvement of the user into the innovation process. For that purpose, the special user-friendly environment is created where non-professional can design products and improvements that absolutely meet their desires. Such environment must enable a user to proceed the design phase and then to test the solution in order to identify the key weaknesses and reconsider it to implement improvements - "learning by trial-and-error". The main advantage is that the platform for cooperative research enables users to freely experiment and innovate [Franke & Piller, 2004; Bin, 2013].

Development of communication technologies and remote interaction enhancement has led to the increasing attention to the new forms of company-user networking. The new phase of user-driven innovation policy development was the Innovation communities concept creation being underlined by Open innovation theory. According to von Hippel the Innovation community - is an organized cooperation focused on designing, testing, and diffusion of user-initiated innovations [von Hippel, 2001]. Communities combine users with common interests and needs and provide an environment for effective collaboration [Franke& Shah, 2003; Bin, 2013]. The platform enables users to autonomously experiment and innovate [Jeppesen & Frederiksen, 2006]. Innovation can be developed within the users community, but the commercialization of the product is carried out by the company [von Hippel, 2001].

It is crucial to underscore that various innovating users are ready to confide their inventions with others [Morrison et al., 2000]. Thus, users in such communities don't need to create everything by themselves but can share their ideas and profit from available there shared innovations [von Hippel, 2005]. Such communities can help to identify Lead users and those who are willing to share insights about their innovation ideas. A number of efficiently-running high technological manufacturing companies, for instance, Microsoft, BMW, and IBM actively invest their capital in virtual communities implementation [Prause & Thurner, 2014]. There are more possibilities for firm-user collaboration considering speedy progress in technologies and social media development [Bosch-Sijtsema & Bosch, 2015].

It is obvious that the topic of user-innovators, communities, and its value is well-researched. Several authors have focused the process of user-driven innovations deployment in their papers [Thomke et al, 1999; Jeppesen & Frederiksen, 2006] and assumed that companies can develop strategies to raise users involvement into innovation process [Jeppesen & Molin, 2003]. Karen L. Janssen in her research focused on the techniques of users involving into radical innovation development process [Janssen & Dankbaar, 2008]. Some researchers are mostly focused on certain methods and tools that are used by firms for users' insights gathering and processing [von Hippel, 2001, 2008; Kratzer, 2016] while others focus on the process of firm-customer collaboration as a process [Bosch-Sijtsema & Bosch, 2015].

The importance of user-driven innovations was realized not only by firms but also by policymakers in different countries [Jin & von Hippel, 2009; Flowers et al., 2010]. European commission pays considerable attention to the user-driven innovation process, taking into account that this process is much more than just gathering ideas from several users [EC, 2012]. The topic of user-driven innovations should be further researched being a part of the largest Europe research and Innovation programme - HORIZON 2020 [EC, 2016].

The analysis of literature review showed that the user-innovation concept developed and expanded significantly through time because of efforts by Eric von Hippel and other authors. The concept was supported by a number of empirical studies disclosing real cases of user-driven innovations that were successfully commercialized. Nevertheless, there is a necessity to analyze different approaches to user-driven innovations deployment process and to systematize them considering the whole process of innovation deployment taking into account the interconnections between different functions in the organization.

The research paper consists of the methodology and approach, main findings and conclusion sections.

The research begins with the methodology and approach part which determines the major research question, research objectives, background and scope of the research. Background of the research opens up the key concepts and terms underlying the research. Background is based on contains the comprehensive analysis of existing literature on user-driven innovation process deployment. The methodology and approach section includes an overview of methods being applied in the research correlated with research questions.

The main results of the conducted research are covered in the findings section. Firstly, it explains the relevance of users' involvement into innovation process considering the possible benefits and risks of project realization. The beneficial impact should be analyzed for both stakeholders - a user and a firm as they benefit differently. Secondly, the research contains the analysis of perspective spheres of users' involvement and existing trends in company-user cooperation. This analysis shows the industries where attention is increasingly focused on a user who is a possible source of innovation. Thirdly, it proposes a matrix, consolidating the process stages with job functions involved into the various activities. This matrix is based on the comprehensive analysis user-driven innovation process concepts and on the job families' classifications research. The matrix enables to visualize the whole process, demonstrating inter-linkages between internal stakeholders and the user in different scenarios. Finally, the chapter includes the background, specifications and results of the interviews. Basing on the conducted interviews the corporate user-driven innovations deployment trends were identified and summarized in the findings section.

