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The role of the user in innovation Results from the Finnish Community Innovation Survey (CIS 2010)

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A Room Document delivered at the OECD / NESTI meeting of 17-19 April 2013

Mervi Niemi, Statistics Finland

Jari Kuusisto, MIT Sloan School of Management, USA & University of Vaasa, Finland

Contents

  • 1 Introduction

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  • 2 The role of users in innovation activity 2008 -2010

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  • 3 New questions on users and their contribution to the activity of innovation

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  • 4 New findings concerning users and their contribution to the activity of innovation

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  • 4.1 Users as a source of information for innovation

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  • 4.2 Co-creation of innovation with users

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  • 4.3 Commercialization of user innovations

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  • 5 Conclusions and future work

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  • 5.1 Summary findings

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  • 5.2 Some implications of the findings

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  • 5.3 Direction for further work

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1

Introduction

Innovation, the putting of new or significantly improved goods or services on the market, or the finding of better ways of getting them there, is linked in the policy literature to the creation of jobs and of economic growth. Promoting innovation is a policy objective in many countries and, in Europe, the activity of innovation is measured directly by the Community Innovation Survey (CIS) which has been conducted during the last twenty years. The purpose of the CIS is to inform the public policy debate around innovation and its outcomes.

A robust finding of the CIS is the importance of users of the goods or services produced by enterprises and brought to market. As Section 2 shows for Finland, users are principal sources of information for the activity of innovation in the enterprise and they are also leading collaborators or co-innovators for the innovative enterprise. There is no question that users are key players in the activity of innovation. However, their role as innovators in their own right as been less well explored.

Section 3 draws on data from a new question added to the Finnish 2010 CIS. It probes the importance of users as sources of information and as active collaborators. It also examines the importance of products made by users to the activity of innovation in the producing enterprise. A significant finding is that products originating with users are most commonly reported by the enterprises with innovations new to the market. This may indicate that user orientation creates foundation for products new to the market, but this is something yet to be surveyed in detail and exactly proved. The Oslo Manual (OECD/Eurostat 2005) classifies innovation according to novelty, the lowest form of novelty is ‘new to the firm’, the next is ‘new to the market’, and then comes ‘new to the world’. CIS 2010 expands the last category to include new to your country, new to Europe or new to the world.

The new question on users in the activity of innovation in Finland was experiment for the first time and the findings suggest that more work needs to be done. More data and analysis is needed to confirm the findings and extend what has been learned about the role of the user innovator in the innovation process. This is discussed in Section 4.

The Finnish CIS 2010 was carried out in autumn 2011– spring 2012 and its target population covered more than 8000 enterprises; 3,955 enterprises in manufacturing 1 and 4,267 enterprises in service sectors. Enterprises with 250 or more employees were targeted by a census, while simple random sampling targeted enterprises with 10 to 249 employees. In total this CIS census and sample covered 1,613 Finnish enterprises in manufacturing, mining and quarrying, electricity, gas and air conditioning supply, water supply and waste management and, 1,550 businesses in selected types of services. The response rate of the survey was 70 per cent, thus obtaining data from almost 2,200 enterprises.

1 Manufacturing here refers to actual manufacturing with 3,552 enterprises, mining and quarrying with 70 enterprises and electricity, gas and air conditioning supply, water supply and waste management with 333 enterprises.

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The definition of innovation used in the CIS, and paraphrased at the start of this section, is taken from the Oslo Manual, paragraphs 146 and 150 (OECD/Eurostat 2005). The share of innovation- active enterprises in the population was 56 per cent.

  • 2 The role of users in innovation activity 2008-2010 Users are sources of information for innovation and they are also active participants and co- innovators in the activity of innovation. For Finland, the significance of ‘users’ as sources of information is demonstrated by the results in Table 1, on the third line from the top representing clients and customers. Respondents rate this group as the most important external information source. Only own enterprise/group is rated higher as an innovation related information source. Other information sources include; suppliers of equipment etc., competitors and others in the sector, universities and polytechnics, government or public research institutes, conferences / trade fairs, and exhibitions, professional/industry associations and scientific journals as the leas important innovation related information source. Exhibit 1:

The importance of information sources to the innovation activities of the enterprise during the three years 2008 – 2010. (Enterprises with innovation activities relating to products and processes.)

