How users and employees interact when developing a new product - case study on creative companies seen from a process perspective

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3 How users and employees interact when developing a new product - case study on creative companies seen from a process perspective By Louise Rønne and Majken Rønne 3

4 How users and employees interact when developing a new product - case study on creative companies seen from a process perspective Master thesis in Creative Business Processes and Business Administration & Economics (Copenhagen Business School and Roskilde University), June 2009 By Louise Rønne (CBS) and Majken Rønne (RUC) Supervisors: Christoph Hienerth (CBS) and Lars Fuglsang (RUC) Chapter 3, 4, 7, 9, 11 is written by Louise Rønne Chapter 1, 2, 6, 8, 10 is written by Majken Rønne Chapter 5 is written in cooperation The thesis accounts for keystrokes, equivalent to 89 standard pages of 2275 keystrokes (CBS) and 84 standard pages of 2400 keystrokes (RUC). Including spaces. 4

5 Efforts to maintain the illusion that organizations are rational and orderly in the interest of legitimacy are costly and futile. They consume enormous energy and undermine self-acceptance when managers hold themselves to standards of prescience that are unattainable. To appreciate organizations and their environments as flows interrupted by constraints of one own s making, is to take oneself a little less seriously, to find a little more leverage in human affairs on a slightly smaller scale, and to have a little less hubris and a little more fun Karl Weick, 2005:xi 5

6 Table of Contents Executive summary... 8 Resumé... 9 Foreword List of tables List of models Introduction Motivation...14 Field of interest...16 Research question...18 Project design...18 Clarification of concepts...21 Theoretical framework Analytical focus: Process theory...26 Theory to explain the three modes...28 Inspiring mode: lead user theory and theory on creative class...29 Legitimising mode: Institutional theory...33 Sensemaking mode: Process theory...36 Combination of theories...42 Research method Epistemological considerations...44 Pre-understandings...45 Multiple case study design...45 Selection of industries and cases...46 Data collection...49 Data reduction...50 Research validity...52 Selection of analytical focus...53 Research framework...54 Creative industries and case descriptions Creative industries...58 Case presentation Arkitema...60 Case presentation Fritz Hansen...61 Case presentation Kompan...62 Case presentation Mutopia...63 Data analysis The inspiring mode of user involvement...66 The legitimising mode of user involvement...72 The sensemaking mode of user involvement...78 Concluding the analysis...83 Discussion Theoretical implications

7 Managerial implications...93 Conclusion Limitations and further research Thesis in retrospect Relation between theory, method and empirical data Good theory building? Trustworthy data collection and reduction? Process reflections Perspective References List of appendices

8 Executive summary Seen from a process perspective the purpose of this thesis is to study the interaction between users and employees when developing a new product. Despite the increasing interest for studying user involvement, little research has examined the social aspects of the innovation process. With a multiple case study, users and employees from creative companies are interviewed. By analysing actions between users and employees three modes of user involvement are identified emphasising, how users can be involved differently: to inspire the employee (inspiring mode), to diffuse the reputation of the new product (legitimising mode) and to qualify the new product (sensemaking mode). The key findings underline the importance of observing actions taken by users and employees, in order to discover new innovation potential such as inspiring, diffusing or qualifying a new product. Furthermore, the thesis reveals insight about the source of innovation coming from the interaction between users and employees, highlighting the importance of the employee in user involvement. Based on the key findings, the authors develop a model of how to work with a process perspective on user involvement. The findings are valuable to researchers, as well as managers to gain in-depth knowledge on the processes of involving the users. The thesis makes an original contribution by proposing a process perspective on user involvement. 8

