Open Innovation Processes And Roles In Sm Es Verteramo De Carolis Greco
Open innovation processes and roles in SMEs: The case of a network in its early stages
Verteramo S., De Carolis M., Greco L.
Department Business Science- University of Calabria
1.Networking and innovation driven by lead user..............................................................................3
1.1 Lead user and user-manufacturer............................................................................................4
1.2 Network innovation roles.........................................................................................................6
3.The case study: innovation processes and roles in a network in its early stages...........................11
4.Lessons learned and conclusions...................................................................................................17
Open innovation has received increasingly attention, but so far it has mainly been analyzed in
large enterprises. Focusing on open innovation processes leaded by SMEs, scholars point out
the role of lead users (both user firms and individual end users), but there is a lack of studies
focused on the formation of network driven by lead-users SMEs. The aim of the paper is to
contribute to scholarly knowledge regarding this topic and, in particular, the research
questions developed are: (1) how open innovation processes and inter-firm networks activated
and led by a lead-user SMEs develop?; (2) which are the stages and the actors/roles of these
processes and how they vary over time?
The paper describes the results of the conducted literature review on the role of lead users in
innovation processes and on the different innovation roles (with particular reference to
SMEs). This analysis has enabled to conduct and interpret the presented case study: Aster
Group. Aster is an Italian automotive dealer that has developed high level competences in
marketing and CRM strategies. It carried out some innovative projects with IT partners for
internal needs and it is developing consulting services for other dealers. This case study can
be considered as an example of open innovation driven by a lead user-manufacturer SME and
based on the synergies developed by a network of complementary competences.
The case study shows that (1) some phases of the innovative process conducted by a lead user
SME can be emergent in nature; (2) the interorganizational relationships can provide the
complementary competencies to let a lead user SME become a user manufacturer SME; (3)
during the different phases of the innovation process, the active roles in the network of SMEs
can change when unpredicted events happen.
Keywords: open innovation models, lead user firm, Small and Medium Enterprises, network
1. Networking and innovation driven by lead user
Open Innovation can be defined as “the use of purposive inflows and outflows of knowledge
to accelerate internal innovation, and expand the markets for external use of innovation”
(Chesbrough et al., 2006, p.1). This notion, proposed by (Chesbrough, 2003a, b), has quickly
gained the interest of both researchers and practitioners, illustrated by a number of special
issue publications, dedicated conferences and a rapidly growing body of literature (Elmquist
et al., 2009). Open innovation has received increasingly attention, but so far it has mainly
been analyzed in large, high-tech multinational enterprises. Few studies have studied open
innovation in smaller organizations (van de Vrande et al., 2009).
This study addresses this gap by focusing on small-and medium-sized enterprises (SMEs).
Small firms are recognized as being flexible and responsive to customer and market
opportunities, but their size means they are especially vulnerable to resource constraints.
Interfirm cooperation and networking is one way of overcoming resource constraints (Hanna
and Walsh, 2008). Furthermore, co-development partnerships are increasingly important in
open innovation models in which outside partners can be seen as peers rather than as suppliers
(Elmquist et al., 2009). In an open innovation scenario, the networking competence of firms
(Ritter, 1999; Ritter and Gemuenden, 2003) might become an increasingly important
competence (Lettl et al., 2006).
Several studies also underline that (1) while early models of innovation were focused on firm
internal capabilities and R&D, later generations feature a more complex process of
innovation, including internal as well as external sources of innovation (Hienerth, 2006) and
(2) some of the most important and novel products and processes have been developed by
users - both user firms and individual end users (Baldwin et al., 2006).
However, little research exists that would systematically examine the formation of network
driven by lead-users SMEs. The aim of the paper is to contribute to scholarly knowledge
regarding this topic and, in particular, the research questions that are addressed are as follows:
(1) how the open innovation processes and inter-firm networks activated and led by a lead-
user SMEs develop?; (2) which are the stages and the actors/roles of these processes and how
they vary over time?
The paper proceeds as follows: first, we describe the results of the conducted literature review
on the role of lead user in the innovation processes and on the different network innovation
roles (with particular reference to SMEs). This analysis is the theoretical basis that has
enabled to conduct and interpret the analyzed case study presented in Section 3.
