Inbound technology: a fictional scenario for a better understanding of the process of adopting external technologies

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Faculdade de Engenharia da Universidade do Porto

Inbound technology:

a fictional scenario for a better understanding of the

process of adopting external technologies

Maria Antónia Gonçalves Delgado Ferreira Bago

Dissertation carried out under the

Master in Innovation and Technological Entrepreneurship

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Inbound technology: a fictional scenario for a better understanding of the process of adopting external technologie

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“Ó brisa que tão suave, A toda a parte vais, Leva contig'a Saudade, Leva contigo meus ais!”

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Resumo

No mundo dos negócios de hoje, a competitividade aumenta, dia após dia e, muitas vezes, o conhecimento interno das empresas não é suficiente para alcançar os objetivos desejados e atender às demandas do mercado e da sociedade moderna. Por esse motivo, as empresas contam com parceiros externos para desenvolver novas ideias e produtos. Num ambiente de open innovation, onde uma patente tecnológica é absorvida por uma empresa específica, é importante analisar o chamado processo de

tecnology push no contexto dos produtos atuais e futuros da empresa. Essa avaliação concentra-se no

entendimento de como uma patente tecnológica pode ser usada como ferramenta para impulsionar a inovação de produtos de uma empresa e, como resultado, a competitividade dos seus novos produtos.

O objetivo desta dissertação é propor uma metodologia envolvida na adoção de uma tecnologia externa numa empresa. O modelo proposto foi construído com base em métodos como Technology-Product-Market

Linkage (TPM), como ferramenta principal utilizada para a comercialização tecnológica no Mestrado em

Inovação e Empreendedorismo Tecnológico (MIETE) e, também, nos modelos Front End of Innovation (FEI), conforme proposto pela Ariane Pereira na sua tese de doutoramento.

Um método descritivo de avaliação de projeto foi conduzido, onde argumentos informados foram aplicados para criar um argumento convincente para a utilidade da metodologia. Usando um cenário fictício em que uma empresa necessitava de responder a uma exigência do mercado, o método mencionado foi empregado e avaliado.

Assim, foi possível definir uma tecnologia externa que atendesse às necessidades propostas pelo mercado, por meio de análise de mercado, tecnologia e a sua implementação em produtos internos. Futuros estudos serão necessários para explorar a viabilidade do método proposto, em situações práticas com empresas reais.

Palavras-chave: inovação aberta; entrada de inovação aberta; tecnologia de entrada; front end de

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Abstract

In the current business world, competitiveness is increasing day after day, and several times the internal knowledge of companies is not enough to achieve the desired goals and to answer to requirements of the market and the modern society. For that reason, companies had relied on external partners in order to develop new ideas and products. In an open innovation setting, an outside-in scenario, where a patent technology is absorbed by a specific company, it is important to be looking into the so-called technology push process in the context of current and future company products. This assessment focus on understanding how a patent technology capability may be used as an instrument to drive the company product innovation and, as a result, the competitiveness of its new products forward.

The aim of this dissertation is to propose a methodology involved in the adoption of an external technology in a company. The proposed model was built on methods such as the Technology-Product-Market Linkage (TPM), as the key tool used for technology commercialization in the Master in Innovation and Technological Entrepreneurship (MIETE), and also, the Front End of Innovation (FEI) Models, such as the one proposed by Ariane Pereira in her PhD Thesis.

A descriptive design evaluation method was conducted, where informed arguments were applied to create a compelling argument for the usefulness of the methodology. Using a fictional scenario, where a company needed to answer to a market requirement, the mentioned method was employed and evaluated. It was possible to define an external technology that fulfilled the needs proposed by the market, throughout the analysis of the market, technology and its implementation in internal products. Further studies are needed to explore the feasibility of the proposed method in practical situations, with real companies.

Keywords: open innovation; inbound open innovation; inbound technology; front end of innovation;

TPM method; strategic fit; technology push

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Acknowledgments

First and foremost, I would like to thank very much to Professor Alexandra Xavier for in less time than expected, have contributed in a fundamental way to the growth of this work. With a fresh look, it helped me to be more certain about what I was developing and made me see the potential flaws with other eyes. No doubt that I would not be delivering this work now if the professor had not accepted the challenge of supervising my dissertation so soon.

I also want to thank Professor João José Pinto Ferreira for accompanying me on this troubled path. Along my school journey I have always heard my mother say that there are teachers who mark us and no doubt that it would not have been possible to deliver this work without the constant concern and accompaniment. I am not the same person as when I started the whole development process and I owe it a lot to him. To Professor Carlos Brito, for taking a chance on me a year and a half ago although we have not pursued this work together, I was very happy with the idea working side by side with him on what would definitely be a very different dissertation.

To my parents for never giving up on me. As an only child they are my pillars and have always encouraged me to lift my head and move on, to pursue what I want even if that could give them a little heart attack. I know they have been tormented in the last 3 years (maybe even before that, by my choice of academic background) but at the end of the day, the only thing that matters to them is my well-being and I could not thank them more for that. To my family, to the ones who sometimes get me so crazy that had titled me the “grumpy” of the family, you will always be the reason I burst out laughing the most and, also, the ones who tell me what I do not want hear but I would not change a thing. To the ones that I do not remember but I know that are shining light in my path, I hope you are proud to see your grandchild complete a new chapter in her life.

To all my friends and colleagues that, in a way or another, led me into this road, I am so thankful for all your friendship advices and, also, for never letting me quit in any circumstance in life.