9 Resumé Set ud fra et proces perspektiv er formålet med dette speciale at undersøge interaktionen mellem brugere og medarbejdere i udviklingen af nye produkter. Trods en øget interesse for forskning indenfor brugerinvolvering, foreligger der ganske lidt forskningslitteratur, der behandler de sociale aspekter af innovationsprocessen. Et casestudie baseret på flere cases er valgt, hvor brugere og medarbejdere fra kreative virksomheder er interviewet. Ved at analysere handlinger mellem brugere og medarbejdere identificerer specialet tre tilgange til brugerinvolvering, hvorledes de involverede brugere har forskellige målsætninger: at inspirere medarbejderen (inspirationstilgang), at sprede rygtet om det nye produkt (legitimeringstilgang) og at kvalificere det nye produkt (sensemaking tilgang). Hovedresultaterne understreger vigtigheden af at iagttage og vægte handlinger, som brugere og medarbejderes indgår i, da nye dette kan lede til nye innovationsmuligheder såsom at inspirere, legitimere og kvalificere et nyt produkt. Desuden viser analysen, at kilden til innovation opstår i interaktionen mellem brugere og medarbejdere, som påpeger vigtigheden af medarbejderen i brugerinvolveringen. Baseret på hovedresultaterne udvikler forfatterne en model til at arbejde med proces perspektivet i brugerinvolvering. Resultaterne vil være værdifulde for forskere såvel som for virksomhedsledere som kilde til at opnå dybdegående viden om brugerinvolveringsprocesser. Dette speciale tilføjer et originalt bidrag ved at foreslå et procesperspektiv på brugerinvolvering. 9

10 Foreword The thesis is a result of cooperation between students from two further educational institutions, Copenhagen Business School (CBS) and Roskilde University (RUC), representing two master study programs, Creative Business Processes and Business Administration and Economics. The specific requirements from both studies attempted to be met are: issue relevant to creative businesses (CBS) as well as issues relevant to management: innovation, institutional processes as well as reflected management (RUC). With the focus on reflected innovation management in creative companies the criteria should be met. Great sources of inspiration have been the thesis supervisors and their previous and current research. We will like to acknowledge the efforts of Andy Townsend, Ren Bin Lee, Anne Boye Vestergaard, Emanuel Gävert, Kirsten Rønne, Ali Arvanaghi, Trine Nygaard Hansen, Sigrid Bach Sørensen, Thomas Meilandt Mathiesen, Hanne Andersen, Sofie Marie Linde and Steen Rønne for their support in giving feedback and providing new perspectives. 10

11 List of tables Table 1: Applied theorists 28 Table 2: Overview of selected cases and key informants 48 Table 3: Three modes of user involvement 84 List of models Model 1: Project Design 21 Model 2: Sensemaking process 38 Model 3: Combination of theories 42 Model 4: Scale of degree of determination of social systems 54 Model 5: Actions in inspiring mode 71 Model 6: Actions in legitimising mode 77 Model 7: Actions in sensemaking mode 82 Model 8: Illustration of key findings for managers 95 11

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13 Chapter 1: Introduction 13

14 Introduction Motivation Reflecting the growing interest in user-driven innovation; we see how many companies have trust in users capability to innovate for them. For instance, in Toyota and Danske Bank, users are involved to voice their opinion or share ideas (www.toyota.com/whynotinnovate and By asking the users what they want, innovative ideas are generated for the companies. If you had asked the users what they wanted, they would have said faster horses, they would never have said, they wanted a car (Interview with Holger, 4: quoting Henry Ford 1905). To ensure needs are meet, it can seem rational to ask the users, however we wonder, if innovation is possible to control and logically derive from users opinions. As Henry Ford concluded, innovation did not occur by asking the users, what they wanted. A study (Kairos Future 2006) on women s television habits showed similar conclusion. When asking what the women watched, they answered news and documentaries, but when observing them, they actually spend most of their time watching soap operas. The discrepancy between users statements and actions indicates an importance of studying the users actions. We challenge the perspective that innovation is controlled and solved by asking the users. Driven by this curiosity, the purpose of this thesis is to find new ways to study and understand the phenomenon of user involvement by studying the actions taken by users and employees, when developing a new product. Hereby the thesis advances the understanding of innovation as a planned process reached by asking the users. Our contribution is relevant, because the complexities of the interactions process between users and employees still lacks research and will provide new insights to practitioners and researchers within the field of user involvement. The phenomenon of user involvement Theoretically, user involvement has been studied from various perspectives. User involvement caught innovation researchers interest due to the change of studying the different sources of innovation. Looking back at the roots of innovation theory, namely Schumpeter (1934) the source to innovation was dedicated to the 14