Aster Group is an Italian dealer (partner to some of the most important German and Japanese
automotive brands) that, in recent years, has developed high level competences in marketing
and CRM strategies. Aster carried out some innovative projects with IT partners for internal
needs (for this reason it can be considered a lead user) and it is developing consulting services
for other dealers, leveraging the synergies developed by a SMEs network (partnerships with
other software developing firms, commercial partners and technology brokers). Finally, the
theoretical and practical implications of these findings are discussed (Section 4).
1.1 Lead user and user-manufacturer
Von Hippel (1986) deﬁnes lead users as: ...users of a given product or service type that
combine two characteristics: (1) they expect attractive innovation-related beneﬁts from a
solution to their needs and so are motivated to innovate, and (2) they experience needs for a
given innovation earlier than the majority of the target market. So, lead users differ from
ordinary users in two respects: lead users face needs months or years before the mass of the
marketplace encounters them (trend leadership) and they benefit significantly from obtaining
a solution to those needs, and are therefore highly motivated to engage in innovative
endeavors (von Hippel 1986).
User-centered innovation processes are very different from the traditional, manufacturer-
centric model, in which products and services are developed by manufacturers in a closed
way, with the manufacturers using patents, copyrights, and other protections to prevent
imitators from free riding on their innovation investments (von Hippel, 2005). According to
the lead-user theory, these lead users should be integrated into corporate new product
development efforts using the lead-user method (Urban and von Hippel, 1988). Here,
companies try to learn from lead users about the needs and solutions they encounter at the
leading edge of the market.
Several studies provide strong evidence to support lead-user theory empirically both when the
lead users are individual workers and when the lead users are firms (e.g. see the evidences in
Schreirer and Prugl, 2008 and von Hippel 2005).
At the same time, several pre-deﬁned categories for user roles have been introduced; for
example, Baldwin et al. (2006) distinguish among:
• user-innovators. Innovators are people who break ‘‘patterns of accepted modes of
thought and action’’ (Kirton, 1976) and who discover both problems and avenues of
solution. They also tend to take control in un-structured situations are resistant to the
customs of the past, and frequently challenge given rules in a risk-taking manner
(Schreirer and Prugl, 2008). User-innovators seek to develop new designs for their
own personal use or (in the case of user firms) internal corporate benefit. They have a
direct personal need but usually no commercial interest (Hienerth, 2006);
• user-manufacturers, that are user-innovators who make copies of their designs and sell
them to user-purchasers (described below);
• user-purchasers may wish to use an innovative or advanced model, but they do not
want to innovate or produce the good themselves, so they will pay money to acquire it.
In a similar way, Lettl et al. (2006), discussing the users’ contribution to radical innovation,
distinguish between several phases during which the users play different roles:
• users as inventors of radical innovation. They faced severe difficulties in their day-to-day
work that could not be solved by conventional manufacturers’ technology. So, they have
high problem pressure and they search for radically new solutions;
• users as entrepreneurs in building an innovation network. Users lacked the technological
competencies and marketing knowledge that are required in order to implement their
innovation into the market successfully. Therefore, they need to select the innovation
network partners, to establish and to manage the network required to transform their
radically new concepts into first prototypes and later into marketable products;
• users as (co)-developers. These users can participate more or less actively on the
Despite the breadth of the literature on lead users, the study mentioned above is one of the
few that, in part, emphasizes the role of lead users in activating inter-firm innovation
Relatively little is known about this topic, especially when the user is a lead user SME.
In this paper, we present a case study of a lead user SME that has commercialized its
innovation building a network of partners (other SMEs, research centers, universities,
brokers) and that has become user manufacturer.
1.2 Network innovation roles
To find an answer to our second research question (which are the stages and the actors/roles
of these processes and how they vary over time?) we analyzed the literature about the roles
that can support and develop open innovation processes.
The success of innovations is to a great extent dependent upon the activities and the abilities
of individuals who enthusiastically support the new product or process (Hauschildt, 2003). In
the Anglo-Saxon world these persons are called ‘champions’, in Europe the term ‘promotors’
(in the Latin version) is in use.
Champions can be described as “individuals who informally emerge to actively and
enthusiastically promote innovations through the crucial organizational stages” (Howell et al.