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List of Figures

Figure 1. Information Systems Research Framework (Hevner, March, Park, & Ram, 2004) ... 21

Figure 2. High-Level Inter-Domain Key Relationships (Pereira, 2017) ... 24

Figure 3. Sub-ontology FEI Purpose (Pereira, 2017) ... 25

Figure 4. Sub-ontology FEI Purpose, focus on Opportunity (Pereira, 2017) ... 25

Figure 5. Technology-to-product-to-market linkage (Markham & Kingon, 2004) ... 26

Figure 6. Sub-ontology FEI Agile New Concept Development (Pereira, 2017) ... 27

Figure 7. Creative TPM (Free of Constrains) ... 32

Figure 8. FC Internal TPM (Opportunity: Enriching Existing Product) ... 32

Figure 9. FEI Agile NCD + TPM Method ... 35

Figure 10. Product Strategic Fit Explanation ... 36

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List of Tables

Table 1. Literature Review Analysis ... 7

Table 2. Design Evaluation Methods (Hevner et al., 2004) ... 21

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List of Abbreviations and Acronyms

BMD Business Model Development

CI Collective Intelligence

ERP Enterprise Resource Planning

FEI Front End of Innovation

FEUP Faculty of Engineering of University of Porto

FPP Feasibility and Project Planning

GPS Global Positioning System

IAs Internal Assets

ICT Information and Communication Technologies

IS Information Systems

IT Information Technology

MIETE Master in Innovation and Technological Entrepreneurship

NCD New Concept Development

PCD Product Concept Development

POI Preliminary Opportunity Identification

R&D Research and Development

SMEs Small and Medium-Sized Enterprises

TPM Technology Product Market

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Chapter 1 Introduction

1.1. Motivation

Presently, the modern world got society used to constant technological development day after day, invention after invention, where companies cannot take the risk of creating products that might resemble any already marketed product. The possible error of developing a repetitive product can be crucial for a company, since we currently live in the social media era, where customers easily spread the word, either it is good or bad. Besides, customers have a higher knowledge of what are the current trends, what products have been designed by other companies and what products are still missing. In this way, companies face a more informed society, with more access to product opinions and information.

To successfully thrive in today’s market, a company must be confident in its innovation ability and, to achieve that, firms have been adopting an open innovation model. This paradigm of open innovation has emerged and established itself as one of the major key players in the innovative process (Arrigo, 2015).

Chesbrough was one of the first to describe this process, explaining how open innovation arose as a fresh strategy for innovation management, based on the fact that innovative ideas can indeed be generated from outside, from a new source of knowledge (Chesbrough, 2003). Years later, Arrigo explained the open innovation process also as an “outside-in process”, which involved the gathering of external sources of knowledge and technology, both obtained either from stakeholders (as consumers, suppliers, among others) or from intellectual property acquired from other firms (Arrigo, 2015).

The idea is based on a flow of knowledge from the outside of the company to the inside in order to develop new approaches, which contrasts with the previously established inside-out process, where “in-house” technology is developed and commercialized by channelling it to the outside of the company. A transition between the inside-out and outside-in ideas is also observed in companies, through the establishment of working partnerships, which can be a defined as a coupled process of both type of innovation processes previously described, where the flow of ideas combines both inside and outside perspectives (Arrigo, 2015).

However, nowadays, a market-oriented company is strictly dependent on its innovating ability to create new value propositions for current and potential customers in order to grow. In this way, open innovation appears as a crucial tool for companies to remain competitive in current hyper-competitive global markets (Arrigo, 2015). In today’s competitive world, companies face strategic challenges, namely the need for maintaining constant and step-by-step activities and the performance growth while introducing more radical market improvements that help pave the way for future businesses (Clarke, Evald, & Munksgaard, 2012). Technological progress development and management theory encouraged companies to give an opportunity to open innovation rather than closed innovation, although it is not a' black or white, either/or'

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issue and the debate among academics over the effect of open innovation has been established. Society itself will profit if these concepts flow through various business models and different business companies, as there is unlikely to be a natural monopoly on the best way to market a technology (Chesbrough, 2003). For example, the acquisition of intellectual property consists in an important way for market innovation in business.

However, to have an outflow of innovation resources and have a nice return in the future, companies need to spare time and money in a search for interesting and interested partners (Fu, Liu, & Zhou, 2019). Besides, firms will still have to continue investing in the necessary work to take on promising research outcomes and turn them into products and services that solve the issues of their real customers. In an open innovation approach, this necessary work will also incorporate the creative thought process of others with the firm's own ideas and produce the outcome through the business model of the company. By taking into account outside information from different technology and knowledge sources, companies must allow a flow of ideas to be currently running from the outside to the inside, in order to develop new ideas that can answer to the environmental needs and desires.

The motivation for this work arises exactly from the direct contact with this shift from closed to open innovation, by observing them happening around the world nowadays. Likewise, this work, has an extensive review of the literature where the main objective was to understand if there was any methodology that introduced a technology in an existing product of a company and through this, we identified a knowledge gap that leads us to the investigation and theorization of the subject. A fictional scenario was applied to better understand how and in what way an outside technology can be integrated into a company’s product portfolio.

Ultimately, at a later stage in the development of this work, a methodology was created and applied to the scenario where it can be seen how an ontology and a methodology, that already exist, can merge together to support the knowledge on outside in. Since it is possible to see and almost ‘live’ the effect of open innovation (or lack of it) in current businesses, today, more than ever, it is imperative to explore how this process happens and which consequences come out of its implementation, in order to evaluate if it does, in fact, fill the need of the current innovative world.

1.2. Objective of the Research

In a more detailed analysis, this work main interest focus on exploring the process through which established companies adopt new technology into their already defined inside processes. To accomplish that, specific objectives were defined: (1) From the literature review, collect different knowledge regarding the opportunity for a new product or the expansion of enterprise business; (2) Also from the literature, identify how the concept of outside in is perceived and interpreted and if there are methodologies/frameworks that propose something similar to this research; (3) Based on the research on the Front End of Innovation (FEI) and the Technology-Product-Market (TPM) framework, propose a methodology that combines technology push and a defined model to answer to the research question:

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“How can companies integrate external technologies in their products, through an inbound/outside-in open innovation process?”; (4) Confirm the methodology through a fictional scenario.

The aim of the study is to contribute in both theoretical and practical means, by, on one hand, expanding the knowledge of the process of outside in and how companies can grow with this same process and, on another hand, contributing to the development of new forms of innovation adoption within a company.

