Innovativeness & Interaction: Conceptual Research Approach Maria M. Smirnova Sergey P. Kouchtch GSOM Saint Petersburg

Structure of presentation Aims of the study Main drivers of innovations & interactions research Conceptual model considerations Some empirical evidence Propositions for future research Conclusion

Research motivation Main aim – development of a conceptual model for an empirical qualitative study on innovativeness in buyer-supplier interaction and value creation networks Theoretic motivation – searching for integration of overall marketing and interaction frameworks to study innovation processes Empirical motivation – contradictions in Russian business practice

Overall marketing perspective Inputs Environmental challenges (technological turbulence, market turbulence) Competitive pressure Superior resources & capabilities Customer needs Outcomes SCA-perspective and positional advantage creation Performance outcomes

Positional advantage creation model adaptation (Day, Wensley, 1988) Sources of advantage Positional advantage Performance outcomes Marketing capabilities Innovation capabilities SCM capabilities Networking capabilities Superior value for customer Lower costs Differentiation Advantage Speed of reaction Optimized quality of interaction Profit Sales Customer Satisfaction New product success Adaptability

Internal advantages creating market orientation in firm-supplier interaction creation of relational norms and frames for relationships governance providing internal marketing mechanisms and interfunctional coordination evaluation techniques and feedback from customers NPD process coordination network effects

Interaction perspective “No business is an island” (Håkansson, Snehota, 1989) Complementary assets & capabilities ARA framework From value chain to value network & value system creation Preconditions for cooperative innovation –Relationship history –Relationship quality –Shared values and goals alignment

IMP research: innovation perspective Main IMP papers topics overview: –Collaborative innovations –Innovations in networks –Transparency of value creation –Value innovation –Innovation networks/Strategic networks/Commercialization networks –Supply chain innovation –Organizational innovation capability –Customer perceived value

Conceptual scheme of analysis Type of interaction –Trust, commitment created –Social embeddedness, reputation –Existing relational capital or network effects Resources & Capabilities –Value creation potential –Knowledge sharing –Actors-resources–activities framework Matching potential –Aims alignment –Access to resources, markets, –Lots vs short term

Type of interaction Potential sources of advantage Type of innovation Potential outcomes Conceptual scheme of analysis

Strategic Network Innovations Network Commercialization Network Dyadic interaction product innovation process innovation Creation of competitive advantage Better adaptation & flexibility Better use of resources Preconditions Resources & capabilities Matching potential Reduced uncertainty New markets entrance Customer Supplier Value chain advantage Business model advantage

Research context: some empirical findings from SCM study 2006 Results of a round table on Purchasing Strategy & SCM in Russia (June 2007) –Innovations – main sources of competitive advantage –Innovative collaboration with suppliers – key aims in supplier relationships development –High emphasis on innovativeness of strategy Results of an empirical study 2006 –Very low emphasis on innovations –Innovations as part of supplier interaction process –Assessment of R&D department involvement in SCM

Preconditions Type of interaction (research context): –Dyadic Key supplier relationship Type of product ( 5-point Likert scale ) Unique product – 2,82 (out of 5) Innovative product – 2,69 New products success Number of new products (3,60) Time-to-market (3,38) New products success (3,58) Readiness for R&D outsourcing Current (1,85), future (1,97)

Preconditions (cont.) Technology turbulence Mean = 3.3 (5-point Likert scale) –Technology-based market opportunities (3,61) Speed of technology changes (3,28) –Probability of new product development in industry (3,26) –Technology trend forecast-ability (3,14)

Potential sources of advantage –Integration potential – similar motivation, interest in joint efforts –Knowledge creation & knowledge sharing Main aims of the companies in the field of supply and strategic purchasing: –Joint R&D: 11 th position in priorities, relevant for 11,8% if firms in a sample #1 – cost reduction #2 – creation of long-term supplier relationships #3 – delivery time reduction

R&D involvement in purchasing process Purchasing process involvement Finance R&D Product planning Production Top management Marketing Accounting Legal consulting Security dept Customs dept End user

Marketing-Purchasing integration outcomes Report to Marketing director Aim – time-to- market reduction Sales-purchasing integration Yes (n=14) No (n=185) Yes (n=82) No (n=124) Yes (n=96) No (n=103) R&D Involvement **2.72** Integration capabilities ***2.65***2.96**2.57** Customer oriented integration *2.59* Scores range from 1 (not involved at all) to 5 (always involved) * p<.001 ** p<.005 ***p<.05

Sources of advantage: matching potential Main future priorities for supply chain development% Development of supplier relationships 87,4 Improvement of operational effectiveness 64,3 Development of business processes 46,4 Personnel trainings and education 44,0 Time-management 28,0 R&D integration 17,4 Outsourcing 9,2

Sources of advantage: matching potential Top priorities in supplier relationships development: #1 Quality of products & services (4,78 out of 5) #2 Profit as relationship outcome (4,54) #3 Cost reduction (4,51) #4 Trust (4,35) –… #10 Strategic perspectives of interaction (4,06) #15 Innovation potential of supplier (3,40)

Sources of advantage: additional value and innovation sources Item (5-point Likert scale) Mean Additional market information 3,63 Additional professional knowledge & skills 3,32 Suggestions on improvements of business processes 2,82 Additional technical knowledge 3,60

Sources of advantage: resources & capabilities Item (5-point Likert scale) Mean Suppliers influence value creation 2,81 Suppliers provide our company with new technologies and new ideas 2,70 Better conditions for suppliers with new products 2,60 Suppliers are involved in R&D processes 1,93

Type of innovation & potential outcomes Type of innovation: –Process innovation – in research context of supplier relationships Emphasis on improvement of operational effectiveness –Time management –Reduction of delivery time Potential advantages addressed in the study –Strategic –Customer-oriented

New Product SuccessPerformance Diff. Advantage R&D oriented0,0970,1210,113 Oriented on suppliers with innovation potential0,167**0,223**0,193** Supplier collaboration SUPINN0,229*0,220*0,219** SUPCUST0,293*0,204**0,225* SUPLONG0,279*0,257*0,288* Value created & perceived INNVALUE0,199**0,244*0,156** Functions involved in purchasing process USER0,197**0,163**0,188** MARKET0,254*0,142**0,213** RD0,1140,143**0,172**

Joint function execution Responsibility Now Future CSJCSJ Rationalization of processes49,55,644,931,67,860,6 Creation of supportive IS22,712,764,68,212,679,2 Market research52,18,938,934,48,956,8 R&D27,413,159,415,59,974,6 Customer satisfaction monitoring60,95,733,338,98,452,6 Calculation system improvement32,14,163,818,73,677,7 TQM system introduction38,013,048,925,113,761,2 JIT system introduction17,719,363,06,224,469,4

Joint functions execution-outcome relationship New product success – n.s. Differentiation – n.s. Performance: –Joint problem solution – performance –Joint R&D – performance Maybe problem because of the single item measurement of function’s involvement.

Conclusions 1.Two perspectives can be integrated to study innovation processes –Overall creation of SCA: link between marketing and purchasing to enhance innovations –Innovations as result of previous relationships experience and matching potential 2.Integration of both approaches can provide a basis for a longitudinal study 3.Presented empirical results are taken from a study not developed to measure innovativeness, nevertheless the results show: –Contradiction between qualitative and quantitative study results (round table and survey); –Some attempts to build an innovative collaboration; –Potential for further research using SEM methodology.