2005, 642), and as individuals who are innovative, who are prone to take risks, and who
exhibit a transformational leadership style (Howell and Higgins ,1990). Moreover,
Chakrabarti (1974) identifies the characteristics of champions as technical competence,
knowledge about the company, knowledge about the market, drive and aggressiveness, and
Promotors ca be defined as “individuals who actively and intensively support the innovation
process” (Witte, 1977). This concept assigns the success of an innovation not only to one all-
around “star”, but also to the cooperation of several different kinds of specialized promotors
(Rost et. al, 2007).
Ultimately, the champion role corresponds with the universal promotor. The champion
literature and the promotor literature have developed in parallel. But these roles are only two
of the variety of terms that has been proposed for those who actively promote innovation
processes. Hauschildt (2003) proposes a small selection of this plethora: inventor, initiator,
stimulator, legitimizer, decision-maker, executor, catalyst, solution giver, process helper,
resource linker, technical innovator, product champion, business innovator, chief executive,
technology promotor, power promotor.
Focusing on promotor literature, Fichter (2009) summarizes the innovation barriers and
related promotor roles (and power bases) that have to overcome those barriers (see table 1).
Barrier type Power base Promotor role
Knowledge Knowledge speciality Expert promotor
Ignorance, opposition, Hierarchical potential, Power
resources control of resources promotor
Administrative how, communication Process promotor
Networking competence, Relationship
potential for interaction promotor
Table 1: Promotor roles (adapted from Fichter, 2009)
The author, moreover, proposes three distinct system levels where collaboration of promotors
can take place: (1) the company level; (2) the value chain level of innovating actors and (3)
the level of framing and interlinking organizations.
So, we can observe a shift of focus from the single firm to the relationships and networking
The same considerations can be carried out by analyzing the literature about champions.
Gupta et al. (2006) underlines that when organizations function as part of a network, an
external champion – that is, one external to all organizations in the network – may be required
to act as a catalyst to enhance the operations of all firms in the networks.
Network champions (as defined by Woodside, 1994) act as catalysts to build new linkages
among multiple firms that have previously not communicated with one another in order that
these firms could operate as a network. Those persons are involved in a new inter-
organizational business model in order to identify one or more innovations.
Focusing on inter-organizational roles that play as links among several firms, Howells (2006)
has reviewed and synthesized the literature in several field of innovation about: (a)
technology transfer and diffusion; (b) innovation research on the role and management of
such activities and the firms supplying them; (c) the systems of innovation literature; (d)
research into service organizations and more specifically Knowledge Intensive Business
The author has developed a typology and framework of the different roles (e.g. third parties,
brokers, intermediary agencies, intermediary firms, knowledge brokers) or functions of
intermediaries within the innovation process (e.g. foresight and diagnostics, scanning and
information processing, knowledge processing and combination/recombination, gatekeeping
and brokering, testing and validation, protecting the results and commercialization).
In this framework, Hanna and Walsh (2008) have analyzed the role of network brokers that
facilitate cooperation among small ﬁrms and have a unique perspective on the cooperation
The role of the network broker is to bring interested parties together and to develop the
relationship between the partners. He has a clear understanding of what successful
cooperation requires, he is able to assess the competencies of other potential network
members and could articulate the types of arrangements that ﬁrms could potentially beneﬁt
from, suggesting appropriate goals for a ﬂedgling network.
The short outlined framework underlines the relevance of different roles in order to build a
network of firms for innovation processes. However, the theoretical and specific empirical
contributions on open innovation processes and the different network innovation roles, with
particular reference to SMEs, are limited. In order to explore this topic, we have conducted
the following case study.
2. Research methodology
The research methodology was divided in two steps.
1. Literature review.
After the analysis of the works of the main authors about the topics of our interest (eg. Von
Hippel, Chesbrough), we have selected from ABS (Association of Business Schools) -
Academic Journal Quality Guide – and Harzing - Journal Quality List - the most relevant
academic journals and/or with specific topic on innovation (see table 2), and we have
analyzed the last three years selecting the articles on open innovation/lead user/SMEs/roles in
The results of this analysis have been reported previously.