1.3. Structure of the Dissertation

To successfully reach the proposed objectives, the present work was divided into different sections. Initially, a literature review is addressed in Chapter 2, with the goal to explore how researchers have addressed the process of open innovation, which tools have been developed to enhance the process and which conclusions have been already taken using companies’ case-studies. Chapter 3 addresses the explanation of the research question, using the “Design Science” approach to assist the groundwork. In Chapter 4 the problem and the methodology are presented to find an answer to the research question. In Chapter 5 the proposed model is applied to the fictional scenario created through the “Design Science” approach to understand the need of the methodology in an open innovation environment. Chapter 6 resumes the main conclusions of this work, together with limitations and future work suggestions.

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Chapter 2 Literature Review

The following literature review was performed focusing on the analysis of different reports on open innovation, technology push and outside-in and inbound approaches, in order to provide a theoretical background for the study of the research question addressed in this dissertation.

For this purpose, a Scopus research was applied, with the follow keywords combinations: • "open innovation" AND ("outside-in" OR inbound) AND "technology push" : 0 results • "open innovation" AND "technology push" : 9 results, 5 selected for reading

• ("outside-in" OR inbound) AND "open innovation" : 61 results, 17 selected for reading

2.1. Conceptual definition

For a better understanding of the background behind this work and the proposal presented, an initial definition of the main concepts that hold the core of this research should be performed.

The principal paradigm hereby discussed is ‘open innovation’, in contrast to ‘closed innovation’. The traditional innovation or closed innovation model assumes all innovation processes as an internal enterprise activity, commercialized within the company’s boundaries. The firms control all the internal research, but without having any external contact or integration of different technologies. The closed system encourages companies to create boundaries to the outside environment, so that a defensive position can be created against their competitors (Arrigo, 2015; Chesbrough, 2003; Huang, Lai, & Huang, 2015; Inauen & Schenker-Wicki, 2011a). On the other hand, the concept of open innovation arises from the limitations of the closed model in an innovative world. As stated before (section 1.1), open innovation models predict that companies break through their closed borders to the external environment, contacting and learning with it. A shared flow of innovative ideas is created, in purpose, to accelerate innovation within the firm that introduces internally concepts generated externally (Chesbrough, 2006; Huang et al., 2015).

The inbound vs outbound dichotomy refers to open innovation processes that differ on the source of the innovative knowledge. Inbound refers to the internal exploitation of an external idea, while outbound implies an internal idea exploited by external partners. In both situations, companies are opened to the outside and to allow a participation of an external source in their own activities (Arrigo, 2015).

Technology push refers to when a company stimulates the development of new processes and products by internal or external research and using technology to influence the product functionality (Brem & Voigt, 2009; Groenveld, 1997).

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Further in this literature review, other concepts will be discussed in a specific context, with the respective clarification of its conceptual meaning.

2.2. Selected literature analysis

Table 1 resumes the principal papers selected and analysed, with the respective permission of the authors. For a better understanding, a brief summary of each paper is included, namely main objectives (in a general notion), conclusions and consideration (in a personal perspective) and categories, such as:

• Section A– Enterprise Strategy: O– Opportunity for a new product/ E– Expand Enterprise Business;

• Section B– The article approaches a methodology for introducing a Technology into the Enterprise Product?: YE– Yes, uses Existing Tool/ YP– Yes, proposes a tool and methodology/ N– No;

• Section C– Type: LR– Literature Review/ CS– Case Study/ S– Survey/ QTS– Quantitative Study/ QLS– Qualitative Study/ IM– Introduction of a Method or Framework.

Table 1. Literature Review Analysis

Author and

Year Main goals Keywords

Conclusions / Considerations A B C Aloini, Farina, Lazzarotti, & Pellegrini, 2017 Development of an information and communication technologies (ICT) platform to support open innovation processes Open Innovation, Inbound, Conceptual Design, ICT Platform Only conceptual design, with no implementation or validation E YE LR CS Ardito, Messeni Petruzzelli, Dezi, & Castellano, 2018

Understand the effect of three relevant supply chain stakeholders (suppliers, customers and competitors) on innovation ambidexterity Innovation Ambidexterity, Stakeholders, Inbound, Open Innovation, External Knowledge Sourcing Sourcing knowledge from suppliers, customers and competitors can have a positive influence on innovation Only 3 stakeholders evaluated. N/A N QTS

Arrigo, 2015 Address the gap in the relationship between open innovation and market orientation Open Innovation, Market Orientation, Outside-In/Inside-Out, Market-Driven Management Market orientation is easier to predict once an open innovation model is adopted, since companies are more aware of external N/A N LR

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Author and

Conclusions / Considerations A B C environmental trends. Possibility of using open innovation to help a company be market-driven. Asikainen & Mangiarotti, 2017 Analysis of the possibility of inbound open innovation in information

technology (IT) firms lead to different performance effects Inbound Open Innovation, Knowledge Sourcing, IT Services, High-Growth Enterprises Inbound open innovation services lead to a growth in IT service enterprises. N/A N LR Ben Arfi, Enström, Sahut, & Hikkerova, 2019

Evaluate how the implementation of knowledge sharing platforms relates to the open innovation process Open Innovation, Inbound Innovation, Knowledge Sharing Platform, Customer Knowledge Sharing By sharing external research, the creation of these platforms has led to significant changes in businesses. Interesting platform model within the open innovation process (page 13). N/A N CS Bianchi, Cavaliere, Chiaroni, Frattini, & Chiesa, 2011

Analyse the adoption of open innovation in a bio-pharmaceutical industry and its implication in the different phases of industry activity Open Innovation, Inbound, Outbound, Bio-Pharmaceutical Industry, Biotechnology Specific case description of how a given industry organizes itself to implement open innovation N/A N QTS

Brink, 2014 Understanding how outside-in and inside-out innovation impact on growth in turnover in small and medium-sized enterprises (SMEs) in a food network context. Open Innovation; Networks; Outside-In Innovation; Inside-Out Innovation Attention made to a network consisted of SMEs and how it can provide ideas, skills and resources in an open environment. N/A N S Burcharth, Præst Knudsen, & Søndergaard, 2017 Examine how organizational activities can explain the performance of open innovation Innovation Performance, Employee Autonomy, Open innovation model adoption may give autonomy to firms’ employees N/A N S

