Innovation Engineering

Chapter 1: Introduction
The vitality and survival of companies in competitive markets depend to a large
extent on their ability to innovate. Innovation is not something that emerges
spontaneously from the activities of a company: companies need to invest in it.
Whether companies produce end-user products, subcontract to deliver parts to end-
user companies, or deliver services to customers, innovation is important. It can
sometimes be bought or found through collaboration with other companies (‘open
innovation’). In any event, human capital is an important factor in innovation.

Companies develop strategic plans for facing the future. Innovation can and should be
included in these strategic plans. Diverse external conditions and developments –
political, environmental and economic – do influence corporate choices at the
regional, national and global level. These factors can positively or adversely affect
corporate performance. Continual and forward-thinking decisions are required to
ensure companies’ profitability. For that purpose, experts in companies, institutes and
government can develop scenarios. Such scenarios are instrumental in mapping out
possible ways forward. But a scenario is not a forecast. The further one looks into the
future, the more unreliable predictions are. Big companies commit considerable effort
and money to scenario studies. These scenarios allow companies to modify their
strategies and tactical approaches to optimise profitability and remain successful.
Unlike bigger companies, small and medium-sized enterprises (SMEs) often lack
financial resources to invest extensively in scenario studies. Their strategies are more
often based on survival tactics than on growth optimization. As well-educated human
resources are a key element of successful companies, well-designed learning
programs can have a positive effect on innovation development at SMEs.

1.1 The need for innovation development in SMEs

Current reports from research institutes of
national and European governmental International collaboration
organisations, and from the SMEs Strong Global
organisations themselves, highlight the Europe economy
importance of and the need for innovations
in SMEs. These reports also suggest the Public responsibility Private responsibility
need for the education system’s
involvement. Selected literature is presented Regional Transatlantic
communities market
in this section: it ranges from macro views
to those at the level of SME sectors. National sovereignty

EIM Business & Policy Research (2006)

recently completed an important scenario Figure 1.1: Four possible scenarios for the
analysis for the Netherlands. Their report, Netherlands for 2015 (Source: EIM 2006)
an outlook for 2015, provides four scenarios
for SMEs (see figure 1.1). EIM analysed each scenario for its effect on SMEs’
entrepreneurial activities, and concluded that SMEs will maintain their competitive
position. Emerging small enterprises and existing SMEs will prosper by establishing
co-operation with and exporting products to both European and transatlantic
countries. EIM further predicted enhanced opportunities for SME entrepreneurship,
international market development, and a greater role for education in helping to
develop new products and processes. These scenarios underline the importance of
designing education to prepare students to work effectively in SMEs.

New forms of education must target SMEs. In 2004 and 2007, the Dutch Ministry of
Education published plans to reorganize higher education (OCW, 2004, 2007). Two
statements establish the framework of these plans:

1 The Netherlands is losing momentum in innovation power against other European

countries. This could lead to less favourable conditions in future markets. SMEs
should be given special attention regarding their contributions to innovation.

2 Universities of applied sciences can support the innovative power of regional

industry. Universities can make an important contribution in putting into practice
knowledge and skills that lead toward innovative products and processes.

What do Dutch SMEs think about the need for innovation? In the 1970s and 1980s,
smaller companies focused on both efficiencies within production processes and
providing customers with products or services. Several reports mention that SMEs are
falling behind in initiating innovation (De Jong, 2006), (Boorsma and De Vries, 2004)
and (EIM, 2006), although SMEs themselves have divergent opinions about these
assertions. De Jong assesses the importance of product innovation at technical SMEs
that customarily translate knowledge into new developments in their products and
processes. According to him, such technical companies are more organised than other
companies in strategic thinking for
the future.
Figure 1.2 illustrates the most
important items in 2005 SME
strategic goals. De Jong asserts that
68% of these technology-oriented
SMEs have delineated their strategy.
They are forward thinking when
developing new products, and are
very concerned about corporate
continuity. It is apparent that the
policies of some SMEs have changed
from the immediate to the forward Figure 1.2 Important strategic statements of SMEs
thinking. As technology-oriented in the Netherlands in 2005 (Source: de Jong 2006)
companies only comprise 28% of
SMEs, there is considerable need to
improve overall innovation within, in general, smaller and mid-sized enterprises.
Whereas the Dutch Government and
various research institutes assert that
SMEs are not sufficiently innovative,
technical SMEs believe they are
increasingly attentive to continuity and
product development, two important
aspects of innovation.
De Jong’s research also illustrates that
contacts with knowledge centres, for
example universities are important to
technical SMEs. Some 83% of these Figure 1.3: Intensity of contact of technological
companies already have contacts with SMEs with stakeholders (Source: de Jong 2006)
knowledge centres. Figure 1.3 shows
the types of knowledge centres SMEs interact
with. Unfortunately, only 31% have contact
with universities of applied sciences that could 1%

