Connecting technological

capabilities with market needs

using a cyclic innovation model
Guus Berkhout, Dap Hartmann and Paul Trott
Faculty of Technology, Policy & Management, Section of Technology Strategy &
Entrepreneurship, Delft University of Technology, Jaffalaan 5, 2628 BX Delft, PO Box 5015, 2600
GA Delft, The Netherlands. p.trott@tudelft.nl; l.hartmann@tudelft.nl; a.j.berkhout@tudelft.nl

One of the key limitations of current models of innovation is that they still represent variations
on the familiar pipeline architecture. In addition, they are not embedded in the strategic issues
of company boards and therefore remain isolated entities. Equally, the activity of entrepre-
neurship, while long recognized as a key factor in firm innovation management, is not captured
and is inadvertently understated or only implied at best. We find that there is incongruence
between current theoretical models and innovation practice. We offer a socio-technical
framework that replaces the family of linear concepts by a cyclic alternative. It combines
hard and soft sciences, bridges research and development and marketing communities and
helps firms and policy makers to better understand the iterative nature of the innovation
process.

1. Introduction
I n a recent article in this journal, Howells (2008)
discusses some of the key developments that
are currently affecting research and development
(R&D) activity (see also Coombs and Georghiou,
2002). He identifies the following changing dy-
namics of R&D:
(1) The increasingly distributed and open nature
of networked research and innovation;
(2) The growth of externally sourced R&D (and
as a consequence, the relative decline in internally
generated R&D) within firms;
(3) Overcoming barriers towards the increased
productivity and effectiveness of R&D;
(4) The continued globalization of R&D, parti-
cularly in terms of its spread and reach, associated
with R&D offshoring;
(5) The relative shift from manufacturing-centred
R&D towards more service-orientated R&D.
It would seem that the challenges that lay
ahead for R&D will be as significant as those
that have been faced in the past. Many of us who
have been studying innovation and how firms
manage this process have to accept that, despite
our best efforts, beyond R&D laboratories inno-
vation remains poorly understood. This view is
confirmed by Coombs and Georghiou (2002). If
we are objective and honest with ourselves, the
linear model of innovation from scientific discov-
ery to commercialization in the market still dom-
inates thinking, not just with the general public
but also within board rooms and government
policy making departments across our nations.
Moreover, this misunderstanding extends beyond
the linearity of the process to the characterization
of it. For example, there remains a strong belief
that innovation is fuelled by serendipity and that
R&D departments are freewheeling places of
artistic disorder. Yet, in the large industrialized

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 Connecting technological capabilities with market needs using CIM
firm where R&D is institutionalized, it is fully
recognized that invention and creativity emerge
from the routine of R&D, and innovation follows
under management instruction and control (Pear-
son, 1983). This is not only merely understood
but also is a requirement. For when firms such as
Siemens spend annually in excess of $5 billion on
R&D, their shareholders would rightly expect
that this investment is closely managed and its
activities monitored. Moreover, a decent return
on these R&D investments is expected. Indeed,
Alan Pearson noted in a review of 12 years of
R&D Management that ‘investment in R&D
must be looked at in the same way as any other
investment in the business- the benefits it pro-
duces must exceed the costs’ (Pearson, 1983).
This is very different from what many outside
of the ‘innovation and R&D management world’
see and understand by innovation. Their under-
standing is characterized by a less-ordered, chao-
tic and yet abundantly creative activity with little
routine, proceeding to a more orderly process
where ideas are taken and moulded into products
by engineers, while marketing educates and in-
forms the public why they need these new pro-
ducts. This, as all students of innovation know, is
the linear technology push model of innovation.
Despite the key R&D challenges spelt out by
Howells (2008) – especially points 1 and 2 –
beyond the R&D laboratories, firms and policy
makers seem locked into old thinking. The past
should inform and enable us to develop research
questions for the future. It is from this standpoint
that a comparative historical analysis of innova-
tive firms seems necessary to enhance our under-
standing. Theory is by definition a simplification
(abstraction) of reality, and simplification is ne-
cessary and helpful in order to make sense of
history (Penrose, 1959). If we need theory to
make sense of history, so we need history to
make sense of theory. It is therefore timely to
revisit Roy Rothwell’s (1992) seminal article on
models of innovation wherein he noted that in the
5th generation model, innovation is becoming
faster; it increasingly involves inter-company net-
working; and it employs a new electronic toolkit
(expert systems and simulation modelling).
New conceptual thinking is required if we are
to help inform policy makers and other groups
beyond the R&D laboratory. This paper chal-
lenges the current theory by identifying limita-
tions of past models and schools of thought, and
uses these to develop a more realistic and effective
model of firm innovation. Section 1 reviews the
development of theory and models of innovation.
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Section 2 examines the context of industrial
R&D. The final section reconceptualizes firm
innovation and offers a non-linear framework
that may help firms and policy makers better
understand how innovation occurs in practice.
Firms will benefit from better insights into the
dynamics between technological research, pro-
duct development and market transitions while
policy makers, who are responsible for the gov-
ernance of the economy and therefore an integral
part of the innovation cycle, will be able to base
their decisions on the insights gained from the
other actors.
2. A review of models of innovation
The fundamental question for innovation re-
search is to explain how firms develop innovative
solutions in the form of products, processes and
services. For many years, this was seen as im-
possible to carry out; indeed, it was viewed as a
random phenomenon or ‘manna from heaven’. In
his early works, Joseph Schumpeter (1934) re-
jected this view and argued that innovation had
three main aspects:
(i) A high level of uncertainty;
(ii) The need to move quickly, to reap potential
economic reward;
(iii) Recognizing the inherent resistance to new
things.
This early view of innovation is sometimes
referred to as Schumpeter Mark I. At this stage,
there is a clear emphasis and recognition of the
need of the entrepreneur to fight numerous bat-
tles: the battle to get investors to secure their
backing; the battle with competitors; and the
battle to convince equivocal customers. Signifi-
cantly, as models of innovation have developed
over the twentieth century, the need to fight and
battle seems to have been overshadowed by a
growing list of factors deemed necessary for
innovation to occur (Rothwell, 1992; Van der
Panne et al., 2003). However, this misses the point
about the human involvement and in particular
the dynamic and crucial role of the entrepreneur.
This paper illustrates that firm innovation success
today continues to be dependent on the battling
activities of the entrepreneur, and these need to be
central in any model of firm innovation.
Today, we recognize how different theoretical
perspectives can shed light on different aspects of
firm innovation, and hence the growth in cross-
disciplinary approaches to the study of innovation.