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Author and

Conclusions /

Considerations A B C Inbound,

Outbound

and mediate the effect of openness on innovation sales Caetano & Amaral, 2011 Proposal of a method of technology roadmapping, applicable to companies that adopt the technology push integration Partnerships, Innovation, Integration Strategy, Technology Development

Not clear about the possibility to apply to other field of researches N/A N IM Caputo, Lamberti, Cammarano, & Michelino, 2016 Evaluation of the relationship between the openness and the financial performances of a company Open Innovation, Inbound, Outbound, Financial Performances, Bio-Pharmaceutical Development productivity and revenues to patents ratio decrease with openness. Patents growth is not affected by open innovation model adoption Innovation processes might be distinguished as more prone to lead to a firm growth. N/A N QTS

Chen & Liu, 2019

Understand the effect of open innovation on organizational ambidexterity Inbound, Outbound, Learning Goal Orientation, Organizational Ambidexterity, Ambidexterity can be predicted using open innovation processes N/A N QTS Clarke et al., 2012

Evaluate how a large firm can organize open innovation activities using comprehensive innovation Open Innovation, Corporate Venturing, Inbound, Outbound, Intra And Inter Open Innovation Suggests looking into combining open innovation and corporate venturing N/A N QLS CS Cricelli, Greco, & Grimaldi, 2016 Large analysis of trends in open innovation adoption approaches Open Innovation, Inbound Search Breadth, Coupled Open Innovation

Suggest that firms moved their focus of innovation from their own, secretive, research and development (R&D) labs,

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Author and

Conclusions / Considerations A B C towards outside their organizational boundaries Cruz-Cázares et al., 2018 Analyse a firm’s internal and external drivers of formal and informal open innovation practices Public Funds, Regional Differences, Inbound Open Innovation Determinants, Motives to Innovate Geographical context might be a determining factor in the driver of open innovation practices N/A N QTS Flor, Oltra-Mestre, & Sanjurjo, 2019

Understand how firms in low and medium technology industries implement their open innovation strategy Inbound, Outbound, Low and Medium Technology Industries, Open Innovation Practices Open innovation has been mainly associated with high-technology firms

N/A N S

Fu et al., 2019 Understand measures

for open innovation implementation, using China example Open Innovation, Firm Performance, Inbound, Outbound Open innovation investment should vary concerning the final goal of a company

N/A N QTS

Galati, Bigliardi, & Petroni, 2016

Explore the gap of study of open innovation in low-tech industries Open Innovation, Food Firms, Implementation Strategies Depending on the sets of drivers and enabling factors, firms choose between open market pull and open technology push N/A N S Greco, Grimaldi, & Cricelli, 2016 Explores the hypothesis that external innovation channels, search depth and collaborations are related with the innovation performance Open Innovation, Innovation Performance, Search Depth, Inbound The explored factors are curvilinearly related with innovation N/A N QTS Greco, Grimaldi, & Cricelli, 2019 Addresses the question regarding what the main costs and benefits are of adopting an open innovation model

Open Innovation; Benefits and Costs; Inbound;

Outbound

Identify three classes of benefits and three classes of costs for both inbound and outbound models

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Author and

Conclusions / Considerations A B C Hinteregger, Durst, Temel, & Yesilay, 2019 Evaluate how inbound and coupled open innovation have influence in process organization and marketing Open Innovation; Inbound, Small Businesses, Marketing, Process Innovation, Organizational Innovation Inbound and coupled innovation influence both factors, with difference results concerning the company size N/A N QTS Hosseini, Kees, Manderschei, Röglinger, & Rosemann, 2017 Proposal of an open innovation capability framework to consider when implementing open innovation Open Innovation, Capability Framework, Coupled Process, Outside-In Process This platform provides companies with an overview of capabilities to take into account when adopting open innovation N/A N IM CS Huang et al., 2015 Analysis of the relationship between transformative capacity and open innovation Innovation, Resources, Inbound Open Innovation, Transformative Capacity Transformative capacity serves as a mediating factor to allow companies to have greater inbound open innovation N/A N QTS IM Huang, Lai, Lin, & Chen, 2013

Evaluate the influence of organizational inertia on innovation Business Model Innovation, Inbound, Outbound, Organizational Inertia Organizational inertia negatively influences the innovative processes N/A N QTS IM Inauen & Schenker-Wicki, 2011b Analysis on how an open outside-in innovation management influences the companies’ innovative performance. Open Innovation, Openness, Innovation Performance, Innovation, Stakeholders, Vertical Integration A higher innovation performance is observed with open innovation processes N/A N QTS Ishikawa, 2019 Understand the degree how firms utilize external resources from external partners Inbound, Technological Turbulence, Competitive Intensity Awareness about technological turbulence positively influenced how firms did inbound practices N/A N QTS Kang & Hwang, 2019 Explores the importance of Radical Innovation; Tension between two radical and

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Author and

Conclusions / Considerations A B C incremental innovations Innovation; Ambidextrous Organization. innovation is a key challenge Lalic, Medic, Delic, Tasic, & Marjanovic, 2017 Analyse the innovation measures in developing countries Open Innovation, Inbound Innovation, Developing Countries. In these countries, companies are more focus on internal sources of knowledge than external N/A N QTS Lamberti, Caputo, Cammarano, & Michelino, 2016 Explores in-depth perception of the subject of Internal Assets (IAs) in open innovation by suggesting a methodology for recognizing the Open Business Models Biopharmaceutical, Inbound, Outbound, Intangible Assets and Portfolio, Open Business Models, Open Innovation, Technology Hardware And Equipment Definition of five models that together indicate the openness of a company innovative strategy N/A N QTS IM Laviolette, Redien-Collot, & Teglborg, 2016 Understand how Employee driven innovation can relate with inbound open innovation Absorptive Capacity, Employee-Driven Innovation, Inbound Open Innovation. Employee driven innovation can be a catalyst for open innovation

N/A N CS

Lee, Cho, & Shin, 2015

Examine the effect of different patents with different sources in enterprises

Inbound Open Innovation, Contract Timing, Effort, Nash Best Solution.