The research findings and their economic meaning are summarized in discussion and conclusion part. It also outlines the limitations of the conducted research and elaborates future research needs.

1. Methodology and Approach

1.1 Background and scope of the research

The user is considered to be a potential source of innovation [von Hippel, 1976 (A)]. In this thesis, the major focus of the research is the corporate process of deploying user-driven innovations. First of all, it is necessary to specify the main terms underlying the research: a user, a company, a user-driven innovation, user-driven innovation deployment process, job functions.

The analysis of the existing literature demonstrates that the user's role in the innovation process is very wide. Consumers, businesses and the public sector can act as a user of different products and services [EC, 2012]. The user being involved into innovation process was defined and classified in different interpretations. That is why it is important to analyze the existing concepts and to determine the user being eligible for this process.

The following table 1 summarizes different approaches to defining the user being involved in the innovation process.

Table 1: User in the innovation process concepts summary

Term	Type	Role	Motivation	Opposite
Innovator	an individual/ a firm	Is the first to develop an innovation being functionally useful [von Hippel, 1988] Individuals or units with significant level of innovativeness (reflects the degree when a person or an organization adopts new solutions earlier than the other participants of a social system [Rogers, 1995]	Possesses both scientific and financial interest [von Hippel, 1994]
Inventive user (User inventor)	an individual user	Undertakes to develop the basic or major improvement credited to him [von Hippel, 1976 (A)]	The demand for functional tool for their work on a daily basis Practices while testing the product in order to deepen the knowledge on principles of functioning Uses the invention not only for its intended purpose [von Hippel, 1976 (A)]
Innovation users (User innovator)	an individual user/ a user firm	Participates actively in the innovation process [von Hippel, 1976 (B)]: Realizes the demand for the industrial product innovation; Creates the solution; Prototypes a product; Demonstrates the effectiveness of the prototype product while using it; Proposes his prototyped product to other potential users or to potentially interested firms on a commercial basis (which is further responsible for adjustment of the prototype for future manufacturing and its commercialization) Develops new and more stringent desires [Lu?thje, 2002]	Not satisfied when his needs related to product specifications mismatch with product's perceived performance Intends to get profit from developed innovation usage Expects to be financially rewarded [von Hippel, 1976 (B)] Benefits from the process of innovation development - enjoys the process itself [Lu?thje, 2002] Expects to benefit from using developed by him novel product or a service [NESTA, 2010]	Non-innovating users [Lu?thje, 2002]
Innovating user firms	A user firm	Creates process equipment innovations Transfers such innovations to interested equipment manufacturing firms (which manufactures and comes first with this innovation to the market) [von Hippel, 1977]	Establishment of an outside source of supply for the equipment capable of servicing in-house demand Advantage in satisfaction of its needs Financial incentive [von Hippel, 1977]
Lead user	an individual user	Currently obtains strong needs which on a short-term horizon will be general in a marketplace. Develops complete new product that answers these needs. Problem-solving activities can result in the new form of existing product applying. Develops industrial or consumer product. True Lead users are rare [von Hippel, 1986]. Develops practical solutions that being applicable in current reality environment [Schreier, Pruegl, 2008]. Obtains significant technical expertise required to contribute unique and innovative ideas to develop new function capabilities [Thurner & Prause, 2014].	Pretends to receive benefits from providing solutions meeting the needs that will become general The value of the received benefit affects Lead users efforts to solution obtaining [von Hippel, 1986].	Typical user - incapable of problem-solving being incompetent to assess unfamiliar product and process needs [von Hippel, 1986].
User community	An organized cooperation of individual users/ user firms	Focuses on designing, testing, and diffusion of user-initiated innovations. Some users must have sufficient motive for innovating. Some users must be motivated for the voluntary revelation of their innovations and be desirous of doing so. Possibility of commercial production and selling is essential for innovations by users who participate in user communities [von Hippel, 2001]. Combining people with different interests and personality traits is essential for creativity emergence [Zahay et al., 2011]. Enables virtual collaboration within ICT-based networks uniting users, companies, external consultants, suppliers and others [Kretschmer et al., 2010]. Allows to digitize contents as well as to virtualize cooperation company-user teamwork via user communities that contribute to erasing the interaction boundaries between a user and a company [Thurner & Prause, 2014]. Creation of user communities by companies can help to create favorable environment boosting innovations development and establish the norms of behavior within the community [Sawhney et al., 2005].	Users expect to benefit from innovating getting at least reimbursement of expenses. Users reveal their solutions if received benefits outweigh their costs [von Hippel, 2001]. Users join web communities in order to exchange their knowledge and share their ideas with co-thinkers in order to gain the solid reputation within the community [Thurner & Prause, 2014]. Valuable users' contribution can attract potential employers [Thurner & Prause, 2014]. Users are motivated by intrinsic motives for instance: having fun, curiosity and the possibility to support and help other participants [Thurner & Prause, 2014].