support them in developing innovation. As

well, De Jong notes that SMEs often have
resource limitations, so are more willing to
invest in innovation when economic conditions
are positive. In any case, well-educated
employees do play a role in analysing market
conditions and translating data into future-
oriented company activities.

In their annual report, SMEs in the Netherlands Figure 1.4: Partitioning SMEs in the
highlighted the need for investing in innovation Netherlands in 2006 (Source: MKB 2006)
(MKB, 2006, 2007). They further pointed out
the importance of newly generated knowledge
finding its way to companies. This
valorisation of knowledge is
stimulated by subsidies from
government and should enhance
knowledge transfer between SMEs and
higher education institutes. SMEs
could participate in higher education
by offering innovative and real-life
projects, while, conversely, higher
education institutes could offer their
knowledge to support developing
innovation in SMEs.
Innovation is not only developed by
technology-oriented industry. As
figure 1.4 illustrates, only 23% of all
SMEs in the Netherlands are
technology-oriented. However, Figure 1.5: Differences of business figures of
innovation is also important in the SMEs versus big companies (Source: MKB 2006)
health care, retail and service sectors.
Together with technical industry, these
four branches of companies constitute 95% of all SMEs in the Netherlands. The
Midden en Klein Bedrijf (MKB) 2006/2007 annual report compares the business
figures of the SMEs and large Dutch companies. Figure 1.5 demonstrates that
although individual SMEs are small their collective market activity generates more
profit than large companies. It is obvious that SMEs constitute an important part of
the Dutch economy. Therefore, their role in innovation is also important: as people
are responsible for strategic analysis, it stands to reason that SMEs’ human capital is
well worth educating.

1.2 The need for bachelor level employees

Innovation is a complex and multidimensional process. Codified and tacit knowledge
come together in a creative environment. As such, SMEs’ human resources constitute
a key factor for innovative potential. SMEs and others indicate that well-educated
employees are especially important (MKB, 2007) and (Boorsma and de Vries, 2004).
The Organisation for Economic Co-operation and Development (OECD, 2007) and
the Dutch Ministry of Education, Culture and Science (OCW, 2004, 2007) also
challenged higher education to play a greater role in exposing young learners to
relevant new topics, and preparing them to operate more professionally when
employed at SMEs.

The European Union investigated several economic performance indicators including

countries’ levels of innovation in relation to numbers of higher-educated employees
involved in innovation. They noted (OECD, 2007) that the Netherlands has excellent
knowledge development but only a “mediocre record on innovation activity”. They
called this the ‘Dutch paradox’.

It is important that industry, especially SMEs, invest more in innovation. While

overall SME innovation has increased, this is due to a limited number of SMEs.
OECD stated (OECD, 2007, p. 47): “Though the share of small and medium
enterprises (SMEs) in R&D has increased, only a small portion of SMEs conduct
R&D. It is estimated that 2% of SMEs have their own R&D unit.” The OECD noted
that SMEs do not have enough higher-educated employees to initiate and carry out
research and development projects on innovation. Causally this conclusion should be
used as a design criterion for new developments in curricula in higher education.

Boorsma and De Vries also researched the importance of higher-educated employees

for SMEs, investigating the strategy of SMEs in five branches: retail trade, process
installation, brokers, metalwork and technology. They draw three important
conclusions about the relevance of higher education:

1 The need for higher-educated employees in SMEs will grow.

2 Higher-educated employees are needed because innovation and product
development are (amongst others) the important strategic goals to be developed.
3 SMEs need higher-educated employees for future existence and industrial growth.
Designing curricula to address the need for higher-educated employees in SMEs is
one thing, but are higher-educated professionals
willing to begin their career in SMEs? Smits and
Sieben (2008) researched working engineering
graduates in 2007.
Figure 1.6 shows that 46% of bachelor’s program
graduates work for companies with more than
1000 employees. By extrapolation, we see that at
least one-third to one-half of engineers with
bachelor’s degrees begins their careers at SMEs.
Their research also shows that a high percentage
of these engineers continue to work for SMEs,
even after five years. It follows that higher
education curricula should pay more attention to
innovation development in SMEs. Adequate Figure 1.6: Number of higher-educated
education provides SMEs with employees better employees working in sizes of company in
able to contribute to innovation. Because the their first 5 years after graduation (Smits
research addressed only Dutch technical students, and Sieben 2000)
no conclusions from this data can be drawn for
other than engineering students.