R&D Management 40, 5, 2010 475
Guus Berkhout, Dap Hartmann and Paul Trott
[Evidence of this is provided by the research
undertaken over the past 30 years at the Science
Policy Research Unit (SPRU)]. In terms of devel-
oping understanding at the level of the firm, it is
the research activities of business schools around
the world that have developed understanding
here. Manchester Business School and the pio-
neering work of Alan Pearson in the 1970s
deserve special mention here. Traditional eco-
nomics treated innovation as an activity that
had inputs and outputs, and it was these that
formed the basis of their studies. Hence, the focus
is on investment, allocation of resources, patents
and profits – all easily quantifiable attributes. This
also reflected the necessity of the discipline to
measure things (anything, really) so that equa-
tions and statistics can be applied. Statisticians
asked ‘what is research?’ A simple answer was not
easily found. Indeed, until the 1960s there were
some liberal interpretations by firms and govern-
ments as they attempted to assess how much
money to spend on R&D and what was its
impact. In 1963, industrialized countries followed
the US National Science Foundation and adopted
the Frascati manual, which offered helpful defini-
tions to facilitate measurements of science and
technology (Godin, 2003).
In Europe and North America, industrialists in
the 1910s and 1920s were convinced of the in-
calculable value of the progress of pure science
(Carty, 1924). It was US economists and policy
makers after the Second World War who were
largely responsible for the linear model of science
and innovation. This was because statisticians
had to measure research spending and this led
to the categorization of science and research (see
also Bush, 1945). Since then, largely because of its
simplicity, this model has taken a firm grip on
people’s views on how innovation occurs. Indeed,
it dominated the science and industrial policy for
40 years. With regard to its merits, the linear
model is based on the assumption that innovation
Figure 1. Conceptual chain of knowledge flows within innovation.
476 R&D Management 40, 5, 2010
is merely applied science. It is linear because there
is a well-defined set of stages that innovations are
assumed to pass through. Indeed, even the so-
called ‘open innovation’ model of innovation
(Chesbrough, 2003) essentially characterizes a
linear process from R&D to marketing. It pre-
sents the innovation process as a funnel that
begins with scientific research and progresses
linearly via technological and product develop-
ment to the market. It is because of its simplicity
that Open Innovation has been so readily em-
braced by firms in the R&D community (see Trott
and Hartmann, 2009 for a more detailed discus-
sion). The problem with this view is that it
generalizes a chain of causation that only holds
for a minority of innovations. And it ignores the
many feedback loops that occur between the
various stages of the process (Kline and Rosen-
berg, 1986). It was only in the 1980s that manage-
ment schools around the world seriously began to
challenge the sequential linear process. The re-
cognition that innovation occurs through the
interaction of the science base (dominated by
universities and industry), technological develop-
ment (dominated by R&D-intensive industry) and
the needs of the market (dominated by innovative
firms) was a significant step forward (see Figure
1). The explanation of the interaction of these
activities forms the basis of models of innovation
today. There is, of course, much debate and
disagreement about precisely which activities in-
fluence innovation and more importantly, the
internal processes that affect a company’s ability
to innovate.
Nonetheless, there is broad agreement that it is
the linkages between these key components that
will produce successful innovation. From a Eur-
opean perspective, an area that requires particular
attention is the linkage between the science base
and technological development. The European
Union (EU) believes that, compared with the
United States, European universities have not
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 Connecting technological capabilities with market needs using CIM
established effective links with industry, whereas
in the US universities have been working closely
with the industry for many years1 (Miyata, 2003).
There are two basic variations of the linear
model for product innovation. First, and most
crudely, there is the technology-driven model and
second the customer ‘need-driven’ model that
emphasizes the role of marketing, as an initiator
of new ideas as a result of close interactions with
customers (von Hippel, 1978). While the first can
be applied to a few cases, most notably in tech-
nology-intensive industries such as the pharma-
ceutical industry (where a cure for an ailment is
very likely to have a market), it is not applicable
in many other instances. These models concen-
trate on what is driving the downstream efforts
rather than on how innovations occur (Galbraith,
1982). Hence, the linear model is only able to
offer an explanation of where the initial stimulus
for innovation was born. Mostly, the future is
unknown – some firms will prosper, others will
not. In virtually all areas of business, it is not
always clear who are the players in the innovation
race. Very often contenders will emerge from the
most unexpected places. Furthermore, companies
frequently find themselves in a race without
knowing where the starting and finishing lines
are. Even when some of these are known, com-
panies often start out with the aim of becoming a
leader and end up being a follower (Pavitt et al.,
1991).
The interactive model develops this idea further
and links the technology push and market pull
models of innovation (Rothwell and Zegveld,
1985; Sundbo, 2002). It emphasizes that innova-
tions occur as the result of the interaction of the
market place, the science base and the organiza-
tion’s capabilities. Like the coupling model, there
is no explicit starting point. The use of information
flows is used to explain how innovations transpire
and that they can arise from a wide variety of
points. While still oversimplified, it is a more
comprehensive representation of the innovation
process. It can be regarded as a logically sequen-
tial, although not necessarily a continuous process
that can be divided into a series of functionally
distinct but interacting and interdependent stages
(Rothwell and Zegveld, 1985). The overall innova-
tion process can be thought of as a complex set of
communication paths whereby knowledge is trans-
ferred. These paths include internal and external
linkages. The generation of ideas is shown to be
dependent upon inputs from three basic compo-
nents (as outlined in Figure 1): organization cap-
abilities, the needs of the market place and the
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science and technology base (Bessant et al., 2000;
Katz, 2003).
The preceding discussions have shown that
innovation is not a singular event, but a series
of activities that are linked in some way to the
others. This may be described as a process and
involves (Kelly and Kranzberg, 1978):
(i) A response to either a need or an opportunity
that is context dependent;
(ii) A creative effort and if successful, results in
the introduction of novelty; and
(iii) The need for further changes.
The recognized complexity of the innovation
process not only makes it difficult to manage,
explain and study but also presents problems for
the development of a generalized model. Saren
(1984) argued that the absence of a definitive
model compounds the problems of semantics
and definitions when discussing innovation. In
his review of models of innovation, he put for-
ward a taxonomy of different types of innovation
models: (a) Departmental-stage models; (b) Ac-
tivity-stage models; (c) Decision-stage models; (d)
Conversion process models; and (e) Response
models.
Innovation has been described as an informa-
tion-creation process that arises out of social
interaction. In effect, the firm provides a structure
within which the creative process is located (Non-
aka and Kenney, 1991). These interactions pro-
vide the opportunity for thoughts, potential ideas
and views to be shared and exchanged. A great
deal of technical skill is based on know-how and
much industrial innovation occurs through on-
the-spot experiments – a kind of action-oriented
research with ad hoc modifications during step-
by-step processes, through which existing reper-
toires are extended. Such knowledge can only be
learned through practice and experience where
the creation of new knowledge within an organi-
zation depends on tapping the tacit and often
highly subjective insights, intuitions and hunches
of individual employees and making those in-
sights available for testing and use by the organi-
zation as a whole (Nonaka and Kenney, 1991).