Patents by internal R&D sources can boost sales, profits and corporate value, but without increasing sales N/A N CS Li-Ying, Mothe, & Nguyen, 2018

Analyse how different inbound approaches can affect environmental research Environmental Innovation, Inbound Open Innovation, R&D Acquisition, R&D Cooperation, Technology Sourcing, Value Creation and Capture. New insights about the contributions of multiple inbound approaches to innovation considering the ability of companies to create and embrace distinct kinds of Environmental Innovation N/A N QTS

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Author and

Conclusions / Considerations A B C Li-Ying, 2018 Proposal of a typology on dual boundary spanning Open Innovation, Resource-Based View, Outside- In Innovation Types, External Knowledge. Innovation projects can be separated into categories, allowing an easier analysis for managers concerning the company innovation portfolio N/A N QTS IM Lo Nigro, 2016

Investigate how that partners in charge of the explorative nature of the innovation make depend on the timing of the alliance

Inbound Open Innovation, Contract Timing, Effort, Nash Best Solution. Later inbound alliances allow a higher innovative value in companies N/A N CS Lopez Flores, Belaud, Le Lann, & Negny, 2015 Proposal of the application of the Collective Intelligence (CI) study field technique, to improve individual creativity Computer Aided Innovation, Social Collaboration, Collective Intelligence, Inbound Open Innovation, Conceptual Design, It is still necessary to overcome barriers to end up with a real and open collaborative innovation N/A N CS Loureiro, Borschiver, & Coutinho, 2010 Review of technology roadmapping as a tool and the key aspects for its application

Technology Roadmapping, Technology Roadmap, Roadmaps in Chemistry. Allows the alignment of market, technology and product over time

N/A N LR Lukac, Rogic, Rihter, & Chatzimichail idou, 2012 Evaluation of the information stream in ICT businesses, exploring procedures of development, intern and externally

Open Innovation; Ict; Outside-In Process; Inside Out Process; Deutsche Telekom. The adaptation of the open innovation was exemplified using Deutsche Telekom N/A N CS

Lyu, He, Zhu, & Li, 2019 Explore the possibility of and individual firm network embeddedness can affect its open innovation practice Inbound Open Innovation Practice; Network Embeddedness; Technology Cluster; Industrial Technology Concentration Ratio Inbound open innovation shows variations in different network settings, either at firm or cluster levels. N/A N QTS

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Author and

Conclusions /

Considerations A B C

Mahringer, Rost, & Renzl, 2019

Proposal of a theoretical structure to connect open innovation measures, people involved and contextual variables Open Innovation, Inbound Open Innovation, Knowledge Absorption, Contingency View. Suggestion of a contextual view on open innovation N/A N CS IM Martovoy, Mention, & Torkkeli, 2015

Investigate inner and external sources of knowledge Inbound Open Innovation, Financial Innovation, Inter-Firm Cooperation. In a financial perspective, the crucial sources of knowledge are frontline employees, bank executives, among others. N/A N QTS Michelino, Cammarano, Lamberti, & Caputo, 2014

Fill the gap concerning the quantification of open innovation Open Innovation, Inbound, Outbound, Accounting Metrics, Bio-Pharmaceutical. A framework was proposed to measure how open innovation inflows and outflows are important. N/A N QTS IM Michelino, Caputo, Cammarano, & Lamberti, 2014 Evaluate the relationship between the company degree of openness and variables related to financial, development and context features Open Innovation, Inbound, Outbound, R&D Organization, Financial Performances, Bio-Pharmaceutical Industry Companies perform more inbound than outbound activities N/A N QTS Michelino, Lamberti, Cammarano, & Caputo, 2015b Identify open innovation models considering inbound and outbound financial transactions Open Innovation, R&D Outsourcing, Incorporation, Bio-Pharmaceutical Proposed framework provides a methodology for defining open innovation adoption models by defining expenses, profits, fresh investments and innovation-related divestments in all its parts N/A N QTS IM Michelino, Lamberti, Cammarano, & Caputo, 2015a Understanding the relationship between open innovation adoption from pharmaceutical companies' and its

Financial Performances, Inbound, Innovation Metrics, Open Innovation, Provides an accounting measure system N/A N QTS

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Author and

Conclusions /

Considerations A B C context attributes,

inner R&D, and economic performance Outbound, Pharmaceutical Industry Moraes, De Oliveira, & Miranda, 2016 Proposal of a model that approximates the meeting market and customer requirements. Management, Development, Innovation, Innovation Model. The theoretical framework used is composed by models of innovation: the technology push, the coupling innovation process, among others. N/A N QTS IM Naqshbandi, Tabche, & Choudhary, 2019 Suggestions for companies that are now embracing the open innovation Empowering Leadership, Inbound, Outbound, Employee Involvement Climate. Empowering leadership has a positive influence in open innovation adoption N/A N S Rocafort, 2017

Investigate the need for technology scouting for a successful open innovation Open Innovation, Technology Scouting, Environmental Trends, Technology Awareness Scouting allows the company to be aware of technology advances and leads to a faster growth N/A N IM Romero-Martínez, García-Muiña, & Ghauri, 2017 Assessment of the relation between outsourcing innovation and international results International Inbound Open Innovation, International Performance Human and technologic capital enhance the international performance N/A N S Seyfettinoǧlu, 2016 Evaluation of open innovation behaviours and the relation between them and social and financial results Inbound Open Innovation, Outbound Open Innovation, Firm Performance Company open innovative strategy is not the only determining factor on open innovation level.