Innovation development in a SME is a delicate matter. For innovating products or

services different analyses need to be made. From inside and outside the company
different information is to be considered. This makes those analyses complex and
multidimensional. In most cases it will not be possible for one single person to make
these multidimensional analyses. Several expertises are needed. If products are to be
innovated technical knowledge is needed to develop changes in the product but also
relevant market information like customer needs and governmental demands are
needed. Another crucial element is the financial means of the company. All that
information is needed to judge if the innovation is likely to contribute to future
profitability. In that case a major strategic decision can be made to proceed with
innovation developments and to invest in needed activities. Of course when services
or other processes are to be dealt with comparable analyses can be made. Key persons
on innovation in companies must be capable to work in a multidisciplinary team.
They should also be able to organise such a team with the crucial and relevant
disciplines that it enables the company to make proper analyses for innovation
development. A critical element in this respect is to understand how to work in such a
multidisciplinary team. Members of such a team must understand what contribution
they can make and what others can contribute. An innovation team will always be a
multidisciplinary team and working in such a team has to be learned.

If we accept that
1. A substantial part of bachelor graduated starts their professional careers in SMEs,
2. SMEs will have to pay attention to innovation of products and processes and
3. Higher-educated employees often are key persons in innovation processes;
bachelor education should pay attention to the development of competences relevant
to innovation. As multidisciplinary teamwork is an important aspect in innovation
processes students from different disciplinary domains will have to experience what it
means to be involved in innovation processes. The main goal of higher education is to
prepare young people to be able to work successfully in a competitive world. This
requires carefully designed environments in which learning for specific tasks in
companies and learning while doing are seen as important aspects.

1.3 Educational context

Higher education and discipline-based curricula are rather tightly scheduled and focus
on teaching professional skills. Non-disciplinary approaches are limited even though
professional groups would profit from them. This is a dilemma. So-called ‘minor’
programs do offer an opportunity to develop new approaches. For example, at Fontys
University of Applied Sciences, students can select from fifty different minor topics
in the fields of engineering, economics and social studies. These minor topics should
be attractive to students. In the major part of curricula, students are educated in their
chosen professional domain while minors provide further specialisation or broadening
of their topics of interest. This thesis focuses on a minor in strategic innovation in
SMEs. The minor offers a multidisciplinary learning environment in which students
from technical, social and economics departments work together on innovation
projects in SMEs.

The research proposes to discover how competence development in the setting of

action-oriented learning can be used to educate students about innovation in SMEs.
Appropriate models are found in, for instance, the work of Montgomery, Brown and
Deery (1997).

Fontys University of Applied Sciences’ approach, as described in this thesis, provides

an open and meaningful learning environment by taking ‘real life’ development
questions from SMEs as the starting point for learning. This facilitates students in
developing relevant competences and professionalism to meet the challenges of
innovation development in their future jobs. As well, this action-oriented learning
approach can result in direct valorisation of the learning process at the companies
involved. A simulation environment has been developed, so students experience
actual working conditions for people who can be seen as potential developers and
initiators of innovation in a company. We will call these ‘key persons’. The
‘innovation simulator’ constitutes the practical, action-oriented portion of
the minor program entitled ‘strategic innovation’ which is 30 EC in size (about 20
weeks of teaching and learning activities). In this simulation environment students use
competence elements learned in the theoretical part of the minor to explore strategies
that companies can employ to innovate products and/or organisation processes.
Geraedts (2006, 2007) provides a detailed description of this approach.