This implies that certain knowledge and skills,
embodied in the term ‘know-how’, are not easily
understood and moreover, less able to be com-
municated. The recognition of the value of inter-
actions to facilitate the innovation process
emphasized the significance of networks in the
innovation process, which led to the development
of network models of innovations (Nonaka and
Takeuchi, 1995).
R&D Management 40, 5, 2010 477
Guus Berkhout, Dap Hartmann and Paul Trott
Roy Rothwell (1992) reviewed the factors that
affect innovation and put forward the notion of a
fifth-generation model of innovation that was
based on observations that innovation was be-
coming faster; it increasingly involved inter-com-
pany networking; and it used a variety of new
technologies (expert systems and simulation mod-
elling). This he argued was replacing the fourth-
generation innovation process, which itself had
marked a shift from perceptions of innovation as
a strictly sequential process to innovation per-
ceived as a largely parallel process. This shift
owed much to observations, at that time, of
innovation processes in leading Japanese corpora-
tions (see Nonaka and Kenney, 1991; Nonaka
and Takeuchi, 1995). More recently, an attempt
has been made to pull together different but
related areas of research, namely the innovation
theory of the firm, the resource based-view and
the complexity theory. It introduces the theore-
tical framework of Total Innovation Manage-
ment, and presents a tri-dimensional innovation
strategy model (Xu et al., 2007).
It is clear that the innovation process is com-
plex and full of uncertainties, which combine to
make innovation a risky investment. But, the
level of risk correlates to the level of improve-
ment or change required. Scientists and engineers
know that they can improve the performance of
virtually all existing products. The difficulty lies
in the cost of achieving this improvement and
also whether the market is willing to pay for this
improvement. Furthermore, the process is de-
pendent on information and knowledge flows,
and it is this concept in particular that is a
cornerstone of all models of innovation (see
Adams et al., 2006), and is applicable to large
and small firms alike (Berry and Taggart, 1994).
In a major review of the literature in this journal,
Hidalgo and Albors (2008) review the scope,
trends and major actors (firms, organizations,
government, consultants, academia, etc.) in the
development and use of methods to manage
innovation in a knowledge-driven economy,
and confirm that today knowledge plays a crucial
role in fostering innovation in a social network
theory of innovation.
3. Industrial R&D
One of the most important influences on innova-
tion seems to be industrial R&D. After all, during
the Second World War, military R&D had pro-
duced significant technological advances and in-
478 R&D Management 40, 5, 2010
novations, including radar, rocket technology and
new weapons. A period of rapid growth in ex-
penditure by countries on R&D was to follow.
But economists soon found that there was no
direct correlation between R&D spending and
national rates of economic growth. It was clear
that the linkages were more complex than first
thought. There was a need to understand how
science and technology affected the economic
system. The neo-classical economics approach
had not offered any explanations. A series of
studies of innovation were undertaken in the
1950s, which concentrated on the internal char-
acteristics of the innovation process within the
economy. A feature of these studies was that they
adopted a cross-discipline approach, incorporat-
ing economics, organizational behaviour and
business and management. These studies looked
at:
(i) The generation of new knowledge;
(ii) The application of this knowledge in the
development of products and processes; and
(iii) The commercial exploitation of these pro-
ducts and services in terms of financial income
generation.
In particular, these studies revealed that firms
behave differently (see Carter and Williams, 1959;
Simon, 1957; Woodward, 1965). This led to the
development of a new theoretical framework that
attempted to understand how firms managed the
above, and why some firms appeared to be more
successful than others. Later studies in the 1960s
were to confirm these initial findings and uncover
significant differences in organizational character-
istics (Burns and Stalker, 1961; Cyert and March,
1963; Myers and Marquis, 1969). Hence, the new
framework placed more emphasis on the firm and
its internal activities than had been the case
previously. The firm and how it used its resources
were now seen as the key influence on innovation.
Schumpeter first argued that modern firms
equipped with R&D laboratories have become
the central innovative actors. Since his work,
others have contributed to the debate (Chandler,
1962; Nelson and Winter, 1982; Cohen and Le-
vinthal, 1990; Pavitt, 1990; Prahalad and Hamel,
1990; Patel and Pavitt, 2000). Success in the
future, as in the past, will surely lie in the ability
to acquire and utilize knowledge and apply this to
the development of new products. Uncovering
how to do this remains one of today’s most
pressing management problems.
In their study of the US manufacturing sector,
Cohen and Levinthal (1990) reconceptualize the
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 Connecting technological capabilities with market needs using CIM
traditional role of R&D investment, which was
viewed simply as a factor aimed at creating
specific innovations. They see R&D expenditure
as an investment in an organization’s absorptive
capacity. They argue that an organization’s abil-
ity to evaluate and utilize external knowledge is
related to its prior knowledge and expertise, and
that this prior knowledge is, in turn, driven by
prior R&D investment. The point here is that
over long periods of time organizations build up a
body of knowledge and skills through experience
and learning-by-doing (Teece, 1986). In addition
to these internal organizational processes, Kay
(1993) suggests that the external linkages that a
company has developed over time and the invest-
ment in this network of relationships (generated
from its past activities) form a distinctive compe-
titive capability. Moreover, this can be trans-
formed into competitive advantage when added
to additional distinctive capabilities such as tech-
nological ability and marketing knowledge (Cas-
per and Whitley, 2003).
3.1. Firm characteristics that facilitate the
innovation process
The innovation process, outlined in the previous
sections, identified its complex nature. It also
emphasized the need to view innovation within
the context of the organization. In a recent study
examining the relationship involving innovation
stimulus, innovation capacity and innovation
performance, Prajogo and Ahmed (2006) found
that there was a strong relationship between
innovation stimulus and innovation capacity
and a strong relationship between innovation
capacity and innovation performance. The find-
ings did not find any direct relationship between
innovation stimulus and innovation performance.
The implications of this for firms are clear: if firms
wish to improve innovation performance, they
first need to put in place and then develop
processes that stimulate innovation such as ap-
propriate leadership, R&D and creativity. Within
such an environment, the nurturing and building
of innovation capacity can then occur. Prajogo
and Ahmed (2006) argue that Innovation Capa-
city is the combination of technological and hu-
man factors. In other words, having good science
and laboratories is necessary but insufficient. In
addition, effective intangible skills are required
such as project management, innovative experi-
ence and risk management. For example, Prajogo
and Sohal (2006) found in a study of Australian
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firms that TQM used within R&D management
can help to improve innovative performance.