15 entrepreneur (Schumpeter 1934, 2003:8). Later innovation was acknowledged as stemming from labs such as research and development departments in companies (Fuglsang, 2008:11, Sundbo & Fuglsang, 2002:7) and subsequently the focus was dedicated to networks of multi actors as sources of innovation (e.g. Prahalad & Ramaswamy 2000 & 2004a, Chesbrough 2003, von Hippel 2005). According to Chesbrough, innovation shouldn t be limited to e.g. experts in R&D units, but rather originate from as many actors as possible such as customers, users, employees, suppliers, partners, universities, consultants and newly started companies: Open innovation means that valuable ideas can come from inside or outside the company and can go to the market from inside or outside the company as well (Chesbrough, 2003:43). In line with Chesbrough, we understand that different actors can contribute to innovation, though this thesis aims at taking a closer look at the user and employee interaction as a source of innovation. Although researchers have examined the subject of user involvement, little research has defined the concept of user involvement. Amongst few researchers Alam (2002) develops a framework with four key elements (objectives, stages, intensity, modes), which aims at helping service managers identifying a set of activities that should be undertaken in involving users in a new service development program (Alam, 2002:251). Besides studying the specific user activities at various stages of the development process, researchers have focused on the role of users as either passive or active in a new product development process. For instance, by studying the users as innovators with their peer communities or studying users as information providers for the company (e.g. Jeppesen 2004, von Hippel 1986, Franke & Shah 2003, Lüthje & Herstatt 2004). This dichotomy has also been advanced by acknowledging a third role; users as co-creators with the company (Kaulio 1998, Desouza et al. 2008, Blake 1984, Kristensson et al. 2004, Vargo & Lusch 2004). Desouza et al. (2008) has summarised the past studies of users in three roles: users as resources, users as innovators and users as co-producers, describing innovation as done for, by or with the users (Desouza et al., 2008:35,43). Moreover researchers have studied different ways of involving the user, where both physical and online spaces for instance can be utilised (Desouza et al., 2008:42-43, Kaulio, 1998:143, Blake, 1984:590, Risom, 2008:108, Jeppesen, 2004:19, Alam, 15

16 2002:255, Kristensson et al., 2008a: ). While the above-mentioned literature provides rich insights into who the users are and what they do when developing a new product, research on how the interaction between users and employees takes place still remains unexamined. Lack of theory on interaction between users and employees So far interaction between users and employees has mainly been studied by examining the value created and the outcome of this interaction (Prahalad and Ramaswamy, 2004a, Vargo & Lusch 2004, Kristensson, 2008:113). But a complete set of user involvement practices necessary to fully describe the systematic interactions between users and employees has not been studied (Fuglsang, 2008:12, Alam, 2002:252). Jon Sundbo asserts that an increasing emphasis on economic processes and politics has removed the focus from where innovation actually starts: innovation is a process that is carried out by people in interaction with people (Fuglsang, 2008:xiv). This gap demands a focus on sociological aspects more than solely economic. It is agreed with Sundbo, that there is a need for studying the social processes, and we are motivated to contribute to this movement of out-ofmainstream approaches to innovation. That is, returning to the original point of departure for innovation: to the changes in social behaviour through the study of the complex interaction processes between users and employees. Field of interest Building on the overall motivation and lack of research, two fields of interest have particular interest to this thesis: one regarding the challenges that user involvement pose to the creative industries 1 perspective of user involvement. and the other regarding the unexplored process User involvement challenges creative industries Innovation and creativity is the competitive advantage and core of the creative industries (Lampel et al., 2000:263). Other industries are also gravitating towards the combination of knowledge and creativity as sources to generate and sustain competitive advantage. Therefore, the dilemmas faced by the creative industries are 1 Creative industries are characterised by producing experience based products and have creative skilled employee. Further elaborations if found later in this chapter (clarifications of concepts). 16

