Innovation key success factors for sme acting on niche markets

White Paper INNOVATION KEY SUCCESS FACTORS FOR SMEs ACTING ON NICHE MARKETS Magnus Penker, July 2011 magnus.penker@bearing-consulting.comUnited Kingdom Sweden Spain Switzerland South Africa5th floor, Imperial House Jakobs Torg 3, 1tr Paseo de Gracia 44, 8C 11 Rue du Port 2nd Floor, 1 Sandton Drive15-19 Kingsway 111 52 Stockholm 08007 Barcelona 1204 Genève Sandton 2196London WC2B 6UN Sweden Spain Switzerland JohannesburgUnited Kingdom Ph: +46 84 11 87 10 Ph: +34 66 005 6419 Ph: +41 22 575 2023 South AfricaPh: +44 208 133 3125 Fax: +46 85 010 9637 Fax: +34 93 396 1973 Fax: +41 22 594 8005 Ph: +27 11 327 8705Fax: +44 845 280 3818 Fax: +27 86 685 8444 1

INNOVATION KSFs FOR SMEs ACTING ON NICHE MARKETSTABLE OF CONTENTS1. INTRODUCTION TO BEARING 32. EXECUTIVE SUMMARY 43. RESEARCH OBJECTIVES, PROBLEMS AND SCOPE 54. REVIEW OF CURRENT THINKING 64.1. Type of innovations 64.2. Strategic innovations 84.3. Open innovation 94.4. Leadership and culture 114.5. Strategy, capabilities and key success factors 124.6. The innovation process 154.7. Market structure and competition 184.8. Conclusions 205. INVESTIGATION 225.1. Objectives, research questions and hypothesis 225.2. Investigation design and methodology 225.2.1. Research methodology 225.2.2. Questionnaire design 235.2.3. Sampling strategy 235.2.4. Data analysis techniques 235.3. Findings and analysis 235.3.1. Can innovation lead to competitive advantages? 285.3.2. Is there any difference if acting on an oligopolistic market compared with other market structures? 285.3.3. Which type of innovations has the most impact on competitive advantages? 295.3.4. What are the perceived key success factors when establishing an innovation process in order to gain competitive advantages on an oligopolistic market? 295.3.5. Linking innovation personas to KSFs 376. CONCLUSIONS AND RECOMMENDATIONS 396.1.1. Competitive advantages 396.1.2. Differences on oligopolistic markets 406.1.3. KSF 406.1.4. Organisational aspects 416.1.5. Recommendations 417. REFERENCE LIST 45 2

INNOVATION KSFs FOR SMEs ACTING ON NICHE MARKETS1. INTRODUCTION TO BEARINGBearing Consulting Ltd. (“Bearing”) is a United Kingdom based management consulting company. Wehave offices in London, Stockholm, Barcelona, Geneva and Johannesburg and we work with projectsworld-wide. Bearing Consulting is a partnership, owned by senior consultants. The business wasestablished in 2001 and has operated under the Bearing brand name since 2004.We work in close cooperation with academic research institutions and many international andregional Innovation Systems. Some of our consultants have an academic career in parallel with theirconsulting practice. 3

INNOVATION KSFs FOR SMEs ACTING ON NICHE MARKETS2. EXECUTIVE SUMMARYIn a world of hyper competition, innovation is imperative to gain competitive advantage. However,the coin has a flip side, as innovations are often expensive and can be easily imitated by competitors.In this study, the nature of small and midsize enterprises (SMEs) acting on niche markets with fewplayers have been investigated and explored, resulting in a set of Key Success Factors (KSF). The fourkey research questions answered in this study are: Can innovation lead to competitive advantages?Which type of innovations has the most impact? Are there any differences acting on a niche market(with oligopolistic characteristics) compared with other market structures? What are the key successfactors when establishing an innovation process?The investigated sample of respondents are employed, or work for firms, up to the size of 250employees distributed all over the world within the verticals of professional services, merchandising,retail and Technology-Media-Telecommunications (TMT).One of the key findings is that management system innovation, sales and marketing innovations, andproduct innovation confer the strongest competitive advantage. There is also trade aspect to betaken into consideration, e.g. merchandising and retail generally rank product innovation highestwhile professional services and the TMT sector rank process innovation as most important.Moreover, data analysis confirms that technology driven innovations and management innovationshave the most positive impact on competitive advantage. Sustainability of the competitive advantageis, however, not possible to judge according to the investigation or the literature review, as previousresearch says that innovation can lead to sustainable competitive advantages, while more recentresearch indicates that it might be problematic to gain sustainable competitive advantages. It is likelythat static KSF need to be replaced with a more dynamic approach, but this is out of the scope ofthis study and part of Bearing Research Program.It is also surprising that, among respondents, using innovation to keep competitors out was stronglycorrelated with being a technology driver but only weakly correlated with the capability ofunderstanding emerging technologies and trends. This calls for a recommendation to developcapabilities for exploring and understanding emerging technologies and trends.Generally speaking, SMEs are strong in the ideation phase and weak in the commercialisation phase,following the pattern observed in larger corporations. However, the investigated SMEs do not useoutsourcing to strengthen their capabilities, which is also a bit surprising, as this could potentiallyincrease their ability to move into new areas. This is also one of the recommendations made to SMEsgoing forward with radical and technology driven innovations.The conclusion of the study is that SMEs acting on niche markets benefit from increased profit and/orkeeping their competitors out. Perceived KSFs are partly dependent upon the purpose of innovation;whether the firm is trying to keep competitors out or if the firm is trying to increase its profit. Intotal, there are 21 KSFs, which are all important but different ranked according to the purpose, thetype innovation work, the market structure as well as the trade in which the firms operates. At theend of the study, five comprehensive recommendations are made together with conclusions anddiscussions about the findings. 4

INNOVATION KSFs FOR SMEs ACTING ON NICHE MARKETS3. RESEARCH OBJECTIVES, PROBLEMS AND SCOPEThe research problem is investigating how innovations can be used to gain competitive advantage,and the level of analysis is set to analyse on a company level (which is also the entity). The scopeof the investigation is niche market with oligopolistic market structure and SME companies, while theobjective of the investigation is to identify perceived KSFs when establishing an innovation processto gain competitive advantages through innovations.The research questions are: Can innovation lead to competitive advantages? If yes, which type ofinnovations has most impact on competitive advantages? Moreover, are there any differences if actingon a niche markets with oligopolistic market structure compared with other market structures?Finally, what are the KSFs when establishing an innovation process to gain competitive advantages ona niche market? 5

INNOVATION KSFs FOR SMEs ACTING ON NICHE MARKETS4. REVIEW OF CURRENT THINKINGAccording to (Encyclopedia Britannica, Inc., 1974) an innovation is „the introduction of newtechnologies, held by some writers to be a primary factor in economic growth which is the core ofmy research problem‟. Innovations are driven by opportunities and capabilities. Drucker (1998)pointed out four areas of opportunities which exist within a company: unexpected occurrences,incongruities, process needs and industry and market changes. Outside the company, there are threeadditional sources of opportunities: demographic changes, changes in perception and new knowledge.It is also possible to consider the linkage to other organisations as an asset in itself. Tovstiga andBirchall (2005) argue that firms are nodes in lager networks which create value by transformingopportunities into businesses by strategic deployment of capabilities. Moreover, they argue that firmsare continuously looking for opportunities within the environment, turning them into a competitiveadvantage through transformation innovation, and ultimately gaining profitable growth. Tosummarise, innovation can be seen from two perspectives; from the internal perspective of a firm‟scapabilities, and from the external market perspective where the performance can be measured andsuccess judged (Tovstiga & Birchall, 2005).There are three kinds of innovation strategies that most companies apply to; there are need seekers,market readers and technology drivers. The need seekers look for potential opportunities byapplying superior understanding of the market and rapid go-to-markets, market readers capitalise onexisting trends and understanding of markets, while technology drivers drive for breakthroughinnovations based on new technology (Jaruzelski & Dehoff, 2010).In current thinking, there are several types of innovations that are discussed, as well as what is calledstrategic innovation and innovation of business models. Another trend, known as open innovations,is where innovations are driven in symbiosis with external parties. Many practitioners, as well asacademics, point out the importance of building the right capabilities, adopting the leadership style aswell as understanding and developing corporate culture to maximise the value of innovation work.The literature review is divided into sections reflecting these different aspects of innovationmanagement.4.1. Type of innovations„Innovation can be categorised by level of aggregation, from the first level which is improvements onan individual level, to the second level which is functional level like processes, to the third level whichis the company level and typically concerning the value chain and radical product and serviceinnovations to the last and the fourth level which is the industry level typically concerningbreakthrough innovations changing the playing field. Another way of categorise innovations iswhether it is aiming at a new market or not as well as the level of aggregation, or scope, which canbe combined as illustrated in Figure 1 (Assink, 2006).‟„The nature of innovations can be described by the scope of innovations in combination with either aquantifiable outcome or a non-quantifiable outcome (Tovstiga & Birchall, 2005)‟. Both Tovstiga andBirchall (2005) and Assink (2006) point out scope, or aggregation level, as one of two characteristicsand the market or the outcome as the other characteristic. Tovstiga and Birchall (2005) point outquantifiable and operational scope as institutional innovations while Assink (2006) points outtechnology, concept or product innovations with existing means on an existing market as incremental 6

INNOVATION KSFs FOR SMEs ACTING ON NICHE MARKETSinnovations. Moreover, Tovstiga and Birchall (2005) call non-quantifiable and strategic scope radicalinnovations, while Assink (2006) points out new technology, concept or product innovations on anew existing market as breakthrough innovations. Also see Figure 1. New technology/ Disruptive Breakthrough process/concept Technologies innovations Existing technology/ Incremental Disruptive business process/concept innovations concepts Existing market New marketFigure 1 Innovation Framework (Source: Assink, 2006)Kim and Mauborgne (1997, 2005) argue that the conventional approach to staying ahead ofcompetitors is less successful than making the competitors irrelevant by applying what they call „valueinnovation‟, which is also the cornerstone of „blue ocean strategy‟. Kim and Mauborgne (1997) defineconventional logic as the current industry logic companies applying getting competitive advantages aswell as to keep existing customers and expand the customer base through line expansions. Later,Kim and Mauborgne (2005) renamed conventional logic as „red ocean strategy‟ (Amabile, 1998;Hamel, 2006).There are three platforms for value innovations and they are product, service and deliveryplatforms.According to Kim and Mauborgne (2005), when applying blue ocean strategy based onvalue innovation, there are six principles to follow;  Reconstruct market boundaries  Focus on the big picture  Reach beyond existing demand  Get the strategic sequences right  Overcome key organisational hurdles  Build in execution into strategyExcept for the dimensions of scope and market innovation, these might be categorised within atypology defined by Trott (2008) and illustrated within Table 1. 7