1.4 Research
This thesis describes action research. The investigator was not ‘observing from a
distance’, but was a ‘participating observer’. This has methodological implications.
To translate empirical findings to theoretical conclusions, we use the so-called
grounded theory approach as described by Glaser and Strauss (1977), and extend it
with the approach of Miles and Hubermann as presented in Robson (2005, pp. 473-
486). The investigations’ subsequent steps were to:

1. design a minor on the basis of literature research and experiences with earlier
developments of new programs for technical, economics and management major
programs, combined with personal experiences of students working in practical
years and graduation projects in companies;
2. pilot the minor with a group of students who used a specific type of role play at
actual SMEs;
3. collect data via interviews and evaluation reports of stakeholders, and empirical
analysis of the relevance and effectiveness of the program in relation to
innovation development in SMEs;
4. improve the program’s design for the next offering in three iterative steps based
on the empirical data; and
5. design an effective, competence-based and action-oriented program once the
educational concepts were developed.

The goal of the research project is to contribute in an evidence based way, to the
theoretical development of innovative learning processes and environments that
prepares students in a more optimal way to innovation development in their future
job. The case study explored an educational setting that used a combination of theory
and ‘real life’ simulations as the basis for learning. We designed the learning
environment, were part of it, and observed the learning process from different
perspectives. The minor program was developed and studied over three years, from
2006 until 2009. The ADDIE method, as derived from ‘Learning Theories
Knowledgebase’ (2009), was used to analyse the design for success and failure
factors. During the study period, the minor program was continuously improved.
Improvements themselves were also studied from different perspectives. An active
interaction between a higher education institute and SMEs took place in the learning
environment. Relevant indications of learning performance were measured and
related to each other. Three important stakeholders – students, teachers and key
persons in participating companies – were interviewed. Interview results were
evaluated to analyse the perceptions of and interaction between
stakeholders. Learning performance indicators, notably relevance and effectiveness,
were monitored and are defined below.

Relevance
Teachers and students consider all teaching elements of the program (knowledge and
competences) required to adequately prepare for contributions to innovation
development at SMEs. Key persons from SMEs believe that such knowledge and
competences are important for companies to increase market competitiveness through
innovation.

Effectiveness
Students develop perceptions on how innovation developments should be initiated in
SMEs. They learn how to analyse companies for indicators of and preparation for
changes. Students are capable of formulating an innovation development advice for
companies, and explain how current activities could be changed to improve corporate
success.

1.5 Research questions

The starting point for the research is the perceived effectiveness of teaching
bachelor’s program students to take part in developing innovation at SMEs. More
specifically, the question is how to develop action-oriented learning environments
where students can develop competences for innovation development. The central
research question of this thesis is:

In what way could a competence-based and action-oriented learning environment on

innovation development in SMEs be designed?

This central research question leads to the following sub-questions:

1 Is innovation development in SMEs a relevant aspect of the professional

environment of the educated bachelor student in the future?
2 In what way can key persons in companies collaborating in the training
contribute to education on innovation development?
3 What competences should the teacher have in order to be effective in a
competence-based and action-oriented learning environment?

Is innovation development in SMEs a relevant aspect of the professional environment

of the educated bachelor student in the future?
Relevant information needs to be searched for in literature answering this first sub-
question. Reports of research institutes on the performance of SMEs in respect to
innovation development will be referred to, to answer this question.

In what way can key persons in companies collaborating in the training contribute to
education on innovation development?
This sub-question will be answered by developing specific conditions in the
innovation project where students will look for potential discussion partners within
the company with which they can discuss possibilities for developing innovation. For
this an innovation simulator is designed.

What competences should the teacher have in order to be effective in a combination

of a competence-oriented teaching and an action-oriented environment?
This sub-question is to be answered by using the information of student’s evaluation
and the interviews with the teachers themselves. At the end of the three years period
enough data should be gathered to formulate evidence based conclusions that can be
used to develop effective educational environments enhancing competence-based and
action-oriented learning.

Knowledge development is an important part of the minor. For students it is also

essential, however, to develop critical thinking skills when analysing possible
innovation developments in their future jobs. An innovation project in a company will
give them perceptions on how knowledge needs to be used in a real life situation. The
main goal of the simulation project is that students will have the opportunity to look
for parallels with the real situation. Knowing how things are organised, how to assess
possible elements of an innovation project and compare today’s capabilities to future
possibilities are important items in the minor. Students need to have experiences that
are real and give them the feeling that they are right in the middle of a change in a
company. Precisely these aspects form the basis of the ‘innovation simulator’ and give
students the feeling that they are involved in a ‘real world’ experience. Evaluation
from the perspective of the participants gives more insight in the effectiveness of the
training method. Therefore interviews, questionnaires, and evaluation reports of
participants will be analysed.