Academy of management review
Creativity and innovation management
European journal of innovation management
Industry and innovation
International journal of innovation management
International journal of technology management
Journal of engineering and technology management
Journal of high technology management research
Journal of product innovation management
Table 2 – List of the examined journals
2. Empirical research.
Following the case-study methodology of research (Yin, 1994) the empirical work has been
conducted during the last six months.
Case-study research is especially appropriate for research into new topics (Gillham, 2000;
Stake, 2000), for studies focused on understanding the ‘how’ and ‘why’ questions concerning
a contemporary set of events, and for studies intended to develop theory further (Eisenhardt,
1989). Rogers (1995) claims that, in process research, data gathering and analysis via a case
study research tries to determine the time-ordered sequence of events.
Sessions of in-depth interviews have been conducted with the top management of the
involved firms (network actors) and other key informants using a semi-structured interview
guideline. Document acquisition was also carried out. The guideline topics were focused on
key issues of our study and were aimed at (1) analyzing how the open innovation processes
and inter-firm networks activated and led by a lead-user SMEs is developing and (2)
identifying and discussing the different stages and the roles of these processes.
The findings of this analysis have been read and confirmed by the informants themselves.
3. The case study: innovation processes and roles in a network in its early stages
Basic information about Aster and its experience in CRM systems
Since 1983, Aster Group has been a leader in automotive sales and services and a commercial
partner to some of the most important German and Japanese automotive brands. Today, Aster
Group represents eight brands, has 80 employees, and generates 50 million Euros of revenue
Additionally, Aster Group collaborates with other important automotive dealers, consulting
them on strategic decisions in Marketing and CRM. In this context, Aster Group plays the
role of technology innovator, delivering solutions to improve dealership competitiveness.
These consulting services are developed in partnership with other software developing firms,
commercial partners and technology brokers.
We argue that this case study can be considered as an example of open innovation driven by a
lead user-manufacturer SME and based on the synergies developed by a network of
The automotive market is a mature market characterized by a strong competition among few
big companies. Taking into account the relatively recent EU directives for automotive
distribution network (removal of limits on exclusive distribution for brand or localization)
both phenomena mean more aggressive competition and decreasing profit margins in
traditional selling activities.
Therefore the dealer’s value chain is changing: the services area (enlarged to the entire car
lifecycle) is becoming the main area where profit margin can arise: the selling phase in this
context becomes just the starting point for a “relationship” with the customer.
Aster started in 1983 following a traditional dealership business model aiming at enrolling
key brands in its portfolio. Since 1998 the engagement of young and high level educated
people in the top management turned on a dime: an innovative strategy (respect to the local
competitors) has been adopted as consequence of changes in automotive market previously
Starting in 2000, Aster Group began a strategic corporate restructuring program focused on
total customer service. The program resulted in the first multi-service center located in Rende,
Italy, boasting 30,000 square-meters of space as well as numerous technological and business
innovations. The restructuring process was driven by a strategy based on a holistic approach
to customer relationship management (CRM).
The main components of this strategy were:
• the development of a knowledge platform to support the customer relationship process
through a “value-based” approach;
• the development of a central customer care team, which uses a centralized approach to
manage all the inbound and outbound communications between the various business
units and customers;
• the development of a One-to-One Marketing strategy based on relationship value.
The knowledge platform is a CRM solution specific for automotive dealers, developed
through a partnership with Itkey (a software firm founded by people linked to the Computer
Science Department at University of Calabria and specialized in CRM projects). This
partnership started when Itkey proposed to Aster its CRM solution: in that time Aster did not
know Itkey, but this proposal happened just as Aster’s marketing manager was looking for
something suitable for improving the Contact Center .
The point of reference in Aster for this project at that time was the Marketing manager
(successively appointed President): he had a central role in promoting this and other
innovative projects, probably due to the high level education and the professional experience
gained as a consultant (in the Telecom sector) before going back to work in his family firm
The Itkey CRM solution first proposed did not fit exactly Aster needs, but after 2 years of
continuously improved releases, the outcome of this intensive collaboration between ITkey
Technical Director and Aster President, produced an innovative CRM solution specific for
automotive context. This solution made a significant contribution for gaining good results and
consolidating the management of customer relationships.