INNOVATION KSFs FOR SMEs ACTING ON NICHE MARKETSType of Innovation ExampleProduct Innovation The development of a new or improved product.Process Innovation The development of a new manufacturing process.Organisational Innovation A new venture division; a new internal communication system; introduction of a new accounting procedureManagement Innovation TQM (total quality management) systems; BPR (business processes re-engineering).Production Innovation Quality circles; just-in-time (JIT) manufacturing systems; new production planning software.Commercial/Marketing New financing arrangements; new sales, Delivery innovations inInnovation sales, market approaches, e.g. direct marketing.Service Innovation Internet-based financial services.Table 1 Typology of innovations adopted with explanations and examples (Source: Trott, 2008)Understanding the typology of innovations will contribute to the investigation when structuring thedata collection and analysing the collected data.4.2. Strategic innovationsStrategic moves, as Kim and Mauborgne (2005) named it, are managerial actions and decisions thatfundamentally change the business, opening new markets resulting in large leaps in demand.Moreover, Kim and Mauborgne (2005) argue that strategic moves give the possibility of profitablegrowth instead of head-to-head earlier in this section referred as red ocean strategy. Govindarajanand Trimble (2005) point out that strategic innovations and entrepreneurship are imperative tosuccess in a globalised world where the economic environment is rapidly changing. Moreover, it is inthe process of strategic innovations that potential customers are explored, delivery of value isconceptualised and analysed, and the end-to-end value chain explored and redesigned. Strategicinnovations are like experiments, characterised by the fact that they leverage on an organisationexisting capabilities but are not line extensions, are launched before competitors, require at leastsome new capability and knowledge, are unprofitable the first period of time and are initially hard tojudge where successful or not. Strategic innovations are driven as projects and use existing businessas a platform, while management innovations are about changing the platform, the principle of thebusiness. „A management innovation creates long-lasting advantage when it meets one or more ofthree conditions: the innovation is based on a novel principle that challenges management orthodoxy;it is systemic, encompassing a range of processes and methods; and it is a part of an ongoing programof invention, where progress compounds over time‟ (Hamel, 2006:74).Management innovation is about management process innovation while other innovation is aboutbusiness processes like the supply chain and customer support. Typically managerial work is settinggoals, coordinating the use of resources and activities, acquiring knowledge, identifying anddeveloping talents, as well as building and nurturing relationship. According to Hamel (2006), theelements of management innovation are: 8

INNOVATION KSFs FOR SMEs ACTING ON NICHE MARKETS  Commitment to a big management problem  Novel principles that illuminate new approaches  A deconstruction of management orthodoxies  Analogies from atypical organizations that redefine what‟s possibleA business model „consists of four interlocking elements that, taken together, create and delivervalue‟ (Johnson et al., 2008 : 52), and is one of several possible management innovations. Accordingto Teece (2010), new product development should be complemented with a new business modelwhich defines the go-to-market strategy and the capture-value strategy in order to secureprofitability. Teece (2010) point out two extremes of business models; an integrated business modelin one end and outsourced business model in the other end. The integrated business model suggeststhat all activities are done in-house, from design, manufacturing to sales and distributions. Theoutsourced model suggest focusing on the core capabilities and outsourcing the rest, one examplementioned is Dolby (high fidelity noise reduction) which is a pure licensing model where everything isoutsourced.One of the major reasons why new business models do not generate new growth is that the currentbusiness model is not understood by the management which also make it hard to judge whether touse existing business model or to reinvent it. Johnson et al (2008) explain that the elements of abusiness model are composed of a profit formula, key resources and key processes. The profitformula is defined to be a revenue model, cost structure, a margin model and resource velocity,which refers to the inventory turnover and other aspects of how to utilise resources. The keyresources are about what‟s needed to operate while the key processes are about how to operateand measure.Strategic innovations leading competitive advantages and profitable growth is one of the aspects to beconsidered when investigating the current research questions.4.3. Open innovationOpen-market innovation is about the free trade of innovations involving external parties within theinnovation process. Innovation exchange, innovation databases, access to venture capital andinnovation agents are driving the open-market innovations that has a positive impact on the ownorganisation such as insights what‟s the core business actually is, improved employee retention andpotential better revenues through licensing fees (Rigby & Zook, 2002). Henry Chesbrough, a well-known champion of open innovation, argues that open innovation can be seen as inside-out oroutside-in. „Outside-in is where companies are using external ideas in its business, and inside-out iswhere the companies offer open platforms and technologies to the market. Amazon is an examplewhere the internal web based systems is offered to be used by customers driving revenue, and LEGOwhere they opened up to external parties to develop their new concept of programmable toy robotscalled MindStorm™. The key to competitive advantage is to understand the service value web wherethe company and the market interact creating value‟ (Chesbrough, 2011). Figure 2 shows the newservice value web as Chesbrough (2011) argues „focus on what is primary value creating andcomplement Michel Porter‟s Value Chain‟s week spot, namely the customer interaction part of thevalue chain‟. 9

INNOVATION KSFs FOR SMEs ACTING ON NICHE MARKETSFigure 2 A Service Value Web (Source: Chesbrough 2011)Huston and Sakkab (2006) point out that external parties, or „networks‟, are not guarantees forearning money. It is more like a system; dependent on how you use it you can bring ideas andcapabilities together – Connect and Develop, which also is the basis and name of Proctor & Gamble‟smodel for innovations‟. Nambisan and Sawhney (2007), on the other hand, argue that ideas and/ormarket-ready concepts can very well be bought, which is a kind of outsourcing in itself. Whenshopping ideas or market-ready both concept industry factors as well as company factors have to betaken into consideration. Industry factors that typically need to be taken into consideration are paceof technological and market change, innovation potential, and costs. Typically, company factors to beconsidered are the purpose of the innovation, product capabilities, company size and risk appetite.One example of outside innovations, where external parties are driving innovations, is Nintendo, amanufacturer of hardware game consoles which encourages third party businesses to develop andsell games on their platform (Boudreau & Lakhani, 2009). „From our research, we have identifiedthree critical issues that managers should take into account when they make the decision [startingwith open innovations]. Specifically, the discussion must look at: (1) the type of innovation, (2) themotivation of the individual innovating and (3) the nature of the platform business model‟ (Boudreauand Lakhani, 2009:70).The motivation of external innovators can be divided into extrinsic and intrinsic motivators, asexplained by Boudreau and Lakhani (2009), where open markets are driven by extrinsic motivatorssuch as money and need for development while communities are driven by intrinsic motivations suchas identity, fun and intellectual challenges. An example of a community is Linux and an example ofopen market is iTunes. There are three kinds of platforms, integrator platforms, product platformsand two-sided platforms. The integrator platforms are platforms such as iTunes and iPhone wherecustomers get in contact with innovators through the platform, while product platforms such asGore-Tex offer external innovators the possibilities of innovation and selling to customers, and thetwo-sided platform is typically affiliate programs where external innovators directly interact withcustomers. 10

INNOVATION KSFs FOR SMEs ACTING ON NICHE MARKETSHowever, there are also concerns such as intellectual properties might be tricky to handle whenpeople outside the organisation is generating ideas, as well as many companies have difficulties usingthe results (Brinkinshaw, Bouquet, & Barsoux, 2011).Within the investigation, the open innovation market was one of the possibilities to investigate inorder to gain competitive advantages on an oligopolistic market. Moreover, the linkage to thebusiness model was of interest to the investigation.4.4. Leadership and cultureRigby et al. (2009) argue that creative fashion businesses are virtually always lead by a right-brainindividual with imagination in partnership with a left-brain individual with analytical skills. Anotherpossibility of getting the dynamics is to „assemble small incubation teams to help directors refine theirown ideas‟ (Catmull, 2008). According to Leonard and Straus (1997), the mix of the teams isimportant, and ‟if you want an innovative organisation, you need to hire, work with, and promotepeople who make you uncomfortable… [y]ou need to understand your own preferences so that youcan complement your weaknesses and exploit your strengths‟ (Leonard & Straus, 1997). Accordingto Kelly & Littman (2005), there are ten typical personas needed to drive creativity through anorganisation. „The Devil´s Advocate may never go away, but on a good day, the ten personas cankeep him in place‟ (Kelly & Littman, 2005).The idea behind Kelly and Littman‟s (2005) ten personas is to create a climate and culture stimulatinginnovative working, from idea to results. One person might have one or several personas and theimportant thing is to make sure all profiles are present within an organisational context to stimulateand support the innovation processes. The ten personas are divided into learning personas,organisational personas and building personas. The learning personas are individuals digging for newsources and knowledge, while the organisational personas are the ones structuring, challenging andorchestrating the work. The building personas are typically the intellectual architects, the storytellerand the caregiver as well as the one setting up a proper environment.People, team composition and leadership are all important components as well as the process ofrunning the creative work. Breakthrough thinking is about orchestrating the brainstorming processasking the right questions and not just let people brainstorm without any guidance. Generallyspeaking, people are not very efficient when running unstructured and abstract discussions withoutclear goals or at slicing data in all kinds of ways. Instead exploring unexpected success, looking atother trades with similar challenges and boundaries as well as examine binding constraints are moreeffective ways of orchestrating the creative processes (Coyne, Clifford, & Dye, 2007).Moreover, people need to be motivated and encouraged. The motivation is both intrinsic andextrinsic, however just extrinsic motivation is not enough, and if not complemented with intrinsicmotivation, it can actually destroy the creativity as people might feel controlled. The intrinsicmotivation is the strongest mean and gives the work meaning. It can be achieved by assigning theproper assignments to the right people, give freedom, allocate resources and encouraging work(Amabile, 1998).A well-known innovative practitioner, Steve Jobs, has developed seven principles for breakthroughthinking and success. Gallo (2011) has documented Steve Job‟s seven principles in his book; 11