N/A N QTS

Shi & Zhang, 2018 Investigate how inbound open innovation is affected by radical innovation capability Inbound Open Innovation, Organizational Inertia, Radical Innovation Capability Inbound open innovation affects the radical innovation capability N/A N QTS Singkarin & Liu, 2012 Identification of key process and their

Innovation, Open Innovation,

Companies explore new ideas

N/A N LR CS

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Author and

Conclusions / Considerations A B C results when a company follows open innovation models Process, Inbound Open Innovation. concerning the ability for opening the innovation process Tauraite-Kavai, 2014 Evaluation of knowledge management practices when approaching an open innovation model Open Innovation, Knowledge Management, Knowledge Creation, Inbound Knowledge Transfer Knowledge necessary for innovation cannot be acquired, but should be developed N/A N QLS Thanasopon, Papadopoulos , & Vidgen, 2018

Analyse the openness of service innovation and how it may impact its respective success Online Service Innovation, Inbound Open Innovation, Openness Competence Four key dimensions are identified at the early stage of innovation N/A N CS Theinsathid, Chandrachai, & Keeratipibul, 2009 Reveal the complexities and challenges present in managing innovation to achieve specific results Open Innovation, Technology Transfer, Polylactic Acid Value Chain, Biobased Economy Multidisciplinary nature of research development and its risks and non-linear processes constitute one of the biggest challenges N/A N QTS Wang & Zhou, 2010 Suggest outbound-revealing as a way for firms increased their successful inbound-sourcing Open Innovation, Outbound-Revealing, Inbound-Sourcing, User Innovation Revealing outbound during user innovation process would lead to a better inbound open innovation N/A N CS

Wang & Xu, 2018

Proposal of a new model that explores open innovation, customer knowledge management and radical innovation Radical Innovation, Inbound, Outbound, Customer Knowledge Management Open innovation models (inbound and outbound) have different impacts on radical innovation N/A N QTS Ye & Kankanhalli, 2013 Investigate how solvers and seekers participant can be enhanced in open networks Knowledge Brokering, Open Networks, Innovation Performance Open networks facilitate open innovation, aiming to create more value to companies, fulfilling the N/A N LR

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Author and

Conclusions /

Considerations A B C company

objectives

Zhou & Gao, 2018

Understand the role of information technologies on allowing a better exchange of different sources of knowledge in an open innovation model Open Innovation, Technological Capability, Information and Communication Technologies Established concepts and models were used for a better understanding of the shift from closed to open innovation, and will be practically tested N/A N IM Zhu, Dong, Gu, & Dou, 2017

Explore the major roles of three informal ties, namely business, universities and government, in driving open innovation processes Inbound, Outbound, Open Innovation, Informal Ties, Market Dynamism

All ties affect positively the inbound processes, but only business ties facilitate

outbound openness.

N/A N QTS

2.3. Discussion

The reports found on literature and summarized in Table 1 can be associated with three different categories: theoretical papers, where the outside-in processes and approaches are discussed; case-studies, where companies are used as a study example for open innovation analysis; and methodology/tools proposals, with new suggestions being presented in order to improve what has been done so far.

The process of open innovation has still many valuable questions that remain unanswered and that have been studied in several cases. Arrigo evaluated the importance of the market orientation as an antecedent of the open innovation process (Arrigo, 2015). In fact, it is discussed how important it is for a market-driven company to be aware of its environment, namely customers, suppliers, among others, and not to be only relying on internal ideas and knowledge, in order to anticipate environmental trends and market speciation. By including an open innovation approach, these companies are able to find new sources of customer value and to identify growth opportunities, which would not be possible in a closed system (Arrigo 2015). Chen and Liu evaluated how open innovation affects the organizational ambidexterity, which consists in the balance between explorations and exploitation and has been shown that, when equilibrated, is positively related to the success of a company. By exploring the example of some case-studies, this study showed that through open innovation processes, predictions of the achievement of organizational ambidexterity can be done, by relieving the tension in resource allocation and inspiring employees to learn proactively, coupled with a learning goal orientation process (Chen & Liu, 2019). Rocafort explores the importance of technology scouting in the success of open innovation, defending that

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organized in order to fulfil its assigned mission of collect different information and opinions from customers, suppliers and competitors, and to better support the technology development within a company. After gathering this outside information, it can be used as the starting point for the open innovation process in order to facilitate a better correspondence between the outside needs and the internal knowledge of the company (Rocafort, 2017). Huang et al. studied how the organizational inertia, which is believed to have significant effects on organization operations, can influence by open innovation processes (Huang et al., 2013). Previous studies showed that an increased organizational inertia is linked to a bigger lack of innovation in the company and to a decreased on the development and commercialization of innovative products (Nijssen, Hillebrand, Vermeulen, & Kemp, 2006). In fact, Huang et al. showed that organizational inertia has a negative influence in open innovation processes. Since open innovation leads to organizational changes, if a company is not willing to change its current situation, it is difficult for it to apply an open innovation process that implies permeable boundaries with employees that have closed boundaries. However, it is also discussed that open innovation has indeed a positive influence on the performance of the companies, once the boundaries are permeable, by generating higher profits and reducing costs (Huang et al., 2013).

In order to better evaluate how the open innovation is implemented and influences the company, as well to allow a better implementation and support of that process, different tools and platforms have been developed and tested. Aloini et al. developed a conceptual design of a platform for information and communication technologies that supports the open innovation process, to answer to the challenge the inbound process, reflecting its own specificities. For example, this tool allows the company to identify the external technology by its source (namely in publications and patents searches), as well as in internal sources (namely in suppliers and customers lists, among others). This study shows promising progress in the design of platforms that can facilitate the adoption of the open innovation process, although it still lacks validation and implementation (Aloini et al., 2017).

Li-Ying suggests a typology for the spanning of boundaries in open innovation processes, to distinct if the innovative idea is created and developed inside or outside and if the innovation process relies or not in external knowledge resources, that had not been developed so far. In fact, the boundary criterion (in vs out) remains vague to some extent, since it does not specify if it is determined by where the innovation is commercialized or by where the innovative idea is created. In this way, with a dual boundary spanning, the innovation projects can easily be sorted by categories, allowing managers to prioritize and organized the company’s innovation portfolio (Li-Ying, 2018).