Armed with this information, the challenge for
firms remains immense. Putting in place the
necessary stimulus and then nurturing capacity
may sound straightforward, but what does this
mean? A major review of the innovation manage-
ment literature by Van der Panne et al. (2003)
provides us with some of the answers. This
research examined factors that contribute to the
success and failure of innovative projects within
firms and this is classified into four major groups:
(i) Firm-related factors;
(ii) Project-related factors;
(iii) Product-related factors; and
(iv) Market-related factors.
Marketing can provide the necessary informa-
tion and knowledge required by the firm to ensure
the successful development of innovative new
products and the successful acceptance and diffu-
sion of new products. In both cases, it is usually
the insights with respect to understanding poten-
tial customers that marketing supplies. Uncover-
ing and understanding these insights are where
effective marketing is extremely valuable. The
deep insights necessary for truly innovative pro-
ducts require great skill as much of the informa-
tion gained from customers for such products
needs to be ignored (Veryzer, 2003). Research
within marketing has shown for many years that
gaining valuable insight from consumers about
innovative new market offerings, especially dis-
continuous new products, is extremely difficult
and can sometimes lead to misleading informa-
tion (Veryzer, 2003; King, 1985; Tauber, 1974;
Martin, 1995; Hamel and Prahalad, 1994). The
greater uncertainties involved with discontinuous
innovations demand both insight and foresight
from firms. Advanced technology presents signif-
icant technical and market uncertainty, especially
when the technology is emerging and industry
standards have yet to be established. Appreciating
and understanding the potential new technology
and uncovering what the market will and will not
embrace are a key challenge for marketing. In-
deed, bridging the technology uncertainty and the
market need is critical for any commercially
viable new product.
Highly innovative or discontinuous new pro-
ducts are particularly demanding in terms of early
timely information if they are to avoid being
harshly judged later by the market (Christensen,
2003). Whether this information and knowledge
are provided by marketing personnel or by R&D
R&D Management 40, 5, 2010 479
Guus Berkhout, Dap Hartmann and Paul Trott
scientists and engineers does not matter, but its
input to the new product development process is
essential. The product development team needs to
determine: What are the potential applications of
a technology as a product? Which application(s)
should be pursued first? What benefits can the
proposed product offer to potential customers?
What is the potential market size and is this
sufficient? (Leifer et al., 2000, p. 81).
When it comes to managing the innovation
process within the firm, the stage gate approach
is a widely used product development process that
divides the effort into distinct time-sequenced
stages separated by management decision gates.
It has been popularized by Robert Cooper’s
research in this area (Cooper, 1981; Kleinschmidt
and Cooper, 1995). Multifunctional teams must
successfully complete a prescribed set of related
cross-functional tasks in each stage before obtain-
ing management approval to proceed to the next
stage of product development. The framework of
the stage-gate process includes work-flow and
decision-flow paths and defines the supporting
systems and practices necessary to ensure smooth
operation. However, the stage-gate procedure
suffers from a number of limitations:
(i) The procedure is sequential and therefore will
be slow;
(ii) Decisions are focused on the next gate rather
than on the end of the chain;
(iii) Deviating activities can be stopped or frozen
too early. The high levels of uncertainty that
accompany breakthrough concepts make the
stage-gate procedure a model of lost opportu-
nities; and
(iv) The stage-gate procedure is a black box with
respect to the actual network processes at the
innovation shop floor.
Finally, enabling technologies have also had a
dramatic impact on the innovation process.
Dodgson et al. (2005), developing and reinforcing
the point made by Rothwell (1992), suggest that
there are significant changes occurring at all levels
of the innovation process forcing us to reconcep-
tualize the process with emphasis placed on the
three areas that have experienced the most sig-
nificant change through the introduction and use
of new technologies. These are: technologies that
facilitate creativity; technologies that facilitate
communication; and technologies that facilitate
manufacturing. Globalization and technological
advances are driving organizations to extend the
boundaries of R&D teams from traditional co-
located settings to dispersed or virtual settings.
480 R&D Management 40, 5, 2010
Virtual R&D teams have a wide array of informa-
tion and communication technologies (ICTs) at
their disposal. ICTs allow team members to
communicate and collaborate as they cope with
the opportunities and challenges of cross-bound-
ary work (Montoya et al., 2009). Information
flows in a huge osmosis process through the
boundaries of the firm. When this is coupled
with changes in manufacturing and operations
technologies enabling rapid prototyping and flex-
ible manufacturing at low costs, the process of
innovation seems to be undergoing considerable
change (Schrange, 2000; Chesbrough, 2003;
Dodgson et al. 2005). Models of innovation
need to take account of these new technologies,
which allow immediate and extensive interaction
with many collaborators throughout the process
from conception to commercialization. With this
in mind, we now turn our attention to a new
conceptual approach.
4. A new conceptual approach to
innovation
The preceding sections have challenged the cur-
rent innovation theory by identifying limitations
of the various models and schools of thought.
Specifically, these are:
(i) Variations on linear thinking continue to
dominate models of innovation. Actually, most
innovation models show innovation paths, repre-
senting a stage-gate type of activity, controlling
the progress from idea to market introduction,
rather than giving insight in the dynamics of
actual innovation processes;
(ii) Science is viewed primarily as technology
orientated (physical sciences) and R&D is closely
linked to manufacturing, causing insufficient at-
tention to the behavioural sciences. As a conse-
quence, service innovation is hardly addressed;
(iii) The complex interactions between new tech-
nological capabilities and emerging societal needs
are a vital part of the innovation process, but they
are underexposed in current models;
(iv) The role of the entrepreneur (individual or
team) is not captured; and
(v) Current innovation models are not embedded
within the strategic thinking of the firm; they
remain isolated entities.
In this section, we propose a different way of
viewing the firm-based innovation process. It at-
tempts to capture the iterative nature of the net-
work processes in innovation and represents this in
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 Connecting technological capabilities with market needs using CIM
the form of an endless innovation circle with
interconnected cycles. This circular concept helps
to show how the firm gathers information over
time, how it uses technical and societal knowledge
and how it develops an attractive proposition. This
is achieved through developing linkages and
partnerships with those having the necessary
capabilities (‘open innovation’). In addition, the
entrepreneur is positioned as a ‘circle captain’.
This framework is the result of a combination of
analysis of theory and practical evidence, based on
many years of experience within industries that
work with scientists to develop valuable new pro-
ducts and services. Furthermore, evidence has been
gathered from Delphi, a science-industry consor-
tium that consists of a large number of interna-
tional companies within the field of geo-energy.
The Delphi consortium and the CIM
The Delphi consortium develops new ima-
ging technology for the global geo-energy
industry. Seismic waves are used to extract
detailed geological information from up to
10 km below the surface of the Earth. These
data are vital in the search for new oil and
gas reservoirs, and in monitoring the exploi-
tation of existing fields. With most easy-to-
detect reservoirs already found, enhanced
seismic imaging technology is an absolute
necessity to be successful in finding and
exploiting the remaining difficult-to-detect
ones.