1.6 Set-up of the PhD-report

Chapter 1 provides a general introduction on the research described in this thesis.
Chapter 2, ‘The context of the profession and conditions for education’, explains how
a competence-based and action-oriented learning program prepared students for
innovation development in SMEs. What is innovation and what indicators can be
found? Chapter 3, entitled ‘Changing role of the teacher’ highlights the important role
of the teacher. What are the important changes to be made in order to make teaching
more effective? Chapter 4, ‘Research set-up’, clarifies the minor program design and
describes the basis for the first set-up of the minor on ‘strategic innovation’. The
conceptual model, data collection formats, and data interpretations are addressed in
Chapter 5, entitled ‘Presentation of collected data’. Chapter 6, ‘Main conclusions’
explains how competence-based learning in a setting of action-oriented learning can
be designed and emplaced.
Chapter 2: The context of the profession and
conditions for education
Innovation is a hot issue currently, and important for companies to attract customers.
But what exactly is the content of innovation? How do we define important aspects of
innovation? What is the process of innovation? And how can innovative education be
designed?

This chapter begins by exploring the content of innovation. Next, competence-based

and action-oriented aspects of innovative learning are discussed. As mentioned in
chapter 1, innovation education is relevant to the development of small and medium
enterprises (SMEs). The design of the minor program for innovation education is
based both on available literature and on my previous experience as described in
chapter 3. We measure designed educational processes, and their teaching and
learning contexts, by their effectiveness. The research analyses the relevance and
effectiveness of the minor ‘strategic innovation’.

2.1 Exploring innovation

Teachers at Fontys University of Applied Sciences often face confidentiality demands
when launching graduation projects in partnership with companies. Such demands are
generally related to innovation. In some cases, projects concern specific product
development, but may also be part of larger development initiatives. By using the
word innovation, companies show they are advanced and sophisticated. Innovation is
a multi-interpretable term, which is used in several ways and in different contexts.
Various aspects of innovation are depicted below.

• Innovations can be either structural, delivering completely new products or

processes, or incremental, delivering smaller changes in existing products or
processes.
• Innovation may be more socially driven, not only products are the main focus, but
the roles of stakeholders in product lifecycles are also considered. In contrast,
innovation can be entirely product driven. Volberda (2006) mentions that of all
innovations only one-fourth is related to product innovation, whereas three
quarters are more related to social indicators.
• ‘Open innovation’ refers to meaningful innovation through collaboration with
corporate partners, whereas ‘closed innovation’ occurs entirely within the walls of
a single company (Chesbrough, 2006).
• Innovation, especially of products, always involves ownership. Companies expend
human and financial resources in developing new products or processes. Others
may wish to benefit from these developments. In some instances, companies
protect their product
• innovation with patents1. Conversely, open source innovation permits companies
and customers to use innovations freely.
• In addition to obtaining patents, companies may innovate continuously to stay
ahead of competitors (Tushman, 2004). Conversely, innovation may be an
occasional activity. Engaging in constant development of innovations is easier for
larger companies with greater financial means than for SMEs.
• Innovation and new products are often linked. However, innovation can also occur
in developing processes like services, renewing organisations, or developing
innovative approaches to markets. There are four distinct domains: product,
process, organizational and market innovations. (OECD, 2005).
• Innovation does not endure. New developments display past innovative products.
Therefore, companies must continually invest in innovation.
• Innovation involves ethics. Sustainable innovations should integrate social and
environmental benefits with profit (Cooymans and Hintzen, 2000). These are
referred to as ‘triple-p aspects’ (people, planet and profit).
• Innovation must reflect corporate capacity. Finances, hardware and employees’
key competences form internal boundaries for innovation development.
• Innovation risk assessment is an important aspect of strategic management and
investment. SMEs managers often own their companies, are therefore responsible
for corporate activities and results, and determine if innovation will occur.

2.2 Characteristics of innovation and its key activities

Much has been written about innovation and its related key activities.
For example, Bruce and Bessant (2002) provide several formulations of innovation:
“Innovation is the successful application of new ideas in practice in the form of new
or improved products, services or processes.” Trott (2002) cites Myers and Marquis
(1969): “Innovation is not a single action but a total process of interrelated sub
processes. It is not just the conception of a new idea, nor the innovation of a new
device, nor the development of a new market. The process is all these things acting in
an integrated fashion.” Trott (2002) himself states: “Innovation is the management of
all the activities involved in the process of idea generation, technology development,
manufacturing and marketing of a new (or improved) product or manufacturing
process or equipment.” According to Sundbo (2001): “Innovation is considered to be
a phenomenon which is partly rational, partly an unpredictable social process.” To
summarise Roozenburg and Eekels (1996): innovation begins when companies wish
to realise something described in their policies. The innovation process involves
policy determination, performing a strict development,