Source: Author's investigation based on literature review.

The analysis showed that there are different approaches to defining the user. To summarize it is possible to emphasize main categories of users that underlie current research.

User-innovator (or Lead user) - an individual user or user firm that should be distinguished from typical or non-innovating user as consistent with the following criteria:

understands the operation principles and essential characteristics of used product / service;

feels and realizes strong needs of product development/ improvement which will become general for the market in the nearest future;

ready to share his ideas/ solutions with an intent to receive benefits for their accomplishment;

independently reaches the potential partner company or is being attracted by the company to working in strong collaboration;

plays a crucial role in user-innovation deployment process being involved into various activities.

User community - an organized cooperation of individual users/ user firms:

unites users with similar related interests;

provides the opportunity for users collaboration: knowledge and ideas sharing, cooperation with each other to develop innovative solutions and feedback sharing;

enables virtual collaboration erasing the boundaries between parties;

appears to be a useful tool for companies in case of appropriate conditions creation for collaboration and further proper support.

Therefore, the research is focused on user-driven innovations deployment process where user - is an individual user or a firm realizes its needs and applies its knowledge for innovations creation through collaboration with a company. Individual users or firms can unite in user communities and unite their efforts.

The second major party in user-driven innovations deployment process is a company which is interested in innovation introduction into the market. There are many examples from empirical research of user-driven innovations development in industrial sphere [von Hippel, 1976 (A); Thomke et al., 1999; Zahay et al., 2011]. Moreover, this concept can be applied in service industries as banking services, tourism or other non-productive industries [Riggs & von Hippel, 1996; Magnusson et al., 2003]. In order to narrow the scope of the research, it is necessary to identify the most perspective industries of user-engagement and to concentrate efforts on companies which represent these industries. The scope of these research is manufacturing and innovating companies that involve users into the innovation process.

The desired outcome of user-company collaboration is the development of commercially successful innovation being introduced to the market. According to Oslo Manual, the innovation is defined as the implеmеntаtion of a significаntly imprоved or new prоduct/ prоcess/ new mаrketing mеthod/ organizаtional methоd in businеss prаctices/ wоrkplаce organizаtion or extеrnal relаtions [OECD, 2005]. OECD definition of an innоvation enclоses a brоad range of pоssible innоvations. It can be nаrrowed and defined as the implеmentation of cеrtain typеs of innоvations [OECD, 2005]. User-driven innovations refer to open innovations concept when companies, searching for opportunities to improve existing technologies and to create new ones, using not only internal forces but also adopting external solutions and introduce them to the market [Chesbrough, 2006]. User-driven innovation is defined as the result of various innovation-related activities that can be initiated and/or completed with active users' involvement [NESTA, 2010]. User-driven innovations are created by means of information on customers, user communities and user firms, through users' engagement as key participants in innovation process [EC, 2012]. Nevertheless, it is important to distinguish the process of user-driven innovation deployment from innovations that were generated by the manufacturer based on the market research. The distinctive feature of the user-driven innovation process is that insights are being gathered from the user not only about its needs but solutions as well.

The basic sources of user-driven innovations are the advanced understanding of users' needs and the competence of companies to convert users' knowledge into eventually perspective products or services with competitive advantages [Rosted, 2005]. Considering that current study mostly focused on product innovations, the user-driven innovations are being considered for the research as the new or improved products that are being developed by users or with users' engagement into the innovation process.

One more fundamental term for the research is the user-driven innovation deployment process that aims to create new products and services of processes that fit customers' needs. The whole process is based on working with users' insights - their needs, knowledge and ideas, instead of particular technology research and development by staff researchers and engineers [EC, 2012]. The process allows to take new ideas from customers and to put them into widely used practice. Innovation process itself includes several steps of innovations development: generation, acceptance, and implementation [Aiken & Hage, 1971].