INNOVATION KSFs FOR SMEs ACTING ON NICHE MARKETS ‟Principle 1: Do What You Love‟ (Gallo, 2011:13) ‟Principle 2: Put a Dent in the Universe‟ (Gallo, 2011:43) ‟Principle 3: Kick-Start Your Brain‟ (Gallo, 2011:79) ‟Principle 4: Sell Dreams, Not Products‟(Gallo, 2011:103) ‟Principle 5: Say No to 1,000 things‟ (Gallo, 2011:135) ‟Principle 6: Create Insanely Great Experience‟ (Gallo, 2011:173) ‟Principle 7: Master the Message‟ (Gallo, 2011:197)A key part of the problem is that different kind of innovation problems call for different kind ofsolutions. Just a few different styles of strategy innovation seem to solve innovation problems in themost successful firms (Loewe, Williamson, & Wood, 2001). The five styles are given metaphoricnames and are:The Cauldron: An entrepreneurial style where the business model is frequently challenged.The Spiral Staircase: A style where you climb upwards without losing the over-all goal.The Fertile Field: A style where the organisation tries to use existing capabilities and resources ina new way.The PacMan: A style where you invent, outsource and finance start-ups.The Explorer: A style where you explore possibilities and invest time and money in them withoutdemanding short-term profit.Govindarajan & Trimble (2005) have pointed out the importance of letting strategic innovationsbecome new ventures where they borrow resources from the corporation (mother company) butare not influenced by past success or ideas about do and don‟ts. Ventures might be spin-offs,strategic experiments or innovations with business models and all have in common that they arestrategic innovations driven as separate ventures founded, financed and deployed with resources(staff, systems, structures, culture) by the corporation but are autonomic and eventually lead byexternal hired management. (Govindarajan & Trimble, 2005).According to Day (2007), innovations can be structured and managed within a portfolio to handlerisk and revenue. „By managing potential revenue and risk within a portfolio of innovation projects,better return can be reached over time‟ (Day, 2007).According to reviewed literature, it seems as though leadership, culture, how to put together teamsin combination with risk and portfolio management of innovation process as well as potential andcontrolled spin-off of strategic innovation projects are fundamental to success. Insights gained in thispart of the literature review can be used to structure the data collection within the investigation inorder to understand and explore how innovation work can be, and is, structured in terms ofleadership style, culture, team composition, portfolio and risk management as well as how creativityis stimulated.4.5. Strategy, capabilities and key success factorsAccording to Jaruzelski and Dehoff (2010), most of the world‟s 1000 innovation top spenders followone of following three innovation strategies: 12

INNOVATION KSFs FOR SMEs ACTING ON NICHE MARKETSNeed seekers, companies actively working with their end-customers understanding how to developand offer superior value to the market.Market readers, watching and analyzing market trends and capitalise on proven trends.Technology drivers, using new technologies to solve problems, sometimes not articulated. Can beboth disruptive as well as improvements.Organisations need to renew themselves and today‟s business environment is especially demandingand is characterised by rapid changes in demand, technology and competition. Innovation is driven bytechnology competence as well as customer competence such as customer insights, distributionchannels, communication and brand as well as reputation management (Danneels, 2002). The abilityto learn about customers and new technology is a critical capability in today‟s competitive landscape.A capability „represents a distinctive and superior way of allocating, coordinating, and deployingresources‟ (Amit and Schoemaker, 1993; Schreyogg and Kliesch-Eberl, 2007, cited by Flynn, Wu, andMelnyk, 2010:247). Moreover, capabilities are firm-specific, emerge step-by-step, are tacit, dependentupon the decision maker and are empirically validated over time (Flynn, Wu, & Melnyk, 2010).Tovstiga and Birchall (2005) argue that successful innovation is strongly linked to capabilities to gainknowledge, learn and change. According to Tovstiga & Birchall (2005:266), „the firm‟s capabilities arethe internal competitive activities with which the firm intend to fulfil and deliver on the key successfactors [which are related to the industry]‟. However, smaller firms tend to outsource their coreorganizational competencies, while medium-sized firms tend to outsource non-core activities (Haq &Sen, 2011).Driving for disruptive innovation is related to external factors as well as internal factors and certaincapabilities. Assink (2006:219) states that disruptive innovation capabilities are ‟the internal drivingenergy to generate and explore radical new ideas and concepts, to experiment with solutions forpotential opportunity patterns detected in the market´s white space and to develop them intomarketable and effective innovations, leveraging internal and external resources and competencies‟.Moreover, Assink (2006) has identified five clusters of key inhibitors of those disruption capabilities: Adoption barriers, meaning many successful enterprises losing their innovation edge only working with improvements and not disruptive innovations and out-of-the-box thinking. Mindset barriers, meaning many firms have problems to unlearn. Risk barriers, typical not-invented-here syndrome and focus on old experience and knowledge that were relevant and true in the past. Nascent barriers, lack of motivating people being innovative and creative when the company grows. Infrastructural barriers, at first there is challenges with standards and after launch challenges with conservatisms on the market.As earlier stated, Jaruzelski & Dehoff (2010) pointed out three kinds of innovation strategies, ofwhich the technology drivers were the disruptive one. All three strategies are shown in Figure 3,which also show how Jaruzelski & Dehoff (2010) link critical categories of capability to the threedifferent strategies where disruptive technology driver‟s success is especially linked to the capabilityof understanding emerging technologies and trends as well as product life-cycle management.According to this literature review, it seems that different strategies call for different capabilities and 13

INNOVATION KSFs FOR SMEs ACTING ON NICHE MARKETSthat these capabilities are linked to the fulfilment of key success factors in the trade. Technologydriven strategies call for a culture of motivation, unlearning, challenging, opportunism, high focus onproduct-life cycle and infrastructural issues as well as being able to allocate, coordinate and deployingresources (Tovstiga and Birchall, 2005; Assink, 2006; Flynn et al., 2010; Jaruzelski and Dehoff, 2010).Figure 3 Critical and Specific Capabilities by Strategy (Source: Jaruzelski & Dehoff, 2010)The concept of KSFs can be used in several ways and one of these ways is „as a description of themajor skills and resources required to be successful in a given market‟ (Grunert & Ellegaard,1992:Executive Summary). KSFs can be divided into perceived and actual key success factors. Theperceived KSFs are measured with interviews and actual KSFs by collecting objective or semi-objective data that shows correlation between cost and perceived value. There are several sourcesof KSFs, which can be identified within the industry, the competitive strategy and the company‟sposition. If a KSF matches a firm‟s strength, i.e. one of its capabilities, this will cause a positive impacton the performance of the firm within the market place. However, to be successful the companymust be able to be used within a cost effective way, otherwise it will just be a slack (Grunert &Ellegaard, 1992).Tovstiga and Birchall (2005) state that „examples of key success factors include the ability to:  Deliver superior value through products and services  Carry out competitive manufacturing and commercial process reviews  Attract superior talents, employees with critical expertise and skills  Grow the business through competitive pricing and marketing image  Establish and maintain a long-term relationship with satisfied customers…‟ 14

INNOVATION KSFs FOR SMEs ACTING ON NICHE MARKETSMoreover, Tovstiga and Birchall (2005) also point out that not all capabilities are always fullyexploited and might have a strong or a week impact on the performance of the firm.Jaruzelski and Dehoff (2010) point out that innovative companies are coherent with the capabilitiesshown in Table 2 are in general more differentiated and have higher margin (EBITDA) as well ashigher market capitalisation relative to their competitors. Category Capability Ideation Supplier and distributor engagement in ideation process Independent competitive insights from the marketplace Open innovation/capturing ideas at any point in the process Detailed understanding of emerging technologies and trends Deep consumer and customer insights and analytics Project selection Strategic disruption decision making and transition plan Technical risk assessment/management Rigorous decision making around portfolio trade-offs Project resource requirement forecasting and planning Ongoing assessment of market potential Product Reverse engineering development Supplier–partner engagement in product development Design for specific goals Product platform management Engagement with customers to prove real-world feasibility Commercialisation Diverse user group management Production ramp-up Regulatory/government relationship management Global, enterprise-wide product launch Product life-cycle management Pilot-user selection/controlled rolloutsTable 2 The Most Important Innovation Capabilities (Source: Jaruzelski & Dehoff, 2010)Within the investigation the concept of KSFs, capabilities and strategies, Jaruzelski and Dehoff‟s(2010) framework of the most important capabilities for innovation can be used to structure datacollections as well as serving as a tool for analysing the collected data.4.6. The innovation processManaging innovation work is related to uncertainty and, according to Trott (2008), there can beuncertainty within the process or the outcome or a combination, which is illustrated in Figure 4.Application engineering is a typical innovative product development managed by a well-defined 15

INNOVATION KSFs FOR SMEs ACTING ON NICHE MARKETSprocess, while development engineering is more unstructured but with a well-defined goal. Theexploratory research are also referred to as blue sky as it is up in the clouds working with newtechnologies not fully understood with a fuzzy goal or idea what to achieve (Trott, 2008). High Applications Exploratory engineering research Uncertainty about output Combining market Development opportunities with engineering technical capabilities Low Low High Uncertainty about processFigure 4 Pearsons uncertainty map (source: Pearson, 1991 cited by Trott, 2008)There is a lack of a general innovation process, covering all aspects of innovation management.However, New-Product-Development Processes are most common and the general steps are:  Idea generation; initial screening and preliminary assessment  Definition; market analysis and preliminary financial analysis, decision on business case  Development  Post-review  Validation; including in-house-tests and pre-commercialisation decision  Commercialisation  Post-implementation reviewProjects typically have a sponsor and en executive team that make decisions about each tollgate.Often projects are organised in portfolios, which are managed to create maximum impact at adefined level of risk (Tovstiga & Birchall, 2005).Another view on innovation management, rather than a traditional process approach, is Sawhney,Wolcott and Arroniz‟s (2006) innovation radar, shown in Figure 5, which is a 360-degree tool to mapand benchmark innovation work. The innovation radar is a way of analysing, in a holistic way, theoutcome of innovation work in terms of customer value as well as a benchmark against other actorson the market. Moreover, it is way of getting the whole picture not missing any relevant aspect ofwhat to innovate gaining customer value (Sawhney, Wolcott, & Arroniz, 2006). 16