1
With a patent a company can prohibit other companies, for the time of 20 years, to produce and sell
the idea behind the innovation. (www.octrooicentrum.nl)
 materialising ideas and, finally, providing a feedback loop to new policy
formulations.
When the aim of an education program is to develop innovation development
competences, students, teachers and corporate partners all require a clear perception
of innovation’s basic characteristics. Preceding paragraphs illustrate a multiplicity of
definitions and characteristics with overlapping similarities and differences.

Authors generally agree that innovation:

• is a process, not a situation or condition;
• can be causally connected to the ambitions of a company;
• can be seen as a process with an integrated organisational approach during all
stages of product or services development;
• concerns both the renewal of existing products, or developing completely new
products.

However, authors have divergent opinions as to whether:

• innovation development should include social processes, or is simply a technical
procedure for inventing and materialising physical products;
• innovation is solely focused on product development or market and organisational
processes are investigated when searching for new products and services as well;
and
• innovation processes should involve evaluation and feedback to determine their
contribution to corporate strategies and goals, or only focus on innovating, not on
measuring internal and external effects for companies.

Authors also express opinions that:

• innovations must contribute to the profitability of the company;
• customers are the final judges of both quality and utility of new products, and
their satisfaction is linked to corporate profit;
• responsible key persons within companies must identify profitable aspects of
innovation development trajectories before committing resources;
• multidisciplinary teams of key persons must investigate the feasibility and
profitability of innovations.

To summarize, innovation is a complex and multi-interpretable concept. It should be

clearly delineated before a minor program on strategic innovation in SMEs can be
designed. The definition of innovation development that guided this research project
follows.

Innovation is an internal development process that contributes to corporate goals

when developing new products, processes, organisational structures or market
approaches, or some combination of these. Technological, economic and
psychosocial factors can be investigated when considering innovation development.
Generally, innovation is initiated by multidisciplinary teams consisting of key
persons in companies. Teams develop new or renewed products or services for sale
in marketplaces. When planning innovation development, corporate decision makers
must have accurate information as a basis for funding innovation projects.
From discussions with persons in companies who expected to have key capacities for
innovation development, it is clear that not all have the same interpretation of
innovation. Nor can they clearly identify corporate decision makers who are
responsible for funding and launching innovation development. In this research, these
persons are called key persons. They play an important role in innovation
development and are defined as follows:

Key persons in companies hold key positions, play key roles or have key competences for
achieving innovation development.

Critical professional situations within companies refer to key persons’ professional

requirements. These are an obvious starting point in designing a minor program for
students as they concern important competences and theoretical aspects of innovation
development. The definition of critical professional situation is:

Critical professional situation: Relevant and essential conditions and activities typical for
the professional practitioner in which a person must show his/her competences in order to
work successfully.

Successful innovation occurs within the context of appropriate and forward-thinking

corporate strategies. Mouwen (2004), Clarysse and van Dierdonk (1998), Mintzberg
(1998), Rotmans (2003) and Tarter and Hoy (1996) provide several interpretations of
strategy. Strategies can focus on activities within companies, external conditions and
corporate styles. Innovative, active producers tend to formulate strategies reflecting
external conditions. In contrast, companies operating mainly as sub-contractors tend
to formulate strategies to optimise internal processes that in turn reflect the demands
their business customers (Haffmans, 2004). Internal activities that help realize
strategic goals will be formulated as corporate tactical approaches.

Decision-making follows from agreed strategies and tactical approaches. It is always