In 1982, Delphi was founded by the first
author with five contributing companies.
Today, the consortium has more than 30
international members, including all major
oil companies such as Exxon, BP and Shell,
and a large variety of innovative service
companies such as Schlumberger and Halli-
burton. All key players in the geophysical
value chain are present in the consortium
(http://www.delphi.tudelft.nl).
The biggest challenge is to keep the existing
members of the consortium onboard as well
as to attract new companies. To remain
successful, Delphi research must develop
new technical capability that outperforms
the existing generation of products and ser-
vices, generating new business for the con-
sortium members. This turns the consortium
membership fee into an attractive invest-
ment. A one-way flow of scientific results
to the members (‘science push’) is not an
option. It is necessary to have insight in
emerging bottlenecks and opportunities in
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the industry (‘industry pull’). Knowing how
the consortium members transform Delphi
technology into new business (‘innovation
process’) is a crucial asset. We found that a
cyclic interaction between push and pull is
the key to long-term success. Nearly 30 years
of firsthand experience with Delphi was
condensed into the development of the fra-
mework of the CIM. This knowledge is
currently being applied to a growing number
of business areas outside the geophysical
community. In other words, CIM has
evolved from a descriptive learning model
(of Delphi) to a prescriptive deployment
model for managing innovation processes.
Later in this paper, we will summarize how the
framework was successfully used to accelerate the
innovation activities in the science-driven Dutch
water sector. It is as a result of this evidence that
the framework is presented here for the benefit of
R&D practitioners and academics for their con-
sideration.
Traditionally, innovation models are linear (ex-
plicit or implicit). They describe the processes
along the innovation path as a causal sequence
(much like in relay): investments in scientific re-
search must lead to application-oriented develop-
ment routes, which subsequently ought to result in
successful market introductions. If we invest en-
ough in science and technology, the rest will work
out all right; this is often the reasoning2. Such a
linear science-push approach in innovation policies
is still occurring on a large scale, with the result
that most innovation systems underperform. Re-
cently, Chesbrough (2003) showed that the well-
known in-house stage-gate model – a pipeline
where promising ideas are developed towards
successful market introductions – can be extended
to a more open version that allows interactions
from outside the pipeline. This pipeline was ex-
tended by Kirschbaum (2003) by introducing the
possibility of spin-in and spin-out. Despite these
extensions, the stage-gate model lacks insight in
the actual processes underlying innovation. This is
the reason we position stage-gate like models as a
project management tool to control the progress
along the innovation path.
4.1. The power of cyclic interaction
In almost every natural system, feedback is an
essential phenomenon. This means that there
exists a path that carries part of the output back
R&D Management 40, 5, 2010 481
Guus Berkhout, Dap Hartmann and Paul Trott
to the input. Mathematically, this phenomenon is
described by an integral equation of the second
kind. In ecological systems, we find an abundance
of feedback paths. This makes them complex and
therefore human interference often has unex-
pected consequences, which we do not under-
stand. Think of the debate on climate change.
On a micro scale, we observe that, for instance,
the human cell – considered to be the most
advanced chemical factory – is full of feedback.
Thermodynamic experts believe that nature aims
at minimum energy systems and that minimum
energy requires many feedback paths. If this is the
case, we must conclude that our current innova-
tion models, being characterized by little feed-
back, are squandering a lot of energy. Hence,
innovation processes should not be forced into
simple one-way pipelines, but rather be organized
by interconnected cycles with feed forward and
feedback connections: from linear to non-linear
thinking. In this way, a dynamic network envir-
onment is created in which the social and beha-
vioural sciences are linked to engineering, and
where the natural and life sciences connect with
market goals (Berkhout, 2000). This is what is
captured in the proposed innovation framework.
Supported by today’s powerful communication
technology, serial process management along a
linear path is replaced by parallel networking
along a largely self-organizing circle. Vital deci-
sions in innovation do not occur in the gates of a
staged project management pipeline, but do occur
at the innovation shop floor itself or, in terms of
our model, in the nodes of the cyclic networks. It
is our experience that young people like to work
in such an environment.
4.2. Double dynamics around
technological research
Examining the areas of overlap in Figure 1, we
will show how outputs in the form of innovative
products and services are created. Figure 2 shows
Figure 2. The dynamics surrounding technological research are driven by the cyclical interaction between new discoveries in the
natural and life sciences (left-hand side) and technical specifications for new process–product combinations (right-hand side).
482 R&D Management 40, 5, 2010
two linked cycles, forming a double loop with
technological research in a central position (this is
how R&D is traditionally viewed). The cyclic
interaction processes for the development of
new technologies occur in the natural & life
sciences cycle (left-hand side of Figure 2) with
the help of a wide range of disciplines from these
sciences. Technological research in this cycle is a
cross-disciplinary activity: a team of scientists
from different disciplines of the natural and life
sciences is needed to develop a new technological
capability (many-to-one relationship). In the last
decades, we have seen that industrial firms have
outsourced a large part of their science-based
technological research to universities. Note that
in Figure 2 the natural and life sciences deal with
quantitative models that not only explain the
properties of physical systems (‘know-why’) but
also are increasingly capable of predicting their
behaviour. This predictability allows us to de-
velop reliable technology with fully repeatable
behaviour (‘know-how’).
Similarly, the cyclical interaction processes for
the development of new products occur in the
integrated engineering cycle (right-hand side of
Figure 2). Modern product development is a
cross-technology process in which a package of
different (often patented) technological capabil-
ities is needed to design and prototype a new
product (many-to-one relationship). As in cross-
disciplinary science, here too we see that many
different experts are needed to succeed. Nowa-
days, we observe that in most industrial firms
specialized skills of technical suppliers from out-
side the firm play an important role in making the
engineering process successful. This is consistent
with the open innovation concept (Chesbrough,
2003). Note that ‘products’ refer to everything
mankind builds: not only tangible products like
houses, cars and computers but also non-tangible
products like websites, games, insurance policies,
laws and combinations thereof.
Figure 2 visualizes that in the natural and life
sciences cycle, technological research is driven
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 Connecting technological capabilities with market needs using CIM
by new scientific insights: science push. It also
shows that in the engineering cycle technological
research is driven by new functional requirements
in product development: function pull. The dy-
namics in technological research are therefore
driven by new scientific insights as well as new
product specifications. For example, the market
need for better image quality stimulated the
development of Blu-ray. Better image quality
implies higher resolution, which in turn means
that more data must fit on the same-sized disc. To
enable this, solid-state lasers of shorter wave-
length had to be developed. Similarly, the out-
break of the swine flu created the need for a
vaccine. Active interaction between the integrated
engineering cycle and the natural and life sciences
cycle was required to develop this vaccine. In a
dynamic technological infrastructure, scientists
and engineers must constantly inspire each other.