INNOVATION KSFs FOR SMEs ACTING ON NICHE MARKETS Offerings (What) 7 Brand Platform Case 1 6 5 Case 2 Networking 4 Solutions 3 2 1 Presence (Where) 0 Customers (Who) Customer Supply Chain Experiance Organization Value Capture Process (How)Figure 5 The Innovation Radar (Source: Sawhney, Wolcott, & Arroniz, 2006)The value of innovation, generated within an innovation process, can be measured by applying KeyPerformance Indicators (KPI) as shown in Table 3. The KPIs are divided into three groups, ideageneration, conversion and diffusion of the innovation (Hansen & Birkinshaw, 2007). 17

INNOVATION KSFs FOR SMEs ACTING ON NICHE MARKETS Idea Generation Conversion Diffusion In-House Cross- External Selection Development Speed Pollination Do Do we Do we Are we Are we good Are we good at people in create secure good at at turning diffusing our unit good ideas enough screening ideas into development create by working good ideas and viable ideas across the Key Questions good across the from funding products, company? ideas on company? outside the new businesses, their firm? ideas? and best own? practices? Number Number of Number of Percentag Percentage of Percentage of of high- high-quality high-quality e of ideas funded ideas penetration in Key Performance Indicator quality ideas ideas generated that lead to desired ideas generated generated that end revenues; markets, generated across from up being number of channels, within a units. outside the selected months to first customer unit. firm. and sale. groups; number funded. of month to full diffusion.Table 3 Innovation Management KPI (Source: Hansen & Birkinshaw, 2007)The generic process steps „The stage gate process at Agilent‟ (Tovstiga & Birchall, 2005), the„Innovation Radar‟ (Sawhney, Wolcott, & Arroniz, 2006) as well as Hansen & Birkinshaw‟s (2007)KPIs are all usable tools when discussing KSF and looking at how to measure and manage them.4.7. Market structure and competitionThirty years ago, Michael Porter introduced his framework „Five Forces‟ (Porter, CompetetiveStrategy: Techniques for Analyzing Industries and Competision, 1980) and the concept thatcompetition is made up of five forces. The five forces are entry of new competitors, threats ofsubstitutes, barging power of buyers, barging power of suppliers and rivalry among the existingcompetitors (Porter, Competetive Strategy: Techniques for Analyzing Industries and Competision,1980). According to Porter (1990, 1996), competitive advantage is gained by pressure and challengeand sustainable competitive advantage is gained based on something distinctive and different within acompany, and not just excellence in operation and cost-cutting, which will always converge within theindustry.The market today is global and hypercompetitive, no competitive advantages is sustainable and allcompetitive advantage erodes. Companies must actively aim to disrupt their own as well as their 18

INNOVATION KSFs FOR SMEs ACTING ON NICHE MARKETScompetitors competitive advantages in order to cope with the hyper competitive market, and forthat a new 7S model has been developed; to be used to identify own strengths and weaknesses aswell as analysing the industry and the competitors (DAveni, 1995). Figure 6 shows DAveni‟s (1995)7S‟s model.Figure 6 The new 7S’s model (Source: DAveni, 1995)However oligopolistic market structure has an inherited dualistic nature, it provides you with acompetitive advantage but competitors will imitate and you need to innovate over and over again;leading to less growth than in a market with more competition and/or larger population (Shrieves,1978; Le, 2008).When it comes to innovation of business models, they are possible to imitate as they become knownto the market when launched. When launching a new business model one should always calculatewhat competitors‟ moves will be; which can be either reduced price or new business models(Casadesus-Masanell & Zhu, 2010).In the work of D‟Aveni et al. (2010), they point out that in a world of hyper competition sustainablecompetitive advantages might not exist anymore or at least not over time and as one singlecompetitive advantage. They comment that temporary competitive advantages are increasing inimportance and perceived sustainable competitive advantages are decreasing in importance as themarket becomes more complex and it gets increasingly easier to imitate and/or disrupt earlierprevious competitive advantages. They suggest using chaos theory models, as well as the theory ofcomplex systems, to deal with the new situation at the same time as they open for the possibility thattemporary competitive advantages might just be a special case of Porter‟s five forces, where lowbarriers and low entries are combined with high power of suppliers and buyers leading to an hyper 19

INNOVATION KSFs FOR SMEs ACTING ON NICHE MARKETScompetitive industry rivalry with many and short competitive advantages. Their conclusion is thatfirms must build their ability to search for and adopt temporary competitive advantages being able tohandle multi-strategies to gain and keep market share.When answering the research questions and designing the data collection method, it is of relevanceto take the market structure and its complications into consideration.4.8. ConclusionsAccording to Tovstiga and Birchall (2005), innovation is used to differentiate firms based on itscapabilities to gain a competitive advantage on the market, and the perspective of innovation caneither be internal factors as the capabilities or external factors as whether an innovation, based onthe supply and the demand, will succeed or not. In the literature review, it is clear that innovationscan be incremental and disruptive, and that there are several kind of possible innovation strategiessuch as need seekers who look for potential opportunities by applying superior understanding of themarket and rapid go-to-markets, market readers who capitalise on existing trends and understandingof markets, and technology drivers who drive for breakthrough innovations based on new technology(Jaruzelski & Dehoff, 2010). Internally, possible capitalisation of capabilities, according to, for example,Kelly and Littman (2005), Coyne (2007), and Loewe et al. (2001), seems to be dependent uponleadership style as well as personalities of the people and the organisation. Moreover, each strategy,according to Jaruzelski and Dehoff (2010) call different capabilities to success. The capabilities forsuccess, or KSFs, can also be divided into actual and perceived key success factors (Grunert andEllegaard, 1992). Actual KSFs are the ones that by certainty lead to expected results, while theperceived ones are expected to lead to certain results There are also, according to the literaturereview, several kinds of innovation possibilities - according to Trott (2008), there are eight kinds ofinnovations.According to the literature review, it seems clear that innovation might provide competitiveadvantages but, according to researchers such as Le (2008) and Shrieves (1978), it is a dualisticrelationship between innovation and oligopolistic market structures, it provides you with acompetitive advantage but competitors will imitate and you need to innovate over and over again;leading to less growth than in a market with more competition and/or larger population.In the investigation, the literature review will provide the foundation for designing the data collection,as well as academic and practitioners thinking, to compare and contrast the key finds against.The data collection will be based on the findings in the literature review and structured around threekey questions; Why, What and How as shown in Figure 7, based upon the work of Jaruzelski andDehoff (2010), Trott (2008), Kelly and Littman (2005) and Loewe et al (2001). 20

INNOVATION KSFs FOR SMEs ACTING ON NICHE MARKETS How Company What Product Innovation Style Why Strategy Process Innovation •Cauldron •Incremental/ Organisational Innovation •Spirale Disruptive •Fertile •Need seekers Management Innovation •PacMan •Market Production Innovation •Explorer readers Commercial/Marketing •Technology Innovation drivers People Service Innovation •10 Faces of Innovation Capability •Ideation •Project selection •Product development •CommercialisationFigure 7 Why, What and How to innovate, based upon the work of Jaruzelski and Dehoff (2010), Trott(2008), Kelly and Littman (2005) and Loewe et al (2001). 21

INNOVATION KSFs FOR SMEs ACTING ON NICHE MARKETS5. INVESTIGATION5.1. Objectives, research questions and hypothesisIn order to fulfil the objective of the investigation, the following research questions shall beanswered: Can innovation lead to competitive advantages? Which type of innovations has the most impact on competitive advantages? What are the perceived KSFs when establishing an innovation process in order to gain competitive advantages on an oligopolistic market? Are there any differences when acting on a niche market with oligopolistic characteristics compared with other market structures?Based on the literature review, the hypothesis is that innovation can lead to competitive advantages ifthe leadership, strategy, culture, processes and capabilities are in place (Quelin, 2000; Loewe et al.,2001; Danneels, 2002; Govindarajan andTrimble, 2005; Kelly and Littman, 2005; Tovstiga and Birchall,2005; Day, 2007; Rigby et al., 2009; Flynn et al., 2010). However, there are different reasons toinnovate, which can be need seekers, market readers and technology drivers (Jaruzelski & Dehoff,2010).Regarding the second research question, about what type of innovations that have most impact oncompetitive advantage, the literature review supports the hypothesis that strategic innovations, suchas disruptive technologies, management innovations or new business models, are most likely toprovide sustainable competitive advantages (Kim and Mauborgne, 1997; Govindarajan and Trimble,2005; Hamel, 2006), which will be explored within the investigation.Based on the literature review, the hypothesis is that the capabilities for success, stated withinJaruzelski and Dehoff (2010) and shown in Table 2, is general KSFs also valid for oligopolistic marketsas several of the top performances, acting on an oligopolistic market (e.g. Google, Apple, Toyota andIntel).5.2. Investigation design and methodology5.2.1. Research methodologyThe research is deductive where the hypothesis, gained from the literature review, is tested and thenlinked back to research questions. The research objective is descriptive; it is about understanding anddiscussing the impact of the perceived KSFs when establishing an innovation process in order to gaincompetitive advantages on niche markets with oligopolistic market structure. The research design isfixed and quantitative, based on primary data. Primary data collection methods are divided intosurveys as well as observations, whereas surveys can be self-completion surveys or interview-basedsurveys (Hair, Money, Page, & Samouel, 2007). The data collection method that will be used is self-completion via an internet-based questionnaire.In the investigation, secondary data also will be used for compare and contrast. The source of thesecondary data will the listed capabilities from Jaruzelski and Dehoff (2010), shown in Table 2. 22