Michelino et al. proposed a methodological framework for the evaluation of the adoption of open innovation processes in a financial point of view. After understanding the lack of study of the financial perspective of the open innovation processes, the researchers exploit the revenues resulting from exploiting the internal technology of a company in an external market, by using secondary data resulting from annual reports of companies. The practical validity of the developed framework was tested by considering different business models and analysing the financial data, although presenting some limitations in companies that have non-financial approaches to open innovation (Michelino et al., 2015b).

Many studies have been done considering a sample of certain companies, to have empirical results to discuss. Inauen and Schenker-Wicki evaluated the adoption and use the open innovation process in a stock-listed companies in Austria, Germany and Switzerland, using a survey. They analyse the effect of openness to universities and industries in research and development processes in the innovative process of the company. Considering the interaction with universities, a positive impact was observed relative to product innovation and respective sales. In fact, the interaction of the firms with public research institutions lead to production improvements. Regarding the analysed sample, Germany and Switzerland showed a great cooperation with universities and colleges. In terms of industry cooperation, intra-industry competition

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showed a positive influence on open innovation process, while cross-industry has a negative influence. The authors hypothesize that it might be related to the insufficient capacity of firms to acquire knowledge and technology from distinct industries and to cognitive distances between firms. Overall, the findings showed a greater innovation performance once the firm opens towards external sources (Inauen & Schenker-Wicki, 2011b).

Fu et al. analysed annual reports from biopharmaceutical companies in China in order to propose an optimization of open innovation measure processes, by applying it to empirical research. With the proposed method, authors suggest that a balance between open innovation and closed innovation can be evaluated, in order to allow entrepreneurs to control how it affects the company goal. For example, it is suggested that firms that focus on short-term performance should reduce their open innovation investment when compared to firms focused on long-term performance that should invest on inbound processes.

However, the authors highlight that several limitations still remain, such as the difficulty to measure different sources of open innovation with money, as within the financial annual reports, suggesting that, in the future, companies should discriminate better open innovation project details to allow a better understanding of enterprise results (Fu et al., 2019). Huang et al. used surveys from around 200 companies in China, to discuss how open innovation can benefit from transformative capacity as a mediator, by analysing how companies use the outside resources to enhance their innovative abilities. Their studies show that transformative capacity acts indeed as a mediating factor that allows companies to enhance inbound open innovation and create competitive advantage by successfully transform and use outside resources, acknowledging that other organizational capacities might also influence positively the open innovation processes (Huang et al., 2015).

2.4. Considerations to take from the review

In the traditional closed innovation model, businesses concentrate their innovation process on research and development, patent applications and the process of introducing their innovation on the market (Calantone & Stanko, 2007; Díaz-Díaz, Aguiar-Díaz, & De Saá-Pérez, 2006).Nevertheless, in latest years, the closed innovation model has encountered numerous environmental difficulties, in an extremely competitive company setting.

Through an open innovation process, companies must be continually vigilant for innovation possibilities through collaboration with other businesses and by listening to stakeholders and customers. By taking into account different innovation policies, accelerating the organization's innovation and marketing, the firms will generate more value (Huang et al., 2013). With this in mind, literature has approached different studies to understand the effect of open innovation in different companies, as well as the remaining gaps on understanding how this open process can affect other processes in a company.

However, how the adoption of knowledge and technologies from the outside is performed by the companies and applied to their own products remains unclear and not well described in literature. The following study attempts on filling this gap, by exploring the process by which companies can integrate outside knowledge and technology in their own production.

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Chapter 3 Research Question and

Methodology

3.1. Introduction

After exploring the existing literature regarding open innovation processes and related consequences of this model in companies, a knowledge gap was understood concerning the adoption of these innovative ideals. Since it is an important step on the successful implementation of the open innovation model, this work will focus on exploring this gap, aiming to give new insights about it. In this section, the research question will be presented, as well as the chosen design science approach and scenario to better illustrate the analysed situation.

3.2. Research Question

When implementing an open innovation process in an established company, the inclusion of external ideas or external partners is mandatory. However, analysing the literature on this subject, a knowledge gap concerning the adoption of external knowledge and technology into the company core was identified. For that reason, this work rises in order to explore this gap, by establishing the following research question: “How can companies integrate external technologies in their products, through an inbound/outside-in open innovation process?”

3.3. Design Science Approach

The design-science paradigm aims to explore to the maximum the limits of human and organizational capacities, creating innovative artefacts. It is fundamentally a problem-solving paradigm that focus on exploring all the possible solutions to answer to a specific problem. The explored solutions may define thoughts, methods, technical capabilities, and products through which information systems can be effectively and efficiently analysed, designed, implemented, managed, and used (Denning, 1997; Tsichritzis, 1997).

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Figure 1. Information Systems Research Framework (Hevner, March, Park, & Ram, 2004) Taking Figure 1 from Hevner et al. paper, which shows the conceptual framework for information systems (IS) research that combines behavioural-science and design-science paradigms to understand, execute and evaluate. In order to place and compare these paradigms, this structure is used (Hevner et al., 2004).

The requirements for an effective research can be accomplished by applying the guidelines presented in the same paper where, after analysis, the guideline 3 was adopted (Hevner et al., 2004).

Table 2. Design Evaluation Methods (Hevner et al., 2004)

This guideline regards the Design Evaluation methods, since the proposed research question focus on the integration of an external technology/product by a company. In fact, to achieve a successful adoption of this new artefact, the company must keep present in their purpose the design evaluation of the respective artefact. With this guideline, the utility, quality, and efficacy of a design artefact is rigidly proved through well-executed evaluation methods. Typically, the assessment of constructed artefacts utilizes methodologies available in the knowledge base that are divided into different methods. The method 5, Descriptive, was selected. As seen in Table 2, this method implies an informed argument when evaluating the artefact and the construction of useful scenarios around it.