To achieve this, research must be organized in a
different manner: no barriers between the two
cycles. In Figure 2, the technological node should
function as a knowledge-driven roundabout.
4.3. Double dynamics around market
transitions
Figure 3 also shows two linked cycles. In this case,
it is the world of market change rather than the
world of technological change that plays the
central role. The cyclical interaction processes
for the development of new insights into emerging
changes in demand – causing rising and falling
markets – occur in the behavioural and social
sciences cycle (left-hand side of Figure 3) with
the help of a wide range of different disciplines
from the behavioural and social sciences. With
these insights, new socio-technical solutions can
be developed faster and with less economic risk.
Understanding changes in demand is very much a
cross-disciplinary activity: a team of disciplinary
experts from the social and behavioural sciences is
Figure 3. The dynamics surrounding market transitions are driven by the cyclical interaction between new scientific insights in
changing consumer behaviour (left-hand side) and new industrial supply of product–service combinations (right-hand side).
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needed to assess and foresight shifts in societal
needs and emotions as well as changes in trade
conditions and regulations (many-to-one rela-
tionship). We see in all industrial sectors an
increasing interest for this type of research, mean-
ing a shift towards a more scientific approach to
market studies. Note that in Figure 3 the beha-
vioural and social sciences deal with socio-eco-
nomic models to explain the properties of markets
and the underlying behaviour of consumers. Until
today, the predictive power of these models needs
improvement.
Likewise, the cyclic interaction processes re-
quired to serve the changing society with new
product–service combinations occur in the differ-
entiated services cycle (right-hand side of Figure
3). In this cycle, services (e.g., the provision of
‘iTunes’ for the ‘iPod’) are seen as an invaluable
link between products and markets: the combina-
tion of products and services determines customer
value. Users play an increasing role in making the
innovation process successful. Utilizing the crea-
tive input of customers is known as democratizing
innovation (Von Hippel, 2005). It is interesting to
note that in recent years the service sector has
expanded considerably, not only because of the
greater demand for services from the end-user but
also because industry has outsourced many of its
non-core processes. This trend is still going on.
The term knowledge-based economy has been
coined to characterize some of the main changes
in the development of economies over the past 20
years. Within the EU, services now account for
60% of the GDP (Eurostat, 2006). Similarly, the
influence of technology in general and the deploy-
ment of ICT in particular cannot be overstated.
In virtually all industries, there has been a huge
growth in specialist knowledge and skills being
made available to firms. A new range of disci-
plines have emerged offering specialist knowledge
and skills. This has been replicated in virtually all
industries (Dodgson et al. 2005). The develop-
ment of these economies has led to a massive
R&D Management 40, 5, 2010 483
Guus Berkhout, Dap Hartmann and Paul Trott
increase in the amount of specialized business
services, which now provide critical inputs to
firms in all sectors (changes in the B2B market).
It is this area of the Western economy (United
States and Europe), which has witnessed huge
expansion and development. It is these knowl-
edge-intensive business services (KIBS) that are
the key behind the development of the service side
of the economies. For example, the provision of
specialist services to the geo-energy industry has
led to huge growth for Halliburton and Schlum-
berger, the world market leaders for oil services.
Halliburton and Schlumberger provide borehole
services to companies drilling for oil and gas. To
maximize returns in this industry, accurate data
are required in challenging complex fields, such as
porosities, permeabilities and saturations. This
enables not only the drilling engineer but also
the geophysicist, petrophysicist, reservoir geolo-
gist and reservoir engineer to carry out their tasks
effectively. All these services can be found on the
right-hand side of Figure 3.
The growth in ICT during the 1980s and the
development of the internet in the 1990s and into
the 21st century has led to enormous sums of
money being spent by firms in order to ensure
that they are equipped to compete. In addition, the
introduction of business systems such as Enterprise
Resource Planning systems has led to significant
reductions in costs and improvements in efficiency.
If one then adds to the KIBS, the huge growth in
entertainment industries including the gaming in-
dustry (Xbox, Nintendo, PlayStation, PC games,
etc.), the new on-line gambling industry (Party-
Gaming, Gaming Corporation) and the more
recent social networking industry (which includes
MySpace, Bebo and Facebook) one begins to
recognize just how much change and growth there
has been to economies over the past 10 years.
For many years, the innovation literature over-
looked the concept of new service innovation.
Innovation was deemed to require a new physical
‘thing’. We have already argued that products are
much more than tangible entities and therefore
technology is much broader than the knowledge
to design and build tangibles. In addition, the
world of business suggested that new services
could deliver potentially even more significant
changes than new products. Together, they served
as the kernel of new business models. The one
caveat here is that frequently the new service is
underpinned by a new technology application.
This suggests that, today, interaction between
the processes in Figures 2 and 3 is at the base of
most innovations.
484 R&D Management 40, 5, 2010
4.4. Cyclic innovation model (CIM)
If we compare Figures 2 and 3, the dual nature of
scientific exploration and product creation be-
comes clear: science has both hard and soft
aspects, and product creation has both technical
and social aspects. Figure 4 combines Figures 2
and 3. The result is the CIM (Berkhout, 2000;
Berkhout et al, 2007), a cross-disciplinary view of
change processes (and their interactions) as they
occur in an open innovation arena. Behavioural
sciences and engineering as well as natural
sciences and markets are brought together in a
coherent system of synergetic processes with four
principal nodes that function as roundabouts.
The combination of the involved changes leads
to a wealth of business opportunities. Here, en-
trepreneurship plays a central role: making use of
those opportunities. The message is that without
the drive of entrepreneurs there is no innovation,
and without innovation there is no new business.
Figure 4 shows that the combination of change
and entrepreneurship is the basis of new business.
The most important feature of Figure 4 is that
the model architecture is not a chain but a circle:
innovations build on innovations. Ideas create
new concepts, successes create new challenges
and failures create new insights. Note that new
ideas may start anywhere in the circle, causing a
wave that propagates clockwise and anti-clock-
wise through the circle. In an innovative society,
businesses are transparent and the speed of pro-
pagation along the circle is high, resulting in
minimum travel time along the innovation path.
Today, time is a crucial factor in innovation.
Indeed, when it comes to managing the process
within the firm the stage-gate approach domi-
nates practice. This is because the project man-
agement advantages tend to outweigh the
limitations it poses to the innovation process.
This can be illustrated within Figure 4; here, the
central position in the innovation circle is fre-
quently occupied by a manager, who adopts a
stage-gate approach and culture, rather than an
entrepreneur. In our experience with the Delphi
consortium, having an entrepreneur in the centre
enhances the innovation process.