INNOVATION KSFs FOR SMEs ACTING ON NICHE MARKETS5.2.2. Questionnaire designIn order to be able to answer the research questions fulfilling the research objective, thequestionnaire has been divided into five sections covering company data, why innovate, what toinnovate, how to innovate and results.5.2.3. Sampling strategyIn this study, purposive sampling, also called judgmental sampling, is used as sampling method as avery specific kind of organisations, the unit of interest, will be analysed, i.e. niche SMEs acting on anoligopolistic market where innovation is used as a part of their corporate strategy.5.2.4. Data analysis techniquesThe data was collected in a database where all data is coded. No editing is required as all questionsare mandatory and no questionnaires will be closed without being complete. Moreover, thequestionnaires was tested on a sample before final data collection.The secondary data from the study with Jaruzelski and Dehoff (2010) is used to discuss and enrichthe generalisability of the collected data in the survey.A limitation with the research design is that actual KSFs are not investigated, and another limitation isthat the survey does not measure how the firms perceive their actual KSFs. Instead, the survey isfocused on perceived important KSFs within the organisations investigated.5.3. Findings and analysisThe investigated sample of respondent is employed or work for firms up to the size of 250employees. The distribution of employees is shown in Figure 8, and as Geographical market Africa South America 3% 2% Asia North America 3% 9% Europe 83%Figure 10 shows, 83% are operating on the European market. The three major trade segmentsamong the respondents are professional services (37%), merchandising and retail (34%) andTechnology-Media-Telecommunications (TMT). 23

INNOVATION KSFs FOR SMEs ACTING ON NICHE MARKETS Number of Employees 51 - 250 Empl. 1 - 10 Empl. 29% 31% 11 - 50 Empl. 40%Figure 8 Number of Employees of the respondents Industry, e.g. manufacturing Trade Venture Capital and raw material 2% 4% Helthcare TMT (Technology- 2% Media- Telecommunicatio ns ) 21% Merchandising and retail Professional 34% Services, e.g. education, training, consulting 37%Figure 9 Trade of respondents 24

INNOVATION KSFs FOR SMEs ACTING ON NICHE MARKETS Geographical market Africa South America 3% 2% Asia North America 3% 9% Europe 83%Figure 10 Geographical market of the respondentsThe reason for innovating is mostly linked to perceived needs and possible improvements, as can beseen in Figure 11, however as also shown, radical changes is an important reason to innovate. Therespondents, in general, seem to seek needs and market opportunities prior being driven by newtechnologies. There is no significant difference between the different trades in which the respondentsoperate. 7,00 6,00 5,00 4,00 All respondents, average 3,00 TMT, average 2,00 1,00 Professional Services average - Merchandising and retail, averageFigure 11 Why innovate 25

INNOVATION KSFs FOR SMEs ACTING ON NICHE MARKETSOn average, the respondents innovate their processes, sales and marketing at most and their productsystems at least. However, as Figure 12 shows, the spread of product innovation is rather high.Merchandising and retail innovate products prior to other innovations while professional servisescore lowest on this category. 6,00 5,00 4,00 All respondents, average 3,00 2,00 TMT, average 1,00 Professional Services average - Merchandising and retail, averageFigure 12 What to innovateThe innovation style of the respondents is, according to Loewe et al.‟s (2001) typology, TheCauldron, The Spiral Staircase and The Fertile Field, while no respondent‟s organisation is a PacManor Explorer (shown inFigure 13). The major innovation style is The Cauldron, which is anentrepreneurial style where the business model is frequently challenged (Loewe, Williamson, &Wood, 2001).In Figure 14, innovation style is distributed upon the questions about whether the competitor isimitating or whether the respondent‟s organisation is imitating, as well as whether the respondentsbelieve innovation leads to better profit and/or keeping the competitors out of their market. Theentrepreneurial innovators, the Cauldrons, are most convinced that they keep the competitors outby innovations, while The Spiral Staircase innovators,a style where you climb upwards without losingthe over-all goal (Loewe, Williamson, & Wood, 2001), are most convinced that they get better profitfrom applying from innovation and that they are imitated by their competitors. The Fertile Fieldinnovators, a style where the organisation tries to use existing capabilities and resources in a newway (Loewe, Williamson, & Wood, 2001), are imitating their competitors most among therespondents. The Fertile Field respondents are also convinced that innovation leads to higher profitand helps slightly to keep the competitors out. However, The PacMan style, a style where you inventand outsource and finance start-ups. (Loewe, Williamson, & Wood, 2001), is not represented by anyof the respondents which is contra indicatory to Haq and Sen‟s (2011) belief that smaller firms tendto outsource their core organizational competencies, as 71% is of the respondent‟s organisations aresmall firms with less than 51 employees. No conclusions can be made, and further research isneeded. Neither is the The Explorer, a style where you explore possibilities and invest time andmoney in them without demanding short-term profit, represented. One possible explanation for this 26

INNOVATION KSFs FOR SMEs ACTING ON NICHE MARKETScould be the fact that the sample is SME companies, which normally have smaller budgets than largercompanies.Also interesting to notice is that, in Figure 14, more respondents state that they are imitated thanimitating, which might be the perceived reality but questionable. Innovation Style 30 25 20 15 10 5 0 Entrepreneurial You clime Tries to use We invent and We explore where the upwards without existing outsource it possibilities business model is losing the over-all capabilities and investing time frequently goal, always resources in a and money challenged innovate to do new way without things better demanding short- term profitFigure 13 Innovation style, based on Loewe et al. (2001) typology, from left to right; The Cauldron, TheSpiral Staircase, The Fertile Field , The PacMan, and The Explorer. 7 6 5 Entrepreneurial where the business model is frequently 4 challenged 3 You clime upwards without 2 losing the over-all goal, always innovate to do things 1 better 0 Tries to use existing capabilities and resources in a Our We are We keep our We believe new way competitors imitating our competitors we do get are imitating competitors out by our better profit our innovations innovation from driving innovations work innovation workFigure 14 Innovation style distributed on competition aspects 27

INNOVATION KSFs FOR SMEs ACTING ON NICHE MARKETS5.3.1. Can innovation lead to competitive advantages?Based on the literature review, the hypothesis is that innovation can lead to competitive advantages.On a 7 point Likert scale, the respondents state that they somewhat (5.85 in mean and 6.0 inmedian) agree that they get better profit by driving innovation work and slightly agree (5.02 in meanand 5.0 in median) that they keep the competitors out by working with innovation. The results areshown in Table 4, and the standard deviation is small (1.45 and 1.35) with a mean and median whichare close to each other, meaning that this is the general opinion without large deviations. Based onthe literature study as well as the data analysis, the conclusion can be drawn that SMEs‟ action on anoligopolistic market can gain competitive advantages by applying innovation thinking and actingresulting in better profit or keeping the competitors out.We keep our competitors 1-7 We believe we do getout by our innovation (7=Strongly better profit from driving 1-7 (7=Stronglywork Agree) innovation work Agree)Mean 5,02 Mean 5,85Median 5,00 Median 6,00Standard Deviation 1,45 Standard Deviation 1,34Table 4 Competitive advantage of innovation5.3.2. Is there any difference if acting on an oligopolistic market compared with other market structures?Based on the literature review, the hypothesis is that innovation not necessarily will provide highergrowth on an oligopolistic marker rather keeping the competitor in place (Shrieves, 1978; Le, 2008).By studying the correlation between whether the respondents believed they kept the competitorsout and the kind of innovation they applied (improvements or radical) and the reason for that (need,market, new technology) the hypothesis can be tested. Table 5 show the results and, as seen, there isa fairly strong correlation between keeping competitors out and radical innovations as well aswhether the respondents were need seekers or technology drivers, but not market readers. It alsoseems logical that market readers do not keep competitors out rather imitating them. Theconclusion, based on the literature study as well as the data analysis, is that SMEs acting onoligopolistic markets apply for radical innovations and are need seekers or technology drivers,keeping their competitors out through their innovation work. Need Market Technology Improvements Radical seekers readers driversWe keep our competitors outby our innovation work 0,26 0,37 0,39 0,05 0,39Table 5 Oligopolistic characteristics 28

INNOVATION KSFs FOR SMEs ACTING ON NICHE MARKETS5.3.3. Which type of innovations has the most impact on competitive advantages?The hypothesis is that strategic innovations, such as disruptive technologies, management innovationsor new business models are most likely to provide sustainable competitive advantages (Kim andMauborgne, 1997; Govindarajan and Trimble, 2005; Hamel, 2006). In Table 6, the correlation isshown between the type of innovation and the results of it (keeping competitors out and/or gettingbetter profit). The strongest correlations are between product innovation and keeping thecompetitors out, and between process innovations and getting better profit. In Table 5, it is alsoshown a rather strong correlation between radical and technology driven innovations and keepingcompetitors out. Management systems and sell and marketing innovations also have a correlationwith keeping competitors out, even if the correlation is strongest to the product innovations. Thedata analysis confirm the hypothesis that technology driven innovations and management innovationshas a positive impact on the competitive advantage, however it is not possible to verify whether it istemporarily or sustainable. Organisation Management Production Customer marketing Processes Products systems Sell and ServiceWe keep our competitorsout by our innovation work 0,26 0,10 0,03 0,21 0,04 0,19 0,11We believe we do get betterprofit from drivinginnovation work 0,17 0,28 0,12 0,12 0,08 0,13 0,15Table 6 Different type of innovation5.3.4. What are the perceived key success factors when establishing an innovation process in order to gain competitive advantages on an oligopolistic market?Based on the literature review the hypothesis is that capabilities for success, stated within Jaruzelskiand Dehoff (2010) and shown in Table 2, is general KSFs also valid within oligopolistic markets. Thedata collected is compared and contrasted with the secondary data from the study of Jaruzelski andDehoff (2010). The secondary data is based upon a survey with large corporations while this study isconcerned with SMEs, which must be taken into consideration.The data is collected through the questions 5.1 to 5.21, and are all on a 5 point Likert scale (samescale as used in the secondary data. The standard deviation is low, no question has more than 1.18 instandard deviation. The data is categorised as in the study of Jaruzelski and Dehoff (2010); Ideation,Project Selection, Product Development and Commercialization, which also fits the innovationprocess of Tovstiga and Birchall (2005). 29