There are a number of studies on user-driven innovation deployment process that argue that user can be attracted to innovation creation in different stages of innovation process [Brockhoff, 2003; Lagrosen, 2005; Voss et al., 2009; Kaulio, 1998; Gruner & Homburg, 2000]. Nevertheless, it is essential to determine that user can be considered as the initiator of the process reaching the company to propose the solution for relevant remuneration [von Hippel, 1976 (A)] or can be found and attracted to the process by the companies' representatives who realize the possible effect from such cooperation and who actively implement users' engagement approach in their companies [Thomke et al, 1999]

There are different approached in the literature on how users collaborate with companies and how companies collect, assess and materialize users' ideas. In some papers, users are being engaged during the whole innovation development process [Brockhoff, 2003; Lagrosen, 2005; Lettl, 2007; Voss et al., 2009] while in the other user is being involved only for providing some ideas for further implementation [Kaulio, 1998; Gruner & Homburg, 2000]. Therefore, these studies differ on the stages determined and on the stages highlighted in which users are being involved into user-driven innovation deployment process.

The main findings of the analyzed studies are summarized in the following Figure 1. The stages of user-driven innovation deployment process were structured by type of activity and correspond with each other vertically. The yellow boxes contain stages of users' activity excluding collaboration with a company; green boxes demonstrate the stages of user-company collaborative work and blue ones show stages of company independent working on user-driven innovation development.

Figure 1: Summary of user-driven innovation process concepts

Source: Author's compilation based on literature review

The analysis allowed to identify the commonly recognized stages of user-driven innovation process:

Idea generation

Development or design

Testing

Market launch

The most detailed concept was presented by Alam, whose 10-stages model reflects the whole process starting from preliminary but crucial for business stage - strategic planning and completing with product commercialization stage [Alam, 2002]. Moreover, significant findings were provided by Brockhoff who characterizes 6 stages of the user-driven innovation development process and defined how the user contributes to each step of the process [Brockhoff, 2003]. The user's contribution activities are summarized in table 2.

Table 2: User's contribution activities at different stages of the innovation process

	Process stage	User's contribution
1	Idea generation	Suggestions, complaints
2	Concept development	Identification of user concepts; Evaluation of supplier's concepts
3	Prototype testing	Prototype testing; Offering references
4	Pre-announcement	Feedback information
5	Market launch
6	Post-launch: overlap with next incidence	Experience-based suggestion

Source: Brockhoff, 2003

Summing up the conducted analysis, we can conclude that users' contribution to innovation process is enormous as the user participates almost in the all stages of the user-driven innovation process. Nevertheless, the company acting as the mostly interested party builds the strategy and leads the process. Therefore, it is evident that company is interested in process structuring and arranging inter-linkages not only with the user but also within involved individual employees or teams.

The conducted analysis underlies the descriptive model where process stages are described and schematized to demonstrate users' role and interrelations between involved job functions.

Job functions describe the basic duties that an individual employee or a team are responsible for. Job functions characterize relation of specific job families to executed certain duties. Job families are considered as groups of several roles that refer to a similar job [HAY GROUP, 2009]. Job families approach allows structuring different roles, occupations and various levels of employees. Levels of employees depend on the competencies that are expected. Proposed user-driven innovation process matrix is based on the internationally recognized classifications of job families and occupations:

Standard Occupational Classification 2010 (SOC 2010) - developed by U.S. Bureau of Labor Statistics;

International Standard Classification of Occupations 2008 (ISCO-08) - International Labour Organization.

In summary, the occupations in the organizations can be structured by job functions, job families, and precise positions. The Figure 2 demonstrates the hierarchy of these categories and provides examples.

Figure 2: Organizational structure example

Source: Author's compilation based on SOC 2010 and ISCO-08 classifications

These hierarchically structured classifications allow to systemize various jobs and provide comparability of information on the intercorporate level irrespective of company size, industry, and location. Each occupation defined in classifications differ on duties assigned and competencies required [U.S. Bureau of Labor Statistics, 2010; ILO, 2012; UK Visas & Immigraion, 2015].

1.2 Research question & methods

The aim of the current research is to analyze the corporate practices and procedures of deploying user-driven innovations. The efficiency of the users' involvement into innovation projects is being proved by a number of authors who have chosen company - user-innovator relationships as their scientific field. The analysis of the literature showed that the user-driven innovations deployment process is a complicated process that involves various parties. Moreover, there are different techniques and methods of collaboration with users which allow companies to achieve targeted results.

The research question is how companies actually govern user-driven innovation deployment process. That is obvious that each company implements its own strategy of working with the user. That explains the necessity to analyze different concepts and practices and transform the diversity of approaches into one model, describing the whole process.