Figure 4 also shows that the proposed model
portrays a system of dynamic processes – circle of
change – with four ‘nodes of change’: scientific
exploration, technological research, product crea-
tion and market transitions. But more impor-
tantly, between these nodes there are ‘cycles of
change’ by which the dynamic processes in the
nodes influence each other. In other words, they
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 Connecting technological capabilities with market needs using CIM
Figure 4. The cyclic innovation model (CIM) presents the processes in innovation by a circle of change. Changes in science (left)
and industry (right), and changes in technology (top) and markets (bottom) are cyclically interconnected. Nodes function as
roundabouts. Entrepreneurs function as circle captains.
inspire, correct and supplement each other (first-
order dependency). This produces a system of
linked cycles, which in turn also influence each
other (higher-order dependencies). The result is a
more or less synchronized regime of highly non-
linear dynamic processes that spark a creative
interaction between changes in science (left-hand
side) and industry (right-hand side), and between
changes in technology (top) and market (bottom).
These are the dynamics that we have realized in
the Delphi consortium. For example, looking at
the dynamics between sciences and products we
recently introduced the concept ‘science of noise’
showing that what until now has been classified as
useless measurement components actually con-
tains an abundance of valuable geological infor-
mation. This new view may cause a new
generation of geo-imaging products. In addition,
looking at the dynamics between technology and
markets, we introduced the concept of incoherent
seismic source arrays. This new data acquisition
capability fulfils an important market need to
improve the illumination of deep and geologically
complex targets in an economic way. These are
also the dynamics referred to by Richard Florida
(2005). Note that in this type of socio-technical
complexity, causality is not a meaningful concept
anymore. Borrowing an observation from the
famous Austrian physicist Wolfgang Pauli
(Donati, 2004), many processes interact and we
can no longer distinguish between cause and
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effect. Innovation resides in the world of orga-
nized chaos, steered by the ambitions of the firm.
Autonomous societal transitions manifest them-
selves in markets as changes in the need for
products and services (the demand). Think of the
huge influence of education and emancipation on a
society. On the other hand, autonomous techno-
logical developments generate new products and
services (the supply). Think of the huge influence
of mobile and web-based communication technol-
ogy on society. It is the cyclic interaction of both
autonomous innovation drivers, social and techni-
cal, which will create new business with a max-
imum value for society. In this respect, specialized
versions of the model can be formulated, depend-
ing on which values we particularly aim for. For
instance, if we would like to emphasize changes in
today’s energy system – aiming at a decentralized
green alternative – then ‘market transitions’ should
be replaced by ‘energy transitions’ in Figure 4.
Similarly, if we would like to emphasize changes in
the global ecological system – aiming at maintain-
ing biological diversity on the planet – then ‘mar-
ket transitions’ should be replaced by ‘ecological
transitions’. For the coming decades, quality of life
will become one of the biggest drivers in innova-
tion worldwide. This means that the transition
node in the cyclic process model should be focused
on the changing values in society at large: ‘value
transitions’. We believe that current single-value
business models, aiming only at the financial
R&D Management 40, 5, 2010 485
Guus Berkhout, Dap Hartmann and Paul Trott
returns on investment, should be transformed into
models that are focused on a multi-value proposi-
tion (business model innovation).
Making the Dutch water sector more compe-
titive using CIM
The Netherlands have an excellent track re-
cord in the international business of water.
Despite this excellence, growth is less than the
Dutch ambition. Recently, a taskforce was
formed to investigate the reason for this lag-
ging growth figure, as well as to propose a plan
of action to increase the Dutch export at least
by a factor of two. The taskforce chose to
adopt the CIM as an instrument of change.
Figure 4 was used to position the key players
in the innovation arena: who is acting in which
nodes and cycles. Their role in the Dutch water
sector was assessed, and in particular, the
interrelationship between the players was in-
vestigated. Looking at the total CIM picture,
two system errors became readily evident:
1. The sector is highly fragmented with
hundreds of players. There is insufficient
symbiosis between science and business.
2. The sector is highly technology oriented;
too many players have relatively little insight
in the transitions that are occurring in to-
day’s global water market.
Next, the taskforce investigated the opportu-
nities in the global market via a bottom-up
process (lower part of CIM), followed by
making an inventory of the technological
strengths of the national technology players
(upper part of CIM). From this big picture
analysis, promising clusters were proposed,
consisting of partners that together involve
all cycles of CIM. Many clusters are active
now, and some of them are internationally
very successful. This outcome confirms our
experience that the CIM offers high added
value as a common framework in fragmented
sectors. Communication between the many
diverse players, essential in innovation, im-
proves within a short time because each
player can identify his position in the arena
as well as his relationship with other players.
In addition, sector activities with little or no
contribution to the common targets can be
identified and removed from the agenda. Our
experience also shows that a ‘circle captain’
(an individual or a team) is needed to syn-
chronize all actions and interactions around
the innovation circle. For the Dutch water
sector, the Netherlands Water Partnership
acts as a successful circle captain.
486 R&D Management 40, 5, 2010
4.5. The role of science in innovation
Figure 4 shows that on the innovation circle, the
left-hand side is directed to research activities of
the science community while the right-hand side
addresses the innovation activities of the business
community. In a productive innovation system,
science and business will challenge each other
continuously on technology-related (upper part)
and market-related (lower part) issues. Looking
at the upper part of the circle first, interesting
examples of new enabling technology can be
found in the bio-sciences where molecular biology
has a great impact on innovations in the food
industry. Crops, for instance, are made more
resistant to diseases and pests, as well as increas-
ing their yield and their nutritional value. It may
be the solution to the insufficient security of the
food supply on our planet. But bio-sciences also
have great impact on the future of drugs, moving
from one medicine for everybody to DNA-related
differentiation. Other impressive examples of new
enabling technology can be found in the nanos-
ciences where nanoparticles are designed to create
coatings and materials with properties beyond
imagination. Today, we already see spectacular
applications in the pharmaceutical industry (drug
delivery), but radical innovations may also be
expected in the renewable energy sector (e.g.,
voltaic solar cells with triple the present effi-
ciency). All these new technological capabilities
will have a major impact on the way we live and
therefore also on the way markets will evolve.
The above natural and life sciences, however,
also play another role in innovation. Industrial
R&D solutions are often discovered without fully
understanding all aspects. Such industrial ‘short
cuts’ are important because time has become a key
issue in innovation. Refinement of the solution
requires filling in the knowledge gaps, and here the
science community becomes an important strategic
partner: the explication of implicit knowledge.
Instead of challenging scientists by asking ‘surprise
me’, the industry is now asking scientists ‘help me’.
Note that this is a different role: science push is
replaced by business pull. The CIM shows that
both roles of science in innovation should occur in
a parallel manner, and even more importantly,
they should be cyclically interconnected.