INNOVATION KSFs FOR SMEs ACTING ON NICHE MARKETS Ideation Deep consumer and customer insights and analytics Detailed understanding of Merchandising and retail, emerging technologies and average trends Professional Services average Open innovation/capturing ideas at any point in the TMT, average process Independent competitive insights from the All respondents, average marketplace Supplier and distributor G1000, average engagement in the ideation creation process - 1,00 2,00 3,00 4,00 5,00Figure 15 Importance of KFS within the Ideation Phase of The Innovation process.The ideation phase is the highest ranked phase among the respondents, with an average of 3.98compared with the other phases with an average between 3.22 and 3.65. In the secondary data, theaverage in all four phases is more or less equal (between 2,02 and 2,04) meaning that each phase isconsidered as to be of equal importance, while among the studied SMEs the ideation phase isconsidered as the most important phase. As can be seen within Figure 15, the largest deviationbetween SMEs‟ and the secondary data is that SMEs consider it to be much more important withsupplier and distributor engagement within the ideation process. A possible explanation might be lackof internal resources, compared with the large corporations, leading to an external engagement withsuppliers and distributors. The conclusion is that all five KSFs, shown in Figure 15, are important andconsidered as KSFs to SMEs and the ideation phase in itself is considered most important of allphases to the SMEs. The involvement of suppliers and distributors are more important to the SMEsthan to larger corporations, which are named G1000 after Global 1000 within the study of Jaruzelskiand Dehoff (2010).The most important KSF within the project selection is, according to both to primary and secondarydata, the ongoing assessment of the market potential while rigorous decision making around portfolio trade-offs are not considered as important or unimportant among the SMEs. Noteworthy is also that thestrategic disruptive decision-making and transition plan is considered remarkably less important to thelarger corporations than to the SMEs. The project selection data is shown in Figure 16. Theconclusion is that ongoing assessment of the market potential, project resource requirement forecasting andplanning, technical and risk assessment/management and strategic disruptive decision-making and transitionplan are the KSFs for the SMEs in this study. 30

INNOVATION KSFs FOR SMEs ACTING ON NICHE MARKETS Project Selection Ongoing assessment of market potential Merchandising and retail, Project resource average requirement forecasting and planning Professional Services average Rigorous decision making around portfolio trade-offs TMT, average Technical risk All respondents, average assessment/management Strategic disruption G1000, average decision making and transition plan - 1,00 2,00 3,00 4,00 5,00Figure 16 Importance of KFS within the Project Selection Phase of The Innovation process.Regarding product development, both SME respondents as well as the large corporations investigatedwithin the study by Jaruzelski and Dehoff (2010), point out reverse engineering as the least importantcapability. The most important, in regards to both SMEs and large corporations, is the engagementwith customers to prove real-world feasibility. Product platform management, design for specific goals andsupplier-partner engagement in product development. Moreover, there is a difference betweenmerchandising and retail compared with professional services regarding design for specific goals wherethe merchandising and retail considering it somewhat important while professional services regardingit neither important nor unimportant. The data is shown in Figure 17. The conclusion is that KSFs forproduct development is engagement with customers to prove real-world feasibility to both SMEs and largecorporations while Product platform management, design for specific goals and supplier-partner engagementin product development are all considered as slightly important to SMEs and not KSFs. 31

INNOVATION KSFs FOR SMEs ACTING ON NICHE MARKETS Product Development Engagement with customers to prove real-… Merchandising and retail, Product platform average management Professional Services average Design for specific goals TMT, average Supplier–partner All respondents, average engagement in product… G1000, average Reverse engineering - 1,00 2,00 3,00 4,00 5,00Figure 17 Importance of KFS within the Product Development Phase of The Innovation process.The commercialisation phase has most variation among the trade investigated as can be seen inFigure 18. Four capabilities out of six are considered as important and they are pilot-userselection/controlled rollouts, product life-cycle management, product ramp-up and diverse user groupmanagement. Both SMEs and the large corporations consider pilot-user selection/controlled rollouts asthe most important capability within the commercialisation phase. Noteworthy is that there is a largegap between the studied respondents and the secondary data regarding the capability of the productramp-up and diverse user group management. The data is shown in Figure 18. The conclusion is thatpilot-user selection/controlled rollouts, product life-cycle management, product ramp-up and diverse usergroup management are KSFs for the SMEs. Moreover, the SMEs have a significant higher perceivedimportunateness regarding the product ramp-up and diverse user group management than thecorporations within the secondary data, which might be explained by the characteristics of anoligopolistic market, where user group management and production ramp-up might be a way of dealingwith the risks of being copied by the competitors. 32

INNOVATION KSFs FOR SMEs ACTING ON NICHE MARKETS Commercialisation Pilot-user selection/controlled… Product life-cycle Merchandising and retail, management average Global, enterprise-wide Professional Services average product launch TMT, average Regulatory/government relationship management All respondents, average Production ramp-up G1000, average Diverse user group management - 1,00 2,00 3,00 4,00Figure 18 Importance of KFS within the Commercialization Phase of The Innovation process.Comparing the top five KSFs within the study of Jaruzelski and Dehoff (2010) and the respondents ofthis study give the result shown in Table 7. Interestingly, three out of five are the same and the othertwo differ. Product platform management and pilot-user selection/controlled rollouts are not on the topfive within the investigated respondent, but among the corporations investigated within the globalstudy of large corporations by Jaruzelski and Dehoff (2010). It might be explained by the focus ofeach group; where the large companies might be more systematic while the SMEs might be moreopportunistic, having detailed understanding of emerging technologies and trends and openinnovation/capturing ideas at any point in the process on their top list. It has already been discussed thatcompanies acting on oligopolistic markets are more likely to apply innovations to keep theircompetitors out, which is also in line with a more opportunistic approach rather than systematic andplanned way of working. 33

INNOVATION KSFs FOR SMEs ACTING ON NICHE MARKETSGlobal 1000 RespondentsOngoing assessment of market potential Ongoing assessment of market potentialDeep consumer and customer insights and Deep consumer and customer insights andanalytics analyticsEngagement with customers to prove real- Engagement with customers to prove real-world feasibility world feasibilityProduct platform management Detailed understanding of emerging technologies and trendsPilot-user selection/controlled rollouts Open innovation/capturing ideas at any point in the processTable 7 Comparing the top five ranked (average) KSF within the study of Jaruzelski and Dehoff (2010)with the studied respondents.Figure 19 shows the correlation between the respondents stating they are driving innovation to keeptheir competitors out and the twenty-one capabilities, listed in the study of Jaruzelski and Dehoff(2010). The five most correlated capabilities within Figure 19 is not equal any of the top-5 KSFswithin Table 7, just as it is not the case in Figure 20 where the capabilities are correlated with therespondents stating they are getting better profit from innovation work. The correlation betweencapabilities and the results of the innovation give that the KSF for innovations are dependent uponwhether the respondent innovates to keep their competitors out or perceive that they get betterprofit. Among the respondents stating that they are using innovation to keep their competitors outthe top-3 capabilities considered as KSFs, and are 1. Pilot-user selection/controlled rollouts 2. Ongoing assessment of market potential 3. Rigorous decision making around portfolio trade-offsAmong the respondents stating that they get better profit from applying innovation the top-3capabilities can be considered as the KSFs, and are 1. Rigorous decision making around portfolio trade-offs 2. Ongoing assessment of market potential 3. Supplier and distributor engagement in ideation process 34

INNOVATION KSFs FOR SMEs ACTING ON NICHE MARKETS Pilot-user selection/controlled rollouts Ongoing assessment of market potential Rigorous decision making around portfolio … Product platform management Engagement with customers to prove real-… Technical risk assessment/management Design for specific goals Deep consumer and customer insights and… Strategic disruption decision making and … Production ramp-up Open innovation/capturing ideas at any… Project resource requirement forecasting… Supplier–partner engagement in product… Supplier and distributor engagement in the… Reverse engineering Product life-cycle management Regulatory/government relationship… Diverse user group management Detailed understanding of emerging … Independent competitive insights from the… Global, enterprise-wide product launch -0,25-0,2-0,15-0,1-0,05 0 0,05 0,1 0,15 0,2 0,25 0,3Figure 19 Correlation between innovation capabilities and respondents stating they are keeping theircompetitors out by innovation work 35

INNOVATION KSFs FOR SMEs ACTING ON NICHE MARKETS Rigorous decision making around portfolio … Supplier–partner engagement in product… Ongoing assessment of market potential Project resource requirement forecasting … Regulatory/government relationship … Product platform management Pilot-user selection/controlled rollouts Product life-cycle management Reverse engineering Diverse user group management Design for specific goals Engagement with customers to prove real-… Production ramp-up Supplier and distributor engagement in the… Independent competitive insights from the… Deep consumer and customer insights and… Technical risk assessment/management Global, enterprise-wide product launch Open innovation/capturing ideas at any… Detailed understanding of emerging … Strategic disruption decision making and … -0,2 -0,1 0 0,1 0,2 0,3 0,4 0,5 0,6Figure 20 Correlation between innovation capabilities and respondents stating they getting better profitby their innovation workThe conclusion is that all capabilities within the study of Jaruzelski and Dehoff (2010) are consideredto be important to the respondents of this study, i.e. SMEs action on an oligopolistic market, and theideation phase is considered as the most important phase. Overall, the most important KSFs,according to the respondents within this study, are: 1. Ongoing assessment of market potential 2. Deep consumer and customer insights and analytics 3. Engagement with customers to prove real-world feasibility 4. Detailed understanding of emerging technologies and trends 5. Open innovation/capturing ideas at any point in the processThe first three are the same as within the global study of the top 1000 innovators by Jaruzelski andDehoff (2010). The respondents stating that they are using innovation to keep their competitors outhas a strong correlation to the top 5 KSFs within the study of Jaruzelski and Dehoff (2010), but anegative correlation to detailed understanding of emerging technologies and trends which is in therespondents general top-5 list. It is a bit surprising that respondents answering that they are usinginnovation keeping competitors out having a strong correlation to being technology drivers but aweek correlation to the capability of understanding emerging technologies and trends.The respondents stating that they get better profit from innovation has a strong correlation to all thetop 5 within the study of Jaruzelski and Dehoff (2010) but a negative correlation to openinnovation/capturing ideas at any point in the process which is in the respondents general top-5 list. 36

INNOVATION KSFs FOR SMEs ACTING ON NICHE MARKETSNoteworthy is that all three first phases of Jaruzelski and Dehoff (2010) study, which are ideation,project selection, and product development, are on the respondents top 5 list but no capabilitiesfrom the commercialisation phase. In the study of Jaruzelski and Dehoff (2010), the respondent statesthat they are significantly less performing within the commercialisation phase which also might be thesame among the respondents within this study.5.3.5. Linking innovation personas to KSFsAccording to the literature review the ten personas need to be present within an organisation tosecure innovation efficiency (Kelly & Littman, 2005), however it does not correlate with the dataanalysis shown within Figure 21, where it is clear that only three out of ten personas are present inmore that 50% of the cases and three personas only present within 25% of the cases. Interesting tonotice is that the four less represented personas are all what Kelly and Littman (2005) state asbuilding personas and important to develop and commercialise innovations. However, theorganisational personas (Hurdlers, Collaborators, Directors according to Kelly and Littman, 2005)are all among top 4. 70% 60% 50% 40% 30% 20% 10% 0%Figure 21 Personas within the investigated SMEs. 37