17 increasingly relevant to a broad section of managers from all industries (Frederiksen, 2007:33). Along with the increasing individualisation, democratisation and demands for information; the creative industries are increasingly involving users in developing new products to maintain their competitive advantage (U-Build 2009). The increased interaction between user and creative industries introduces a dilemma often seen in the creative industries: demand analysis versus market construction. A dilemma between producing what the market wants (demand analysis) as opposed to constructing the market by producing what the creative industries believes the market needs (market construction) (Lampel et al., 2000:266). Involving the user (as representative of the market) questions whether the creative company will trade off its artistic autonomy in favour of a commercial demand? A trade-off that might have consequences for the products level of creativity. The threats that user involvement poses to the creative industries are distinctive and unexplored and have motivated the study of user involvement in creative companies. Unexplored process perspective on user involvement Despite the challenges that user involvement introduce to the creative industries, current research s lack of focus on interaction has motivated this thesis study of interaction between users and employees. Researchers mentioned earlier examine various ways to take advantage of this unexploited potential the users provide. But an underlying question remains unexplored: is it the users who provide an unexploited potential for innovation or is it in the interaction between user and employee where the source of innovation lies? Current research has a tendency to study the involvement of users from a unilateral point of view, understanding users as carriers of innovation (Kaulio 1998, Gruner & Homburg 2000). Process researchers (Hernes & Bakken 2006, Weick 1979, Whitehead 1929) contend that this assertion is inadequate because development of a product happens in a dialectic communicative process between user and employee. As Weick argues; causation is circular not linear and with this, a new perspective on innovation is suggested (Weick, 1979:86). The linear causation, which would study users as holders of innovative knowledge that can be accesses and exploited, is often taken for granted. This view results in the development of management tools on how managers can find and control the users involvement. We believe these tools undermine the complexities of user 17

18 involvement. This is why we want to explore user involvement from a process inspired perspective, examining different ways users and employees interact when developing a new product. Guided by this interest the research question is as follows. Research question How do users and employees interact when developing a new product? Project design Purpose and findings The aim is to understand the interaction between users and employees when developing a new product. Studying the interaction between users and employees; data showed sign of different ways to involve the users. Firstly, it is seen how specific users are involved to give inspiration to the employee. Secondly, users are involved to diffuse the reputation about the new product, and lastly it is observed how users are involved to qualify the new product. The three key differences are formulated as three modes of user involvement, which were further developed by the support of theory. The three modes of user involvement are: Inspiring mode, legitimising mode and sensemaking mode. Each mode is characterised by different actions taken by users and employees, illuminating how the interaction takes place when developing a new product. With the research question, managerial as well as theoretical considerations are addressed when involving users in developing new products. The audience addressed is researchers as well as practitioners dealing with the involvement of users. Approach Due to the exploratory character of the study, a qualitative multiple case study approach has been chosen based on four case companies from the creative industries: Arkitema (architecture), Fritz Hansen (furniture design), Kompan (toys and playgrounds) and Mutopia (architecture). Fourteen interviews of users and employees have been conducted, and they form the basis for a qualitative data analysis. 18

19 The theoretical framework consists of theory from different schools: lead user theory, theory on creative class (inspiring mode), institutional theory (legitimising mode) and process theory (sensemaking mode). Each theory is bringing relevant concepts to the analysis of the three modes and with the combination of these theories, they compose the theoretical frame for the qualitative data analysis. In the interplay between data and theory the three modes are developed. Reading guide Chapter 1: Introduction Firstly, theory on user involvement is reviewed to clarify the thesis interest area: lack of understanding how innovation is created in interaction between user and employee. Furthermore, two major problems in the interest area are presented; challenges of user involvement in creative industries and the process perspective as unexplored. In continuation of the field of interest, the research question is introduced aiming to provide insight about interaction between user and employee, when developing new products. Chapter 2: Theoretical framework Here the theoretical framework for investigating the interaction between users and employees is introduced. Process theory is introduced to constitute the analytical focus. Furthermore different theories are introduced to explain the modes and further applied in the data analysis. Lead user theory and theory on creative class are introduced to explain the inspiring mode, institutional theory (legitimising mode) and process theory (sensemaking mode), respectively represented by Eric von Hippel, Richard Florida, Cathryn Johnson et al. and Karl Weick. Chapter 3: Research method In this chapter the choices regarding the case study method is reasoned. Furthermore, the data collection and reduction are argued as well as the selection of the thesis analytic focus. Chapter 4: Creative industries and case descriptions In fourth chapter data on creative industries are presented and in particular the architecture, furniture and toys/playgrounds lines of businesses. Furthermore the four 19