An unforeseen consequence of the Aster – Itkey partnership, has been the idea to produce and
sell together a CRM solution (called “Leonardo”) for other dealers: so they became
consultants for marketing and CRM aspects with other important Italian dealers1.
Phase 1. The partnership with Exeura
The internal CRM solution developed, strictly integrated with adopted ERP, allows to capture
a large amount of data from the customers during all the relationship phases (from the first
contact to the assistance service phase) and to release these data for each internal people
interacting with customers.
Leonardo, in fact, is a CRM solution strongly specific for automotive dealers, based on the conjoint design and
the synergy among their complementary competencies and, above all, refined by the empirical experiences
developed on the field.
Today, the marketing strategy of Aster Group addresses a customer base of 42,000 customers
and conducts approximately 200 One-to-One Marketing campaigns annually.
Nevertheless, Aster recognized the need to leverage the large amounts of data produced by
their marketing campaigns in order to improve the reach and effectiveness of its marketing
Adopting a more general Customer Equity Management approach, this data can be exploited
and analyzed in order to increase the customer value.
Aster’s management was searching for a better means to analyze marketing data (2008), while
another software firm (Exeura) was looking to improve applications with its cutting-edge tool
supporting business analytics (Rialto™). Exeura is an academic spin-off of the University of
Calabria operating as top level IT consulting firm and involved in several research projects.
This product combines the functionality of multiple applications into a single tool supporting
the entire data mining and analytics lifecycle at an affordable price.
When the Exeura sales manager proposed these tools, Aster’s president perceived that this
was exactly what he needed for exploiting the available large amount of data arising from his
ERP and CRM systems.
Therefore they decided to invest in business analytics that allowed for the evaluation of the
value produced by each marketing campaign, as well as detected the causes and the
By combining Aster’s experience with CRM solutions for the automotive industry and
Exeura’s expertise in developing data mining models, they built together an innovative
solution to optimize business decision-making.
This solution, combining the predictive model adopted by Aster and the analytical tool
provided by Exeura, allowed Aster to discover:
• the “value drivers” that determine the positive or negative value of a customer to a
• the automotive brands and models that are likely to produce positive customer
response to a marketing campaign;
• the most profitable stages of a customer relationship.
The challenge for Aster Group was to develop One-to-One Marketing campaigns that
maximized the value produced while using the results to further predict (leveraging
multivariate regression) the optimal usage of assets and resources (time, budget, information,
and human resources).
The value produced by One-to-One Marketing campaigns is estimated by two main factors:
1. Actual value – the revenue produced during a time period.
2. Potential value – the value derived from the qualitative results of customer behavior
(e.g., high customer loyalty increases future financial value.)
The success of this experience has been fruitful for both partners: Aster improved as
previously described and Exeura achieved interesting results too. Their platform supporting
business analytics is general purpose and in its early stages, then it needs of successful
applications in specific industries in order to refine it.
Phase 2. The early stages of an Aster spin-off for innovative consultancy projects
An interesting evolution of this case study is that the Exeura sales manager perceived that this
collaboration could have been extended and thought to involve a partner, an IT consultant
operating as technology broker in the USA market. He organized a meeting, where emerged
that the developed experience can be the basis for design and sell a more general solution
aiming at supporting the decision making in marketing campaign in automotive industry.
Referring to its personal contacts, the broker suggested that a business opportunity could be
the proposal of this solution for other marketing services providers in the USA market: a
direct approach to the USA dealers would not be economically viable for a joint venture of
these three SMEs. The business idea has been to offer to these providers the management of
an innovative additional service, the so called CSS (Campaign Support System), based on the
complementary competences of the three partners (Aster, Exeura and the broker). The
“entrance strategy” is based on the idea to leave at the end the total ownership of the
developed software to the provider. The revenues come from a business consultancy relation
and from royalties mechanisms (based on the additional provider revenues produced by
selling CSS to the dealers). In this way it is possible for a newcomer to win the mistrust of
these big players (providers for hundred of dealers) minimizing their risk.
This business is still in the early stages in the USA market: the early negotiations will soon
become actual contracts.