 

High%

Medium%

Low%

importance

importance

importance

Own%enterprise%or%enterprise%group

  • 62.1 5.6

25.0

Suppliers%of%equipment,%materials,%components,%or%software

  • 14.8 25.9

46.6

Clients%or%customers

  • 39.5 14.7

35.9

Competitors%and%other%enterprises%in%the%sector

  • 11.5 30.6

44.5

Consultants,%commercial%labs,%or%private%R&D%institutes

  • 3.8 40.0

23.9

Universities%or%polytechnics

  • 4.5 33.0

21.8

Government%or%public%research%institutes

  • 2.8 35.0

12.0

Conferences,%trade%fairs,%exhibitions

  • 7.3 37.6

37.5

Scientific%journals%and%trade/technical%publications

  • 3.7 46.8

28.9

Professional%and%industry%associations

  • 3.2 41.3

16.0

Source:%Statistics%Finland

The survey also asks innovation-active enterprises if they co-operated on any of their innovation activities with other enterprises or institutions 2 . The breakdown of the type of co-operation partner is given in Exhibit 2.

2 The share of innovation-active firms engaged innovation related collaboration was 40 per cent.

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Exhibit 2:

The importance of innovation co-operation partners during the three years 2008–2010. (Enterprises with innovation activities relating to products and processes.)

 

High%

Medium%

Low%

importance

importance

importance

Own%enterprise%or%enterprise%group

11.8

7.3

3.0

Suppliers%of%equipment,%materials,%components,%or%software

6.3

16.7

11.9

Clients%or%customers

15.3

16.1

6.6

Competitors%and%other%enterprises%in%the%sector

3.2

11.9

15.9

Consultants,%commercial%labs,%or%private%R&D%institutes

2.3

11.1

16.6

Universities%or%polytechnics

3.8

12.7

13.8

Government%or%public%research%institutes

2.4

7.3

13.6

Source:%Statistics%Finland

Exhibit 2 presents also the perceived importance of different types of co-operation partners in innovation activities during the three years 2008–2010. The figures concern enterprises with innovation activity relating to products and processes. Presented ratings of importance are based on the national questions in the Finnish CIS survey. The figures indicate that users (clients or customers) are perceived as most important external innovation co-operation partner. Only enterprises within the group are perceived as more important partners in innovation. Suppliers of equipment etc., represent the third most important group of innovation partners.

What is clear from both Exhibits 1 and 2 is that the user is a key player in the innovation process and this is confirmed in repeated surveys in European countries. In the next section, the results of the new questions in the Finnish CIS 2010 are presented. They elaborate on what is found in Tables 1 and 2 and go on to probe the role of the user as innovator, not just as a source of information or as a co-operation partner.

  • 3 New questions on users and their contribution to the activity of innovation New insights into the role of the user come from the questions added to the Finnish CIS 2010. The questions related to user-driven and user innovation were placed at the end of the CIS questionnaire. These questions were presented only to those enterprises that reported some type of the following innovation activities; product innovations, process innovations, projects related to product or process innovations, marketing innovations or organisational innovation. In total, 56 per cent of enterprises were engaged in innovation activities during three year 2008–2010. The share of enterprises with innovation activity is based on the weighted data. Respondents were briefed for the user innovation questions by the introductory paragraph:

During the three years 2008 to 2010, which means and measures did your enterprise use to include customer and user orientation in your enterprise's

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innovation activities and in the production of your innovative products and how significant the means and measures used were?

This introductory paragraph covers the three manifestations of user-driven and user innovation adopted in the Finnish innovation policy programme (2009). Starting from the right they include:

user innovations, co-creation with users, and user needs driven innovation that is based on finding out about user needs with the help of market research tools. These three themes are also addressed in the survey questions presented below.

Exhibit 3:

Manifestations of user-driven and user innovation

innovation activities and in the production of your innovative products and how significant the means and

Source: Ministry of Employment and the economy, 2010

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Exhibit 4

Questions addressing user innovation in the Finnish CIS survey questionnaire 2008-2010

Exhibit 4 Questions addressing user innovation in the Finnish CIS survey questionnaire 2008-2010 1. The first
  • 1. The first question focuses on the methods by which businesses seek to develop better understanding of users and their needs. These include customer feed back systems, market studies, consumer panels, focus groups, interviews and various other alternative ways to research user needs, e.g. ethnography. It elaborates on the question about external sources of information feeding in to firm’s innovation activities, as presented in the Exhibit 1.