5. Descriptive

Informed Argument: Use information from the knowledge base (e.g., relevant research) to build a convincing argument for the artefact’s utility

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To correctly analyse the artefact utility, it is suggested that a previous research is conducted in order to fundament the base knowledge proving that that specific technology/product is the one more suitable for the desired purpose. All relevant evidence should be gathered – any applicable research data, quotes or studies – to show evidence towards the final goal. Only after understanding the artefact and its environment, informed arguments can be created.

Scenarios are descriptions of one or more users interacting under specified conditions and constraints with a system, device, or process to achieve a goal. They provide user-and task-oriented data about the context in which a system must function. Scenarios can be described as wealthy stories or easy statements that describe the triggers and condition that lead a user to communicate with a system.In this way, different scenarios should be created around the artefact, to prove its utility and its adaptation to different situations, including the desired one.

3.4. Scenario

This section presents the scenario. This has two components, a fictitious company and a technology (patent of the University of Porto) that will be analysed and later introduced in the same company.

Presentation of the “Fictional Company” (FC Systems)

FC Systems was founded in 1994 with a simple idea: to give those caring for any type of cultural heritage materials, a software foundation to manage and share their collections and archives. FC produces an interwoven platform of products that share the same database and are designed to answer to the collections management needs in the most efficient and cost-effective way. FC clients include many important museums. This firm promise, as a collections management company, is to never waver in their dedication to their clients as they use their deep knowledge of collection management and technology to create the best tools to efficiently help collectors.

FC aims to provide Museums with state-of-art technology solutions to manage their mesological portfolio and art collections, further enabling unforgettable experiences to Museums visitors. This company intends to always keep the best relationship with their clients, by being aware of their problems and weakness and directing their research in order to provide effective solutions. And as for their vision, FC aims at being a leading software house in providing state-of-art technology solutions to Museums.

Presentation of the Technology1 (inbound)

In the modern world, although several technology steps have been achieved, blind or visually impaired people still face great challenges. For example, in a public place such as a metro station, normal activities are impaired, since the information about the space and the services is practically inexistent for these people. Although global positioning system (GPS) or similar signals have helped to overcome these situations, in places where the coverage is not ideal, the guidance for blind or vision disabled persons is compromised.

1_{Patent from University of Porto which can be accessed here:} https://upin.up.pt/pt-pt/tecnologias/orientation-navigation-and-information-system-specially-adapted-blind-or-low-vision

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In order to answer to this urgent need, the chosen technology was produced, providing an “Orientation, navigation and information system specially adapted for blind or visually impaired people”. The technology uses sound sources to overcome the inexistence of GPS or similar signals and still provide orientation and navigation to its users. With this system, the information usually presented in a visual form, either in public or private places, is available also for those who have their vision impaired. The orientation is possible by the usage of sound sources that can be distinct from environmental noises, by the respective users. To successfully accomplish this, an integration of both information and navigation resources in a system is required. This system, which aims to keep it simplicity, is allied to a wireless personal communication device. This device, named mobile terminal, can be a mobile phone, although other wireless communicators can be considered, if they can offer audio bi-directional communication and support the necessary adaptations needed. Another component of the presented technology regards the sound producing devices, which are already assembled inside the buildings or facilities. The local wireless network previously mentioned is also an important component, since the mobile terminal accesses to the devices through it and mobile’s location is also ensured by the network. The location system acts indeed as another important component of the technology, by providing the adequate localization of the mobile terminal position.

This technology is designed to be adopted by entities which are managing public or private transport facilities like metropolitan stations, airports, bus and train stations but also public or private spaces, as hospitals, universities, shopping center and others, in order to overcome their lack of adaptability to blind or visually impaired people.

3.5. Conclusion

The raised research question focusses on understanding how a company can integrate internally an external source of technology. The analysis of the desired technology should be extensively done, in order to gather important knowledge that might help evaluating its usability and the desired context. To achieve that in the context of the proposed research question, a scenario was created, with two main parts involved – a fictional company, that recognizes a problem in its market and focus on finding a solution that can solve it; and an external developed technology that matches the requirements needed for fulfil the company problems.

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Chapter 4 Proposed Model

4.1. Introduction

After setting up the research question and its respective scenario, it is crucial to understand how the problem should be addressed and which models should be employed. If the situation previously described is not framed within the most suitable model, the research question might not be answered. Therefore, the choice of the model to use, as well as its full understanding are an imperative step in this work.

4.2. Framing the Problem

The current problem addressed in this dissertation, corresponds to a FEI stage, which starts when an opportunity appears, due to various possibilities, and is analysed in terms of being worthy of further research, exploration, and evaluation. The stage then finishes when a company chooses either to invest in or to end with the idea (Khurana & Rosenthal, 1998; Thanasopon, Papadopoulos, & Vidgen, 2018).The front-end literature provides several frameworks highlighting different phases/processes/activities. The one chosen in this work is adapted from a framework used by Ariane Rodrigues Pereira, a fellow colleague from the Faculty of Engineering of the University of Porto (FEUP), during her doctoral studies in Industrial Engineering and Management.

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The scope of this research question is the Front End of Innovation inside an existing company. For a better understanding, Figure 2, 3, 4 and 5clarify different relationships between Front End of Innovation key players. Figure 2 frames this issue by positioning the FEI Agile New Concept Development (NCD) process in the scope of the enterprise Strategic Purpose and the enterprise Portfolio Planning and Management. In fact, the FEI Agile NCD allows the production of New Concepts, however it derives from a strategic purpose defined by the company and is framed after the analysis of the company portfolio. This step is crucial in order to evaluate the technology produced within the company, as well as ideas and knowledge that might have been discussed or gathered after collaborations with exterior partners or by technology scouting. The NCD arises with the ultimate objective of developing a new concept, for a product/service. Figure 3 positions the opportunity in the enterprise purpose and strategy. It clarifies how a business propose can be achieved by finding an opportunity with certain goals, mission and vision that correspond to the characteristics established as desired in the strategic purpose.

Inbound technology: a fictional scenario for a better understanding of the process of adopting external technologies

Faculdade de Engenharia da Universidade do Porto