part of an innovation process and only after that decision the real activities of the
innovation begin. Big companies commonly have enough high-educated employees
who are trained sufficiently to investigate and prepare for possible strategic decisions
concerning innovation development. In SMEs higher-educated employees often are
involved in innovation-oriented processes. At the end of the preparations for
innovation the most attractive options are presented to the main responsible person.
This person, often the owner of the company, will take a final decision to start an
innovation development process or not. In SMEs the person taking this final decision
often is not trained for or experienced in innovation, but this person must and will
take weighty decisions for the company based on experiences in controlling the
company in the past. In decisions on procedures to realize innovation aspects are
involved that are different from decisions on procedures to run the daily business. It is
important for staff to understand the complexity of innovation development in order
to find out what has to be investigated and what aspects need to be taken into account
in order to make a good decision on innovation.
Depending on the size of innovation it can mean that the company risks to sink to
bankruptcy in the future, because such a decision can have a negative effect on the
future market position relative to the competitors or to customer satisfaction.
A person responsible for strategic decision-making takes a decision on which the
profitability of the company in the future will depend. In that decision both what has
happened in the past and the prediction of what could happen in the future play a role.
Predicting the future is impossible, but the decision made now can have major
consequences for the position of the company in the future.
Tushman (2004) describes this as follows: “Decision by itself changes nothing. At the
moment decisions are made, we don’t know their effects.
We spend far more time on the consequences.”

Very often SMEs tend to focus only on production, cost reduction and keeping up
with delivery deadlines. SME staff is focussed on today’s performance rather than on
future developments. Decisions in such companies very often limit themselves to
improving quality and efficiency of the production process. Higher educated staff can
be trained to develop innovation and to focus on the vision of the venture’s owner
who is concerned with future market. SMEs innovations become real when the main
responsible person approves their development. Hence, the decision-making moment
is a central element in a chain of activities. Tarter and Hoy (1996) state that decision-
making is: “rational, deliberate, purposeful action, beginning with the development of
a decision strategy and moving through implementation and appraisal of results. It
occurs in all organisations.”

It may be clear that, because of the different types of companies, making a clear
formulation of decision-making is not easy. Specific circumstances, culture, and
personality in organisations determine what type of decision-making will be used.
Johnson and Johnson (2003) and Noorderhaven (1995) give an overview of several
aspects of types of decision-making. Owners of companies often think that earning
money is the main focus when investing in innovation. In contacts with a company,
which delivers semi-finished products to a larger company of copiers, such an
argument was heard. The owner was disinterested in an innovation project involving
students; in his opinion, the company had already determined its future product line.
The same week, the photocopier company declared to move their production
department to Asia with probably drastic consequences for the SME.
 The definition of decision-making underpinning the research is:

Decision-making results from conscious choices about preparing for and launching
activities towards a desired corporate future. It is a narrow gate that emphasises
changes to or fixes current situations, and builds on relevant knowledge and
information.

It is obvious that initiating innovation has substantial repercussions for businesses.

Therefore, relevant information is required for good strategic decisions.

2.3 Modelling the innovation process

Much has been written about methods of activities around designing new products as
basis of innovation. De Beer (1997), Roozenburg and Eekels (1996), van den
Kroonenberg and Siers (1992), Delhoofen (2003) and Remmerswaal (2000) provide
(Dutch) examples for structuring and organising product development. Bruce and
Bessant (2002) are an example of non-Dutch authors, who have shown ways to
structure the designing process of developing new products.
Trott (2002), Burgelman, Christensen en Wheelwright (2004), Tushman and
Anderson (2004), Twiss (1992), Vrakking and Cozijnsen (1992), Kaplan and Norton
(2004) and Mintzberg (1983) discuss international innovation management. These
authors show a process of shaping and organising new products or services.
Working on
Perception of an innovation trajectory materialization

Vision Financing Select Internal Formulate Design Production In-use stage Life end Waste
Mission innovation innovation external demands process process of the of the
Strategy team info product product

Working on an Recycling
Decision
idea making
moment

Point of no return
Decision-making
Meeting of Director, Innovation Manager and
Production Manager
This is a moment where a decision is made on
the question whether the product idea will be
put into production or will be rejected.

Figure 2.1: Concept model for the innovation process in a venture with strategic
decision-making in the centre, as used in the minor
This process has elements of distinct activities that are the basis of shaping new
products or renewing existing products. In this research the activities for setting up
services are considered to be as likely as activities for product development. This
literature identifies sequential activities for an innovation model, and is the starting
point for the design of the minor program. Different activities are summarised in
figure 2.1, delivering an overview of the innovation process.

2.3.1 Ideation stage

Initially, inventive ideas are formulated and assessed for profitability. Safety and
environmental issues, and government regulations, are analysed for their impact on
potential products or services. Key persons are tasked to explore design solutions and
production issues. At this ideation stage, expenditures are relatively low. The
following list identifies important steps at the ideation stage.