In order to answer main research question, the following research objectives should be met:

Advantages and limitations analysis. As a result of the research the outcomes from involving users into the innovation process should be assessed for the user and the company. Users involvement can be beneficial for all parties and can be risky as it has its limitations. Understanding of advantages and limitations of collaboration with users is essential for accurate implementation and arrangement of user-driven innovation activities.

Trends & perspective spheres determination. The literature review showed that there are lots of examples of user-driven innovation deployment cases in various industries. Nevertheless, it is important to understand which of business areas are more innovation-active in the context of company-user collaboration. The analysis of consumers' innovation activity practices is essential for identification of industries innovative trends, formed by active users' participation.

User-driven innovation process description. The analysis of the existing literature showed that there are different approaches that should be compared and schematized into one descriptive model. In order to develop an obvious model, there is a need to reflect job functions assignment to certain process steps and to determine interrelations between those functions. It will allow to estimate job functions roles in the user-driven innovation process and to identify which functions are being mostly engaged in user interaction.

Corporate practices trends identification. Existing procedures of company-user collaboration are very diversified. According to the literature review, users are considered to be a possible source of innovation. In order to identify the corporate attitude to this approach it is essential to conduct several structured interviews with the representatives of business sphere dealing with users' involvement. The critical task of the research is to determine current trends of user-driven innovations deployment process.

The current research is conducted with the application of several research methods. The figure 3 presents the consolidated methodological framework of the research methods that were used for each research objective.

Figure 3: Research Methodological framework

Source: Author's compilation



2. Findings

2.1 Advantages and limitations of users' involvement

Users' involvement into innovation process has emerged to be a successful approach that became recognized by a number of researchers and many innovation companies. User-driven innovations approach is a different way to innovate, thus, it requires companies to establish and optimize managerial solutions that address corporate requirements and innovating users' needs. This approach has its advantages for all stakeholders as well as specific limitations.

2.1.1 Advantages

The growing trend of users' involvement is dictated by benefits and advantages that stakeholders aim to receive. It is important to find out the main drivers of user-driven innovations. For that purpose, the advantages were identified from the perspective of an innovating user and a company.

That is obvious that user aims to receive maximum benefits from innovation development. Real understanding of users' expectations from innovation process is the key to efficient relationships creation between a company and a user. A user who is attracted to the innovation process by companies is not an employee or contractor. As users' contribution is usually voluntary, they can enter and drop from the project when they want. That is why companies should respect users' freedom and work on their motivation. Comparison study of academic literature allowed to identify the main advantages that user can receive from participating in the innovation project.

Getting desired product or service. The innovation developed by a user is initially based on dissatisfied needs that user feels. Thus, the user benefits from receiving and using the product that he is willing to have [NESTA, 2010, von Hippel, 1976 (A)], especially when it solves a problem that could not be fixed with existing products [von Hippel, 1976 (B)]. An innovating user can feel the results of his efforts much faster than other users in a commercial world. The user benefits from receiving at the same time a useful and a usable product that is compact, smart, easy-to-use and efficient. The user who innovates is usually the first to receive the product fully corresponding to his needs and desires. Moreover, users can benefit from collaborating with other users and experts within the networked environment that allow to combine different ideas and create even more advanced novel product.

Self-fulfilment. One more driver for users to innovate is having the necessary knowledge and skills [von Hippel, 1976 (A)]. Users undertake first of all those tasks and projects in which they have considerable interest and have some expertise. From one side, the user is willing to apply his knowledge, to test it in practice and be helpful for the society from product or service improvement. From other side, the user has a scientific interest and receives an opportunity to strengthen his skills and gain knowledge from individual work and from cooperation with other users or experts from business [von Hippel, 1994]. As a result of such collaboration, users can correct some wrong beliefs and get useful experience on a subject of their interest.

Reward for insights. One of the major reasons why users innovate - is the financial reward for its knowledge and skills. Firstly innovation process requires particular contributions from a user - it can be time spending, financial investments. That is why the minimum users' expectations - is reimbursement of expenses [von Hippel, 2001]. But at the same time intensity of efforts directly depends on actual profit [von Hippel, 1986]. Users can advantage from cooperating with companies - having the opportunity to sell a user-created innovation in exchange for monetary compensation [Brockhoff, 2003].