  • 2. The second question explores the role of users as co-creators of innovations and new content. Here, the possible tools include development forums, platforms facilitating user ideas capture and other types of contributions, innovative user communities, software and content production with users, and crowdsourcing activities. It elaborates on the question about the user as collaborator and innovation related resource which gave the results in Exhibit 2.

  • 3. The third question focuses in the core of user innovations asking businesses about adopting and commercialization of user innovations. Here user innovations include new and modified products developed by users. More specifically, the question includes cases where:

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Customers and users modified existing products, and the enterprise was

responsible for further development, production and market introduction of the product. Customers and users developed a new product that the enterprise took into its production and introduced it in the markets.

In the survey the questions were in Finnish and the above are translations from the original questions. Over all, the response rate on the user innovation questions was very good for this type of survey. This indicates that respondents found the questions on user innovation activities relevant, and were able to provide answers to them. Prior to the survey was launched Statistics Finland tested the question on incorporating user information and users in activity of enterprises. Cognitive testing were conducted with five interviewees who were respondents for the Finnish R&D Survey.

The question worked well and no serious difficulties in responding were detected. Some remarks were however made, such as 1) terminology used should be sharpened (e.g. users, clients, customers), 2) interpretation of the question may vary depending on the position of an enterprise (b to b or b to c market or a role in production supply chain), 3) methods mentioned and terminology used may still be unfamiliar for respondents and 4) the formulation of the question (matrix) was quite complex. Note was taken of these comments for future work.

  • 4 New findings concerning users and their contribution to the activity of innovation Here, the key survey results describing the modes of user-driven and user innovation are presented. User orientation (utilization of user information, co-creation with users and commercialization of user innovations) was most common among those enterprises that had launched new products on the market between 2008 and 2010. The results apply to the enterprises that were engaged in innovation activities in 2008–2010. Their share of all enterprises was 56 per cent. This share and all the other results presented in this paper are population estimates. An innovation-active enterprise or enterprise with innovation activity is one that during the period under review, 2008 to 2010, has introduced a product innovation to market or implemented a process innovation, or which has been working towards achieving these, or which has implemented organisational or marketing innovations. Altogether 46 per cent of all enterprises had innovation activity related to products or processes during the period 2008–2010. The majority, or 79 per cent, of these had engaged in R&D, and about half of those with innovation activity had acquired research and development activities from external sources. A total of 80 per cent of the enterprises pursuing innovation activity reported that they had incorporated user information or engaged users in their innovation process during the survey period. The majority of these respondents estimated that the procedure was significantly or moderately important for them. These results are summarized in Exhibit 5.

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Exhibit 5

Incorporation of users and user information in enterprises’ innovation activities, methods and their importance 2008-10, share of enterprises with innovation activity

 

 

 

 

Source: Statistics Finland

  • 4.1 Users as a source of information for innovation The survey results indicate that businesses use a variety of methods in acquiring user information for innovation purposes. Seven out of ten with innovation activity had utilised information received from customer feedback systems, and 50 per cent of those that practised innovation activity reported that they had made use of information obtained from market surveys, consumer panels or similar means. Good one-third of enterprises had also used more scientific methods in ascertaining user needs. In terms of business population, exploitation of user information was slightly more common among service enterprises than manufacturing enterprises.

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Like innovation activity in general, the exploitation of user information increases as the enterprise size grows.

  • 4.2 Co-creation of innovation with users The results indicate that users are an important innovation resource and a significant number of businesses are already involved in co-creation activities with users. One-third of the innovating enterprises had done so together with users by involving them directly in the search for ideas, in the development process itself and, for example, in the content production. Joint development activities with the users may be realized e.g. by the use of development platforms. More than 17 per cent of the enterprises with innovation activity considered co-development activities with the users to be of high importance or medium importance. Joint innovation activities with users were somewhat more common among service businesses (38 %) in comparison to the manufacturing enterprises (28 %). The joint development also increases as the enterprise size grows.