INNOVATION KSFs FOR SMEs ACTING ON NICHE MARKETS Supplier Deep and consumer distributor Independent Open Detailed and engagement competitive innovation/ understanding customer in the idea insights from capturing ideas of emerging insights creation the at any point in technologies and process marketplace the process and trends analyticsAnthropologists ( 0,10 ) ( 0,10 ) 0,03 0,13 ( 0,05 )Experimenters 0,16 0,18 0,11 0,26 0,13Cross-pollinators 0,25 0,28 0,21 0,04 0,12Table 8 Correlation between learning personas and capabilities within the Ideation Process.The learning personas are central to gain new knowledge and understandings in a world of changes(Kelly and Littman, 2005) and it is, due to this, interesting to explore in context of the ideation phasewhich is considered, according to the respondents, to be the most important phase including all fivecapabilities. The correlation between the learning personas and the capabilities within the Ideationphase is shown in Table 8, and it is clear that there is no significant positive correlation betweenstating having anthropologists and stating the importance of the five KSFs within the ideation phase.There is only one significant (=>0.25) correlation between the experimenters and the ideation KSFand that is the detailed understanding of emerging technologies and trends, while cross pollinators areboth above 50% and only two positive correlation whereof two are =>0.25. 38

INNOVATION KSFs FOR SMEs ACTING ON NICHE MARKETS6. CONCLUSIONS AND RECOMMENDATIONSThe respondents, in general, seek needs and market opportunities prior being driven by newtechnologies. There is no significant difference between the different trades in which the respondentsoperate. On average, the respondents put most effort into innovating their processes and sales andmarketing while they put least effort into innovating their production systems. However,merchandising and retail mostly focus on product innovations while the professional service firmsscore lowest on product innovation.The innovation style of the respondents is, according to Loewe et al. (2001) typology, The Cauldron,The Spiral Staircase and The Fertile Field, while no respondent‟s organisation is a PacMan orExplorer. The major innovation style is The Cauldron, which is an entrepreneurial style where thebusiness model is frequently challenged (Loewe, Williamson, & Wood, 2001). Furthermore, theentrepreneurial innovators, the Cauldrons, is most sure that they keep the competitors out byinnovations while The Spiral Staircase, a style where you climb upwards without losing the over-allgoal (Loewe, Williamson, & Wood, 2001), is most convinced that they get better profit from applyingfor innovations. The Spiral Staircase, which are systematic in their way of working, also state thatthey are imitated by their competitors.The Fertile Field, a style where the organisation tries to use existing capabilities and resources in anew way (Loewe, Williamson, & Wood, 2001), stating that they are imitating their competitors whichis a logical conclusion, as they are reusing existing resources but in a new way. The Fertile Fieldrespondents are also convinced that innovation lead to higher profit and slightly keep thecompetitors out.The PacMan, a style where you invent and outsource and finance start-ups (Loewe, Williamson, &Wood, 2001), is not represented by any of the respondents which is contra indicatory to Haq andSen‟s (2011) belief that smaller firms tend to outsource their core organizational competencies, as71% of the respondents organisations are small firms with less than 51 employees. No conclusionscan be made, and further research is needed. Neither is The Explorer, a style where you explorepossibilities and invest time and money in them without demanding short-term profit (Loewe,Williamson, & Wood, 2001), represented. One possible explanation could the fact that the sampleof respondents are SME companies, which normally have smaller budgets than large companies.6.1.1. Competitive advantagesThe research question whether innovation can lead to competitive advantages can be answeredbased on the literature study as well as the data analysis, showing that SMEs action on an oligopolisticmarket can gain competitive advantages by applying for innovation thinking and acting resulting inbetter profit and/or keeping the competitors out.There are some interesting findings. Management systems, sell/marketing innovations as well asproduct innovations have the strongest correlation to keeping competitors out. The trade is anaspect to take into consideration; e.g. merchandising and retail rank product innovation as mostimportant while professional services and the TMT sector rank process innovation as the mostimportant. 39

INNOVATION KSFs FOR SMEs ACTING ON NICHE MARKETSMoreover, data analysis confirms the hypothesis that technology driven innovations and managementinnovations have the most positive impact on the competitive advantage, which also answers theresearch question about which innovation has the most impact on the competitive advantages. Thesustainability of the competitive advantage is, however, not possible to judge according to theinvestigation and neither according to the literature review, as previous research says it can lead tosustainable competitive advantages but more recent research indicates that it might be problematicto gain sustainable competitive advantages and that firms must get ready for handling temporarycompetitive advantages as well as multi-strategies.However, it is a bit surprising that using innovation to keep competitors out is strongly correlatedwith technology drivers and, at the same time, only weakly correlated with the capability ofunderstanding emerging technologies and trends.6.1.2. Differences on oligopolistic marketsThe conclusion, based on the literature study as well as the data analysis, is that SMEs acting onoligopolistic markets, applying for radical innovations, are need seekers or technology drivers tryingkeeping their competitors out through innovation work.However, increased profit is also a reason to work with innovations on oligopolistic markets, even ifthe most significant reason is keeping the competitors out by applying radical innovation.The research question whether there is a difference acting on an oligopolistic market can beanswered with that the firms are applying for innovation mostly to keep their competitors out byseeking needs and/or applying new technologies doing radical innovations.It is also worth mentioning that it is a fine line between oligopolistic and monopolistic competitionand the conclusions in this study might very well apply on monopolistic markets and companies withniche strategies.6.1.3. KSFPerceived KSFs when establishing an innovation process in order to gain competitive advantagesthrough innovations is partly dependent upon whether the firm is trying to keep competitors out ortrying to increase its profit. However, there are also a common sub set of KSFs in common for bothpurposes. To answer the research question about the perceived KSFs when establishing aninnovation process in order to gain competitive advantages on an oligopolistic market, the answererhas been divided into a general list with KSFs and two purpose-dependent lists linked to whether theobjective mainly is keeping competitors out or is it is increasing the profit.Among the respondents stating that they are using innovation to keep their competitors out the top-3 KSF are: 1. Pilot-user selection/controlled rollouts 2. Ongoing assessment of market potential 3. Rigorous decision making around portfolio trade-offs 40

INNOVATION KSFs FOR SMEs ACTING ON NICHE MARKETSAmong the respondents stating that they get better profit from applying innovation the top-3 are; 1. Rigorous decision making around portfolio trade-offs 2. Ongoing assessment of market potential 3. Supplier and distributor engagement in ideation processAll capabilities within the study of Jaruzelski and Dehoff (2010) are considered as important to therespondents of this study, i.e. SMEs action on an oligopolistic market, but certain capabilities areconsidered as more important than other is. The ideation phase (or category), which consists of 1. Supplier and distributor engagement in ideation process 2. Independent competitive insights from the marketplace 3. Open innovation/capturing ideas at any point in the process 4. Detailed understanding of emerging technologies and trends 5. Deep consumer and customer insights and analyticsis considered as the most important phase (in average).However, the most important overall KSFs according to the respondents within this study, are: 1. Ongoing assessment of market potential 2. Deep consumer and customer insights and analytics 3. Engagement with customers to prove real-world feasibility 4. Detailed understanding of emerging technologies and trends 5. Open innovation/capturing ideas at any point in the processNoteworthy is that none of the top KSFs found are within the commercialisation phase and it is likelythat the firms might lack of related competencies needed within this phase.6.1.4. Organisational aspectsAccording to Kelly and Littman (2005), when establishing an innovation process in order to gaincompetitive advantages through innovations, there are needs of the right personas within the firm.Interesting to notice is that the four less represented personas in the survey are all what Kelly andLittman (2005) state as building personas and important to develop and commercialise innovations,which is the same pattern as within the study of Jaruzelski and Dehoff (2010). This will also be linkedto the recommendation part of this study.Moreover, the correlation between the learning personas and the capabilities within the Ideationphase clearly shows that there is no significant positive correlation between stating havinganthropologists and stating the importance of the five KSFs within the ideation phase.6.1.5. RecommendationsDuring the study of identifying perceived KSFs when establishing an innovation process a number ofconclusions and observations has been made. These conclusions and observations form thefoundation for recommendations and are divided into five parts and structured around the purposes,the process, the organisation, the leadership and how to measure the actions. 41

INNOVATION KSFs FOR SMEs ACTING ON NICHE MARKETS#1 Decide the purpose of your innovation workThe 21 capabilities and potential KSFs identified and described within the work of Jaruzelski andDehoff (2010) have differing importance dependent upon the purpose of driving innovation work. Onan oligopolistic market, it is often about keeping competitors out and/or increasing the profit, andthere is a difference on which KSFs to focus on, as well as what innovation style and model to apply.Generally, the following KSFs are considered as most important regarding to this study of SMEsacting on oligopolistic markets; 1. Ongoing assessment of market potential 2. Deep consumer and customer insights and analytics 3. Engagement with customers to prove real-world feasibility 4. Detailed understanding of emerging technologies and trends 5. Open innovation/capturing ideas at any point in the processThe recommendation is to ensure that the above KSFs are implemented in combination with thespecific and purpose-dependent KSF.If the purpose is to keeping the competitors out, the below KSFs are recommended to implementand secure;  Rigorous decision making around portfolio trade-offs  Pilot-user selection/controlled rolloutsAnd, if the purpose is to increase the profit implement and secure the below KSF;  Rigorous decision making around portfolio trade-offs  Supplier and distributor engagement in ideation processWhen driving the innovation process, keeping competitors out it is also recommended to use newtechnology as well as radical innovations, preferable not just in the area of product development butalso management innovations including the business model, management systems, business andproduction processes as well as sell and marketing innovations.When driving for increased profit, improvements and well-defined market need are more preferableand recommended too.#2 Focus all innovation phasesWithin the study of Jaruzelski and Dehoff (2010), the categories (ideation, project selection, projectdevelopment, and commercialisation) can be mapped to the processes described within the literaturestudy, and can be considered as the major phases of an innovation process. The last phase, thecommercialisation phase, is considered least important according to the respondents. Noteworthy isthat within the study of Jaruzelski and Dehoff (2010), the commercialisation phase was significantlyless performed compared to the other phases within the study and a conclusion is that firmsgenerally has a lack of commercialisation capabilities, even if considered as important.The recommendation is to secure all phases (ideation, project selection, project development, andcommercialisation) and related capabilities in order to successfully implement innovation work,however with a differing significance depending upon the purpose of the innovation work. 42