20 creative companies Arkitema, Fritz Hansen, Kompan and Mutopia are introduced e.g. to get an understanding about their specific projects with user involvement. Chapter 5: Data analysis Answering the research question, three modes of user involvement become apparent: inspiring, legitimising and sensemaking. The three modes of user involvement are constructed by different actions taken by the user and employee, when developing a new product. Chapter 6: Key findings The key findings of the data analysis are briefly presented, and propositions are developed. Chapter 7: Discussion The key findings as well as the theoretical and managerial implications are discussed. Chapter 8: Conclusion In the conclusion, the key findings of the data analysis are viewed in relation to the research question. Chapter 9: Limitations and further research The limitations of the thesis are outlined, and recommendations are given for further research. Chapter 10: Thesis in retrospect In this chapter the relation between theory, method and empirical data are evaluated. Furthermore the thesis is evaluated against criteria of good theory construction and criteria of trustworthy data. Moreover the process of the thesis is reflected upon. Chapter 11: Perspective Finally, the findings of the data point to a new understanding of user involvement, which is briefly introduced. 20

21 Model 1: Project design Chapter 1-4 Introduction: Process perspective on user involvement in creative companies Overall research question and project design Theoretical position Methodical choices Empirical background Contribution to research question with three modes of user involvement Chapter 5 Inspiring mode Legitimising mode Sensemaking mode Analysis of key actions taken by users and employees Analysis of key actions taken by users and employees Analysis of key actions taken by users and employees Chapter 6-11 Discussion and conclusion Key findings summarised and their implications for both theory and management discussed General research question answered and additional limitations are discussed and suggestions for future research Retrospective thoughts and further perspective discussed Clarification of concepts In this paragraph central concepts are clarified that will be used throughout the thesis: creative industries, user and user involvement, employee, innovation and creativity, developing a new product and mode. Creative industries Creative industries are industries that exploit intellectual property by producing experience based products, and which have creative skilled employees (Caves 2000, Hesmondhalgh 2007). Also defined as those industries which have their origin in individual creativity, skill and talent and which have a potential for wealth and job creation through the generation and exploitation of intellectual property (Cunningham, 2003:1). In particular, this thesis concentrates on architecture, furniture design and toys/playgrounds as lines of businesses. More elaboration on the creative industries will be presented in chapter 4 (Data on industry and case descriptions). 21

22 User and user involvement A user can be end-user or customer. In one of the cases, the interviewed children are the users, but their parents or public institutions are the customers. In other cases the user is the customer who purchases the product. Therefore the common term user is used. User involvement is defined as a mechanism happening mostly on the organizational level, where people (here employees) can involve others (here users) in an exchange of experiences and considerations of workable ideas (Fuglsang, 2008:3). Employee When referring to employees, the thesis relates to the central actors from the case company, who interact with the user when developing a new product. The employees are often managers, designers, architects or external project leaders depending on the case. Innovation and creativity Innovation is understood as change that can happen in different ways. For instance change in things, which an organization offers (product innovation), in ways in which they are created and delivered (process innovation), in context in which the products/services are introduced (position innovation) or change in underlying mental models, which frame what the company does (paradigm innovation) (Bessant et al., 2005:10). Rather than seeing innovation from one particular point, it is acknowledged that innovation can change in several forms (product-, process-, position and paradigm innovation) and take place in various contexts among many actors. With an understanding of innovation as an interactive process that is socially distributed and that involves a multitude of changing actors (Fuglsang, 2008:34), this thesis focuses on developing a product innovation through the interaction between users and employees. Innovation often consists of two processes, such as creativity and innovation (Amabile 1996, Fuglsang 2008:6). This means that innovation has two integrated processes: creating new ideas and implementing the ideas. For instance, Amabile defines innovation as the successful implementation of creative ideas within an organization (Fuglsang, 2008:6). 22