Aster in this context decided to create a spin off, exclusively devoted to consultancy business
opportunities. In some way Aster is changing its nature (from dealer to provider for dealers).
The idea is to manage these innovative projects (at the moment focused on the automotive
context) leveraging on network of medium term relationships based on complementary
The starting point of these projects is Aster’s need to solve an internal problem: the success of
the implemented solutions (jointly designed with the technological partner) can successively
become of more general interest for external firms too.
In this network Aster plays a leading and central role: in the network value chain, its role is to
exploit its market competence (in partnership with other actors if necessary) and, on the
supply side, to find the right technical competence, in order to create the right relationships
suitable for solving the specific problem.
4. Lessons learned and conclusions
We started this paper asserting that the open innovation processes are based on the use of
purposive inflows and outflows of knowledge in order to innovate. This statement emphasizes
the ability to predict and plan the innovation process as much as possible, taking less in
account emerging issues. Our study, on the other hand, underlines the existence and
importance of emerging phases in the open innovation process carried out by a lead-
manufacturer SME. This is evident considering that, when Exeura contacted Aster, it was
only to sell a specific product, but: (1) Aster was seeking new opportunities and, acting as a
lead user, has been able to add value to the product for internal use and (2) when the Exeura
sales manager tried to involve the USA technology broker, the new business idea (CSS -
Campaign Support System) for the automotive industry emerged. The possibility to improve
the offered product has emerged during the initial phase both for Exeura and Aster. So, a first
event that could be considered based on serendipity is when Exeura discovered in Aster a lead
user SME, even if this was not its initial purpose: in fact, Exeura was actually just searching
for new clients. A second emerging event was the discover by Aster of the possibility to
exploit an indirect link (through Exeura) with a technology broker on the USA market. This
event enabled Aster to reach the American automotive sector. The emerging nature of these
phenomena is coherent with the flexibility and creativity needed in innovation processes in all
firms, and especially in SMEs. Nevertheless the presence of a general innovation approach
and, more in general, a proactive approach in evaluating the external phenomena, seems to be
critical in order to take the opportunities and to early perceive an evolutionary path.
The conducted case study underlines also that, thanks to the building and management of
interorganizational relationships, Aster has evolved from being a lead user SME to a lead
manufacturer. Indeed, Aster has activated some scanning and networking mechanisms to
search for complementary knowledge (not owned internally): Exeura represented the
technological partner, while the broker was able to present and promote the developed
product (i.e. the CSS) to the American service providers. These technological and market
knowledge, joint with Aster’s internal experience on the required product functionalities,
form the needed value chain competences. The level of analysis of our study is, in fact, the
“value chain level of innovating actors/firms” (Fichter, 2009), in which the central firm
(Aster) has the most critical role. In our case, Aster has the task to act as the value chain
coordinator (see figure 1).
Figure 1 - The value chain of innovating actors
With regards to the roles within the single firms constituting the value chain, the analysis can
be described tracing the innovative process phases:
1. PHASE 1: in Exeura (the technological supplier), the sales manager has been the
champion (see the definition by Chakrabati, 1974, reported above), promoting and
taking part actively on the innovative process. In Aster, the president has been a lead
user which, bringing his market and product requirement knowledge, has co-
developed the system used internally.
2. PHASE 2: Aster’s president promotes a partnership with the Exeura sales manager in
order to commercialize the co-developed product. The commercialization takes place
also thanks to a technological broker. Aster’s president, thus, becomes an innovative
process champion and, at the same time, Aster itself becomes an user-manufacturer.
It is possible to note that, when some events have emerged, some new or different roles have
come out contextually.
Using concepts by Enkel et al. (2009), the innovative process can be described as follows:
1. in a first phase, Aster leads an outside-in process, enriching its knowledge base
through the integration of technological suppliers’ knowledge;
2. in a second phase, Aster leads an inside-out process, through a spin-off and the
partnership with Exeura.
To summarize, the empirical findings suggest that (1) some phases of the innovative process
conducted by a lead user SME can be emergent in nature; (2) the interorganizational
relationships can provide the complementary competencies that are not owned internally (or
that cannot be developed), to let a lead user SME become a user manufacturer SME; (3)
during the evolution of the innovation process, the active roles in the network can change
when unpredicted events happen.
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