INNOVATION KSFs FOR SMEs ACTING ON NICHE MARKETS#3 Make sure you have the right personasAccording to Kelly and Littman (2005), there are ten personas, categorised into three categories,which need to be present in order to drive innovation work in an efficient way. The study shows thatthe respondents are lacking of anthropologists as well as the personas needed to build – the buildingpersonas (the experience architect, the set designer, the caregiver, and the storyteller). It isrecommended to secure that the organisation has covered the ten personas in order to secureefficiency.#4 Evaluate and adopt the leadership styleIt is recommended to evaluate the innovation leadership style according to Loewe et al. (2001)typology; The Cauldron, The Spiral Staircase. The Fertile Field, The PacMan and The Explorer as itamong the respondents were clear that only the three first styles were represented. The PacMan, astyle where you invent and outsource and finance start-ups (Loewe, Williamson, & Wood, 2001),was not represented but is recommended to evaluate for SMEs that might not have the capabilitiesto launch a new invention but still would benefit from it.Neither was The Explorer, style where you explore possibilities and invest time and money in themwithout demanding short-term profit (Loewe, Williamson, & Wood, 2001), represented and isrecommended to partly apply for those firms going for radical and technology driven inventionswhere the outcome might not always be possible to predict but the impact huge when succeeded.#5 Link your KPIs to the innovation ProcessTo measure, and secure, the value created within the innovation process the use of KPIs isrecommended. The recommended KPIs are based upon the work of Hansen and Birkinshaw (2007)and the three categories of KPIs; idea generation, conversion and diffusion of innovation (see Table3) mapped to the categories (here considered as phases of the innovation process) of capabilitieswithin the work of Jaruzelski and Dehoff (2010).Table 9, based on the work of Hansen & Birkinshaw (2007) and Jaruzelski and Dehoff (2010), showthe recommended KPIs to measure and secure the value created within the innovation process. 43

INNOVATION KSFs FOR SMEs ACTING ON NICHE MARKETS Idea Generation Conversion Diffusion Internal Cross- Open Project Project Commercialisati Ideation Pollination Ideation Selection Development on ideation Do we Do we Do we get Are we Are we good Are we good at create create enough good at at turning launching good good ideas good ideas screening ideas into innovations? ideas by by working from the and viable Key Questions our own? across the outside? funding products, company? new businesses, ideas? and best practices? Number Number of Number of Percentag a) Percentage a) Percentage of of high- high-quality high-quality e of ideas of funded penetration in quality ideas ideas generated ideas that lead desired ideas generated generated that end to revenues markets, generated across from up being channels, within a units. outside the selected b) Number of customer Key Performance Indicator unit. firm. and months to first groups funded. sale. b) Average profit margin on new innovation last yearTable 9 Recommended KPIs adopted from Hansen & Birkinshaw (2007) mapped to the categories ofJaruzelski and Dehoff (2010) 44

INNOVATION KSFs FOR SMEs ACTING ON NICHE MARKETS7. REFERENCE LISTAmabile, T. M. (1998, September-October). How to Kill Creativity. Harvard Business Review , pp.14-25.Assink, M. (2006). Inhibitors of disruptive innovation capability: a conceptual model. EuropeanJournal of Innovation Management , 9 (2), 215-253.Boudreau, K. J., & Lakhani, K. R. (2009). How to Manage Outside Innovation. MIT SloanManagement Review , 50 (4), 69-77.Brinkinshaw, J., Bouquet, C., & Barsoux, J. (2011). The 5 Myths of Innovation. MIT SloanManagement Review , 52 (2), 43-50.Casadesus-Masanell, R., & Zhu, F. (2010). Business Model Innovation and CompetitiveImitation.Catmull, E. (2008, September). How Pixar Fosters Collective Creativity. Harvard Business Review ,pp. 41-50.Chesbrough, H. (2011). Bringing Open Innovation to Services. MIT Sloan Management Review , 52(2), 85-90.Coyne, K. P., Clifford, P. G., & Dye, R. (2007, December). Breakthrough Thinking from Insidethe Box. Harvard Business Review .D’Aveni, R. A., Dagnino, B. G., & Smith, K. G. (2010). The ageof temporary advantage. Strategicmanagement Journal , 31, 1371 - 1385.Danneels, E. (2002). The Dynamics of Product Innovation and Firm Competences. StrategicManagement Journal , 23, 1095-1121.DAveni, R. A. (1995). Coping with hypercompetition: Utilizing the new 7Ss framework. Academyof Management Executive , 9 (3), 45-60.Day, G. S. (2007, December). Is it real? Can We Win? Is it Worth Doing?: Managing Risk andReward in an Innovation Portfolio. Harvard Business Review . 45

INNOVATION KSFs FOR SMEs ACTING ON NICHE MARKETSDrucker, P. F. (1998, November-December). The Discipline of Innovation. Harvard BusinessReview , 3-8.Encyclopedia Britannica, Inc. (1974). Encyclopaedia Britannica (15th ed.). (H. H. Benton, Ed.) USA:Encyclopedia Britannica, Inc.EU. (2011, 05 14). Swedish Agency for Economic and Regional Growth - Tillväxtverket. Retrieved 05 14,2011, fromhttp://www.tillvaxtverket.se/huvudmeny/insatserfortillvaxt/flerochvaxandeforetag/cipkonkurrenskraftochinnovation/eusdefinitionavsmfsme.4.21099e4211fdba8c87b800017125.htmlFlynn, B. B., Wu, S. J., & Melnyk, S. (2010). Operational Capabilities - Hidden in Plain View.Business Horizons , 53, 247-256.Gallo, C. (2011). The Innovation Secrets of Steve Jobs - insanely different principles for breakthrough success.USA: McGraw Hil.Govindarajan, V., & Trimble, C. (2005). Organizational DNA for Strategic Innovation. CalifoniaManagement Review , 47 (3), 47-76.Grunert, K. G., & Ellegaard, C. (1992). The Concept of Key Success Factors: Theory andMethod. MAPP working paper no 4 (ISSN 0907 2101).Hair, J., Money, A., Page, M., & Samouel, P. (2007). Research Methods for Business. England: JohnWiley & Sons.Hamel, G. (2006, February). The Why, What, and How of Management Innovation. HarvardBusiness Review , 72-84.Hansen, M. T., & Birkinshaw, J. (2007, June). The Innovation Value Chain. Harvard BusinessReview .Haq, K., & Sen, A. K. (2011). Product Innovation by Small and Medium-sized Firms throughoutsourcing and collaboration. International Journal of Management and Marketing Research , 4 (1), 61-73. 46

INNOVATION KSFs FOR SMEs ACTING ON NICHE MARKETSHuston, L., & Sakkab, N. (2006, Marsch). Connect and Develop: Inside Proctor&Gamble´s NewModel for Innovation. Harvard Business Review .Jaruzelski, B., & Dehoff, K. (2010). The Global Innovation 1000: How the Top Innovators Keep Winning.New York: Booz & Company Inc.Johnson, M. W., Christensen, C. M., & Kagermann, H. (2008, December). Reinventing yourbusiness model. Harvard Business Review , 51-59.Kelly, T., & Littman, J. (2005). The Ten Faces of Innovation. USA: Doubleday.Kim, C. W., & Mauborgne, R. (1997, January-February). Value Innovation: The Strategic Logicof High Growth. Harvard Business Review , 103-112.Kim, W. C., & Mauborgne, R. (2005). Value Innovation: a leap into the blue ocean. Journal ofBusiness Strategy , 26 (4), 22-28.Le, T. (2008, June 12). A dual economy model of endogenous growth with R&D and marketstructure. Springer-Verlag .Leonard, D., & Straus, S. (1997, July-August). Putting Your Company´s Whole Brain to Work.Harvard Business Review , pp. 28-38.Loewe, P., Williamson, P., & Wood, R. C. (2001). Five Styles of Strategy Innovation and How toUse Them. European Management Journal , 19 (2), 115-125.Nambisan, S., & Sawhney, M. (2007, June). A Buyer´s Guide to the Innovation Bazaar. HarvardBusiness Review , pp. 25-35.Porter, M. E. (1980). Competetive Strategy: Techniques for Analyzing Industries and Competision. NewYork, US: Free Press.Porter, M. E. (1990). The Competetive Advantages of Nations. New York, US: Free Press.Porter, M. E. (1996, November). What is strategy. Harvard Business Review , 61-79.Quelin, B. (2000). Core Competencies, R&D Management and Partnerships. European ManagementJournal , 18 (5), 476-487. 47

INNOVATION KSFs FOR SMEs ACTING ON NICHE MARKETSRamaswan, S. N., Bhargava, M., & Srivastava, R. (2004). Market-based assets and capabilities,business processes and financial performance. Marketing Science Institute. Cambridge.Rigby, D. K., Gruver, K., & Allen, J. (2009, June). Innovation in Turbulent Times. HarvardBusiness Review .Rigby, D., & Zook, C. (2002, October). Open-Market Innovation. Harvard Business Review .Sawhney, M., Wolcott, R. C., & Arroniz, I. (2006). The 12 Differetnt Ways for Companies toInnovate. MIT Sloan Management Review , 75-81.Shrieves, R. E. (1978). Market Structure and Innovation: A new perspective. The Journal ofIndustrial Echonomics , XXVI (4), 329-347.Teece, D. J. (2010). Business Models, Business Strategy and Innovation. Long Range Planning , 43,172-194.Tovstiga, G., & Birchall, D. W. (2005). Capabilities for Strategic Advantage – Leading ThroughTechnological Innovation. Basingstoke, Hampshire: Palgrave Macmillan.Trott, P. (2008). Innovation Management and New Product Development (4th ed.). Essex, England:Pearson Education Limited.´ 48

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