23 Developing a new product When referring to developing a new product, the previous definition of a product innovation is applicable. The term new product development (NPD) is recognised, but not usable, because the thesis aims to challenge the linear process of NPD with a more fluid process perspective. Literature on NPD often focuses on the transformation a product takes from idea to a final product and emphasizes various stages of the new product development (Rainey 2005, Kaulio 1998, Gruner & Homburg 2000). A linear view on innovation is something, which can be controlled and planned according to stages as opposed to a flow of actions. Mode A mode is used to describe a set of strategic actions, which can guide a company in how to involve users. A mode has an overall objective as well as a set of strategic actions, and a company might follow different modes (inspired by Fuglsang & Sundbo 2005). 23

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25 Chapter 2: Theoretical framework 25

26 Theoretical framework Recognising that our knowledge is built on theory, this chapter clarifies the thesis s theoretical position. Firstly, process theory is introduced to define the thesis s analytical focus. Secondly, a theory combination of leader user and creative class theory, institutional theory and process theory is presented to explain main concepts reflected in the three modes of user involvement. Analytical focus: Process theory Process theory has inspired the thesis analytical focus on actions taken by actors in an interaction process. An introduction to process theory, its main theorists and perspectives will be presented in the following. The aim of process researchers and in particular Hernes (2006, 2007, 2008) and Weick (1979) is to study organisational processes and the fluid nature of the world as opposed to studying entities such as organisational rules, norms, strategies that reflect the stability of the world. Process researchers assert that by studying organisations as fluid processes it is possible to fully describe, how meaning is created. Examining process as the locus of meaning creation introduces a new ontological view, which challenges what the process researchers call the traditional view. In the traditional ontological view, which Hernes claims is the weaker view, actors are seen as existing ontologically prior to the processes they engage in; they give shape to processes, while remaining intact throughout their participation in the processes (Hernes & Bakken, 2006:1600). This explains a unilateral causation, where actors can enter an interaction, affect it and leave intact. This view appreciates stability and categorises processes as entities in order to make sense of an ever-changing world (Hernes & Bakken, 2006:1602). An opposite ontological view, named the stronger view, understands actors as products of processes rather than existing prior to them (Hernes & Bakken, 2006:1600). According Hernes, a process is forming its entities and not the other way around. That is, processes are seen as the starting point of analysis, being central to change and meaning creation. 26

27 Meaning creation in process theory Hernes contends that process is moving in the sense of flow: a movement from one construction to another. Movement but should be understood as an abstract term such as activity, information, as well as the passing of time (Hernes & Bakken, 2006:1600). Additionally, Weick (1979) has suggested using more verbs (reflecting action) than nouns (reflecting stability) as means of coming to grips with the fluid nature of the world. Weick explains the term process with the verb organising, stressing its dynamic character: I would argue that organizing lies atop that movement between the intersubjective and the generically subjective. By that I mean that organizing is a mixture of vivid, unique intersubjective understandings and understandings that can be picked up, perpetuated, and enlarged by people (Weick, 1995:72). Viewing everything as dynamic can though lead to everything and nothing. Therefore Weick addresses process as a fluctuation between the interpersonal communication (intersubjective understandings) and the structural level (generic subjectivity, describing structures, rules, strategies etc.), which in the end constitutes a meaning creation. A practical example of the fluctuation between intersubjectivity and generic subjectivity could be a new strategy introduction in a company. As the new strategy (generic subjectivity) begins to take hold, the actors communication (intersubjectivity) also changes, in order to make sense of the new strategy. That is, the actors give sense to the new strategy. In continuation of Weick, Whitehead argues that noun making is necessary for human sensemaking, because actors are incapable of thinking purely in terms of process. (Hernes & Bakken, 2006:1601). Thereby Whitehead calls attention to the formation of both verbs and nouns. How verbs shape nouns and vice versa. Inspired by mentioned perspectives, process theory has influenced the thesis analytical focus on user and employee interaction by highlighting the importance of analysing actions (verbs). Here, actions are understood as a result of the dialectic process between verbs and nouns (intersubjectivity and generic subjectivity) (Weick, 1995:71, Hernes & Bakken, 2006:1608). The process perspective is applied, because it interplays with the data as well as it enables us to study user and employee interaction from a new angle not seen in current research. Our process perspective on user involvement is further elaborated upon in chapter 3 (Research 27

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