Challenging process. One more advantage of innovation process for user comes from intrinsic motive - accomplishment of challenging and enjoyable tasks [Magnusson et al., 2003]. Sometimes users decide to participate in the projects in order to create something new that they normally wouldn't do or consider challenging to accomplish. However, the efficiency of the process depends on the clarity of tasks [Brockhoff, 2003]. Companies should give users the sense of autonomy that will increase the level of responsibility and satisfaction and will enhance intrinsic motivation [Jeppesen & Frederiksen, 2006].

Users enjoy the innovation process if they are working in the environment that encourages and motivates. Such creative working environment requires challenging and ambitious tasks, freedom in decision-making, availability of required resources, harmonious teamwork and organizational support from the supervising company. The essential condition is freedom in time management when users split their time at their own discretion. In exchange for invested time end efforts the user can receive the value of the created solution in return [Franke & Piller, 2004]. The user benefits from the creative problem-solving process, from the opportunity to use innovation capabilities and from the availability of new technologies [Kratzer, 2016].

Recognition. Another benefit for innovating user - is recognition from other users and companies. Participating in innovation projects gives users the possibility to share developed products within a large community. Users are ready to share information, interact within the social network communities and work together even with people that they might never get acquainted and meet face to face. This opportunity is strategically important for users as they can expand contacts, receive new career opportunities and attract investors. That is why the company should put efforts into users' recognition [Jeppesen & Frederiksen, 2006]. A positive reputation can increase the chances for experienced user to be attracted by the companies for further work as employees or contractors.

The various studies on user-driven innovations concept argued that users involvement into innovation process is a great opportunity for companies. Companies realized that providing customers with solutions truly answering their needs is the effective way to increase competitiveness. In order to receive this advantage, companies perform market intelligence which essential task is the identification of customers' needs that are common on the market. An accurate understanding of users' needs is obviously a significant input to the innovation process [Urban & von Hippel, 1988]. Users' involvement is not only data gathering by means of market research. Users can contribute insights and propose solutions that correspond with their unfilled needs [von Hippel E., 1976 (A)]. Therefore, companies' efforts in user-driven innovations development can lead to solid corporate advantages.

Marketable products. The important factor of products attractiveness on the market is compliance with customers' requirements. An accurate understanding of customers' needs is of great importance for successful products launch [von Hippel, 2001]. This complex task becomes more difficult as customers' desire rapidly change and companies seek for competitive advantages teaming up with the user. In 2011, McKinsey & Company conducted a research to find out the major digital challenges that marketing experts face in their work. The survey showed that the biggest challenge for business is generating and leveraging deep customer insights (32% of responses) [McKinsey & Company, 2011].

Furthermore, users' needs research is an expensive and time-consuming process [von Hippel, 2005]. But at the same time, an inaccurate choice of investments direction as a consequence of incomplete or incorrect specification of customers desires can result in innovation failure on the market [Thomke et al, 1999]. Such mistake leads to financial losses, irrational time spending and extra work focused on error correction. Users' involvement into innovation process basing on an accurate understanding of customers' needs can allow avoiding product failures as the customer receives the product corresponding their expectations [von Hippel, 2005]. Companies benefit, as innovation ideas created by users lead to a higher probability of successful product commercialization than the ideas created in a laboratory [Meadows, 1969].

Cost-effectiveness. Users involvement into innovation process allows companies to save their money due to personnel costs reduction. Companies receive access to cheaper information that is available in user communities and manage with less budget. So users working with problem-solving tasks facilitate companies to get rid of a sort of expenses [Jeppesen & Molin, 2003].

One of the ways to cut expenses is to create and participate in innovation communities. Usage of special Internet platforms leads to cost-saving as companies can collect and choose users' feedback and proposed solutions online instead of more traditional approaches. This way is perfect for collaboration with users on first stages of innovation project when companies seek for promising ideas. Investments in users' involvement are beneficial both for costs reduction and sales increase, as user receive the product they prefer - usable and less cost-consuming [Rohn, 2005]. Moreover, users' insights help to avoid product failures [von Hippel, 2005] that positively impacts financial matter.

Being first to introduce to the market. Lead users' insights are the greatest opportunity for companies to launch the novel product on the market before competitors. The reason is that Lead users are at the leading edge of major trends on the market [von Hippel, 1986]. Thus, Lead user involvement into the innovation development process can be profitable for companies as Lead user needs and expectations can become general for the average consumers in the nearest future. Lead users can contribute to innovative products development which are ahead of typical user's requirements. In such case, many efforts should be made by companies in the last stages of the user-driven innovation process - market launch. Acceptance of the novel product by customers will mainly depend on developed marketing strategy and on the capability to keep the competitive advantage.

...