Let us now move to the business side of the
model, being the right-hand part of the circle.
After the development phase, technologies enter
the phase of deployment (Perez, 2002). For this
phase, the upper left-hand side of the model plays
a modest role; it is all about using these technol-
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 Connecting technological capabilities with market needs using CIM
ogies in the engineering cycle to create new pro-
ducts and services for existing and emerging mar-
kets. ICT is a typical example. With existing ICT
platforms, innovation occurs in the engineering
and service cycle. Examples are the emerging
product-service combinations based on radio fre-
quency identification (‘tagging’), broadband com-
munication (think of telecare) and new services
facilitated by web 2.0 (and soon web 3.0). All these
innovations are changing society (and the related
markets) in a significant manner, but here the
natural and life sciences are not in the driving seat.
Instead, we see in the deployment phase an
increasing impact of the social and behavioural
sciences, bringing us to the lower left-hand side of
the circle. Today, consumers are generally well-
educated and they communicate with each other
on products and services via social networks.
Traditional marketing approaches do not work
anymore. Firms must collect reliable information
about customer needs and emotions in society.
This is not only a matter of statistics; it is
particularly a matter of the scientific knowledge
behind statistics. The same applies for govern-
ments: effective regulations cannot be built with-
out understanding the behaviour of their citizens.
And the same also applies to the emotions in
society with respect to sustainability. Today, there
is an increasing pressure on the ecological and
social footprint of future production systems.
This type of research is an essential component
in the transition to a fully sustainable economy. It
also resides in the lower left-hand side of the
model; social and behavioural scientists are the
key players in such research.
In conclusion, science plays a role in creating
new technologies and assisting business to utilize
these technologies in the early phase of applica-
tion (cyclic interaction in the upper part of the
circle). In the deployment phase of technologies,
it is primarily a matter of the industry (cyclic
interaction at the right-hand side of the circle);
here, the role of scientists in the upper left-hand
side of CIM is (and should be) small. In the
deployment phase, however, major changes may
occur in society. These changes should be identi-
fied and assessed by scientists active in the lower
left-hand side of the innovation circle. Their role
should be large.
Finally, the transformation to a sustainable
society may be the biggest challenge mankind is
facing. It requires changes in technology as well as
in behaviour. The aim is to make CIM the
innovation framework for the cleantech transfor-
mation. The hard and soft sciences should work
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together with industry leaders to make this trans-
formation occur. In terms of CIM, moving to a
sustainable society requires a process of symbiosis
around the entire innovation circle.
5. Conclusions
From the above, it follows that the innovation
circle acts as a socio-technical framework that
offers insight into the heart of the innovation
process by asking the relevant questions, such as:
What needs to be done where? Who are the
collaborating parties? Where are they active in
the circle? Is there a balance in investments
between the different parts of the circle? Nobel
laureate Robert Lucas (1988) points out that
exchange of ideas is the principal driver for
innovation. Therefore, in terms of the innovation
circle (Figure 4), the key issue is whether there
exists sufficient interaction around the circle.
Particularly, for disruptive innovations an envir-
onment must be created where a large diversity of
people with a broad range of backgrounds can
freely interact, discuss ideas and exchange infor-
mation. This type of environment requires a
significant change in the current institutional
cultures and social structures, as disciplinary
boundaries are deeply rooted in our organizations
and solutions are often a collection of segmented
optimizations. We expect that synergetic alliances
and complementary partnerships will empower
the innovation processes along the innovation
circle far beyond what we see today.
The proposed framework provides a new van-
tage point from which to view innovation. It
characterizes an open work environment that
crosses institutional boundaries. It brings to-
gether the natural sciences and economics, as
well as the social sciences and engineering. We
argue that the family of linear models is a false
representation of what really happens in innova-
tive environments. Innovation projects must not
be managed along the familiar linear pipeline but
should be organized via cross-disciplinary net-
works along an innovation circle with ample
internal feedback paths. Innovation may start
anywhere on the circle and previous innovations
will inspire new ones: innovations build on in-
novations. Although an innovation can originate
in any of the four basic cycles of the innovation
circle, the involvement of the other cycles is
indispensable. Innovations cannot arise from the
confines of a single cycle; only modifications and
improvements can. Innovation needs the colla-
R&D Management 40, 5, 2010 487
Guus Berkhout, Dap Hartmann and Paul Trott
boration of all actors in the circle. An efficient
organization requires an entrepreneur who man-
ages the parallel execution of the dynamic
processes in the four cycles. In such an organized
chaos, causality is a meaningless concept and
modern communication tools are indispensable.
Steering does not occur by traditional manage-
ment rules and procedures, but by providing clear
focus, setting clear targets and having clear con-
straints. Experience with the model shows that a
shared mental framework is essential to allow
synergy between the large number of highly
diverse players in the innovation arena. In this
respect, the framework acts as an effective com-
munication instrument, connecting experts from
different organizations (science and business) and
different disciplines (technical and social).
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Notes
1. This does not mean that we assume that these types
of linkages are good or helpful for universities.
Indeed, many would argue that it is the role of
universities to concentrate on basic fundamental
research and let the industry use some of this
research and to invest in more applied R&D to
help with innovation and competiveness (see Nel-
son, 1959; Arrow, 1962). In addition, Bok (2003: p.
156) states that ‘closer ties between university
science and industry create all sorts of risks for
compromising the openness, objectivity and inde-
pendence of academic research’.
2. The innovation policy in the EU aims at R&D
budgets of the member states that amount to at
least 3% of their GNP.
490 R&D Management 40, 5, 2010
Dr A.J. (Guus) Berkhout (http://www.aj-berkhout.
nl) is Professor of Geosciences and Energy Inno-
vation at the Delft University of Technology in
The Netherlands (TU Delft). He is a member of
the Royal Academy of Arts and Sciences (KNAW)
and the Netherlands Academy of Engineering
(AcTI). His scientific research is dedicated to
geophysical imaging technology for natural re-
sources and to the future of our global energy
system. His research programme is sponsored by
35 international companies (http://www.delphi.nl).
Dr Dap Hartmann (1960) has a PhD in astronomy
from the University of Leiden. He held research
positions at Harvard University and the Univer-
sity of Bonn and is the author of the Atlas of
Galactic Neutral Hydrogen (Cambridge Univer-
sity Press). Since 2003, he is assistant professor of
Innovation Management and Entrepreneurship
at Delft University of Technology.
Dr Paul Trott is Professor of Innovation & En-
trepreneurship at Delft University of Technology,
The Netherlands and Reader in Innovation Man-
agement at the Business School, University of
Portsmouth, UK. He received his PhD from
Cranfield University.
r 2010 The Authors
R&D Management r 2010 Blackwell Publishing Ltd