• Defining corporate mission, vision and strategy To establish the borders and
limitations of a proposed innovation.
• Financing innovation
Management determines financial means and constraints for both ideation stage
and materialisation stage.
• Selecting the innovation team
Management selects a multidisciplinary team of key persons within the company
or finds consultants to investigate the possibilities of innovation for the company.
• Finding internal and external information
The team needs to find external indicators like customer needs, governmental
demands and possible scientific developments that might accelerate demand for
innovative products or services. Internal indicators that show the capabilities of
the company like competences of the employees, financial means, technical
capabilities of the technical staff and organisational requirements have to be
investigated in order to know the internal capabilities of the company to start
innovation development.
• Formulating the demands
The new product or service needs to meet the demands. This ‘SMART’-
formulated (SMART: Specific, Measurable, Acceptable, Realistic and Time-
bounded) demands cover factors that have an impact on developing, producing
and marketing products or services
• Getting important information from the design process
Important information on the design to make a strategic decision is acquired. Part
of the designing stage is getting information for a strategic decision. Products and
services are conceptualised and possibly prototyped to determine their appearance
and function.

Each of these six steps plays an important role in laying the foundations for a
successful strategic decision moment. At this point, the ideation role of
 innovation teams decreases. Innovation initiatives seek strategic decisions before
turning to production and service implementation.

2.3.2 Decision-making moment

Strategic decision moments interpose ideation and materialisation phases of
innovation processes. Based on the findings of ideation stage teams, companies’
responsible persons either accept or reject initiatives. Decisions are generally
irreversible. Positive decisions lead to materialisation, and financial resources are
allocated for human resources and production. Other means are given to be able to
invest in production means. In some cases new team members are assigned to start the
preparation of the real production or execution of services.

2.3.3 Materialisation stage

Materialisation refers to actualising products, or execution of services. Note that, as
compared to large corporations, SMEs innovation investment may be proportionally
high. Investments may be required for new machinery, raw materials, facilities, and
even new employees. Activities may include setting up a production line, organising
logistics, identifying sub-contractors, and preparing facilities, assembly lines and
materials. Investment and activities adhere to safety, labour and environmental
standards. The following sequence of materialisation important steps in innovation.

• Preparations of the production process in the design process

The information gained from the ideation stage is product and production
specifications and a conceptualisation of a possible prototype of the real product
that could meet the demands of the market. In this stage of designing more
demands will be set so the product can be put into production. This information
will be used to re-engineer the product. Re-engineering the design of the product
is a more specific activity that meets the compelling standards of the production
stage.
• Production process
The production is set up. Possible investments are done in new production
machinery and buildings. New employees are attracted or current employees are
instructed and the production line is designed and tested. Finally new products are
prepared for selling to the market.
• Feed back phase from the use stage of the product
The company needs to be aware that customers can provide information about the
quality in using the product or receiving service. This is crucial feedback
information with which the company can enhance the quality of the product or
service so they stay selling to the market. This stage also gives crucial information
for a next innovation development stage.
 • Recycling phase
The company must be aware that there is a life-end for each product. Nowadays
standards from government provide demands to the environmental issues in the
life-end stage. The company must use the governmental standards of the product
or parts of it as to recycling the product or dumping it as waste. Also this
information is crucial to use in the product development stage.

The literature identifies three views of innovation: technological, economic and

psychosocial. All, not only the first two, are important. Sundbo (2001), Smit and van
Oost (1999), Jorna and van Engelen (2004), Tennant Snyder and Duarte (2003)
discuss psychosocial aspects of corporate innovations.

Often as a preparation for defining strategies for a company a so-called SWOT

analysis (Strengths, Weaknesses, Opportunities and Threats) is used. Figure 2.2 is a
schematic representation that relates important aspects of innovation. Technological,
economic and psychosocial nodes are located in the middle. Internal corporate factors
on the left ask: What are company strengths and weaknesses? This can be translated
as: What are staff competences and organisation assets? External factors refer to
opportunities and threats: What are costumers’ needs and how are companies
positioned relative to competitors or governmental requirements? Each aspect has
internal and external dependencies expressed by the six lines reaching to the left and
right nodes. Decision-making (a star) occurs at the centre of the diamond structure.
This illustrates that decision-making is the main focus in innovation development.
Students must understand causal connections within the elements of innovation
processes.
Psycho-social Aspects

Intern aspects Tactical Strategical

decisions
Extern aspects
decisions

Economical Aspects

Technological Aspects
Figure 2.2: Diamond model: schematic representation of components relevant for
innovation
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