  • 4.3 Commercialization of user innovations Utilization of user innovations is common practice among surveyed businesses. About half (47 per cent) of the enterprises with innovation activity reported that products modified by customers had been utilized in their innovation activities. Furthermore, around 30 per cent of the innovating enterprises reported that they had made use of products developed by users. The results indicate that businesses recognised user innovations, and such innovations represent important inputs in their innovation processes. In this CIS survey manufacturing businesses are somewhat more active in making use of user innovations. Exhibit 6 illustrates that enterprises which are active in innovation activities relating to products and processes, and especially in carrying out R&D activities are also making more use of user innovations, in this case products developed by users. Exhibit 6

Enterprises that are active in product and process innovations are also making more use of user innovations

60" 50" 40" 30" 20" 10" 0" Innova.on" Innova.on" No"innova.on"
60"
50"
40"
30"
20"
10"
0"
Innova.on"
Innova.on"
No"innova.on"

Products"developed"by"

users,"low"importance"

Products"developed"by"

users,"medium"importance"

Products"developed"by"

users,"high"importance"

ac.vi.es"rela.ng" ac.vi.es"rela.ng" ac.vi.es"rela.ng" to"products"and" to"products"and" to"products"and"

processes,"and"in; processes,"and"no" processes,"and"no"

house"R&D"

in;house"R&D"

in;house"R&D"

Source: Statistics Finland

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Enterprise size is a factor in the adoption of user innovation. Exhibit 7 illustrates that up to about 50 per cent of innovating enterprises consider products modified by users as a relevant source of innovations. In general, innovation activity is more common in large enterprises than in smaller ones, but the size of the business has relatively limited influence on the perceived importance of user innovation although it seems to grow slightly with the size of the business. Similar results are found in Exhibit 8 for the use of user developed innovations.

Exhibit 7 Importance of user innovations by enterprise size (personnel) 2008-2010* (user modified products) 60" 50"
Exhibit 7
Importance of user innovations by enterprise size (personnel) 2008-2010*
(user modified products)
60"
50"
Products"modified"by"users,"
40"
low"importance"
%" 30"
Products"modified"by"users,"
medium"importance"
20"
Products"modified"by"users,"
high"importance"
10"
0"
10)49"
50)249"
250+"
Source: Statistics Finland
Exhibit 8
Importance of user innovations by enterprise size (personnel) 2008-2010*
(user developed products)
60" 50" 40" %" 30" 20" 10" 0" 50)249" 10)49" 250+"
60"
50"
40"
%" 30"
20"
10"
0"
50)249"
10)49"
250+"

Products"developed"by"

users,"low"importance"

Products"developed"by"

users,"medium"importance"

Products"developed"by"

users,"high"importance"

Source: Statistics Finland

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CIS survey provides information also on the qualitative aspects of product innovations, indicating whether they are novel to the enterprise only, or to the enterprise target markets. According to the data the exploitation of user innovations was most common in enterprises that reported also the introduction of product innovations new to the market.

Exhibit 9

Novelty aspect of user innovations

70" 60" 50" 40" Products"modified"by"users," %" low"importance" 30" Products"modified"by"users," 20" medium"importance" 10" Products"modified"by"users," high"importance" 0" Product"
70"
60"
50"
40"
Products"modified"by"users,"
%"
low"importance"
30"
Products"modified"by"users,"
20"
medium"importance"
10"
Products"modified"by"users,"
high"importance"
0"
Product"
Product"
No"product"
innova5ons,"
innova5ons,"
innova5ons"
only"new"to"the" new"to"the"
firm"
enterprise's"
market"

Source: Statistics Finland

70" 60" 50" 40" Products"developed"by" users,"low"importance" 30" Products"developed"by" 20" users,"medium"importance" 10" Products"developed"by" users,"high"importance" 0" Product" Product"
70"
60"
50"
40"
Products"developed"by"
users,"low"importance"
30"
Products"developed"by"
20"
users,"medium"importance"
10"
Products"developed"by"
users,"high"importance"
0"
Product"
Product"
No"product"
innova5ons,"only" innova5ons,"new"
innova5ons"
new"to"the"firm"
to"the"
enterprise's"
market"

Exhibit 9 presents side-by-side charts for the reporting of user modified products and products developed by users, by type of innovative enterprise. The key difference between user modified innovations and products developed by users is, that a somewhat larger share of respondents view user modified products as more important than pure user innovations. The important observation is that the influence of user modified, or developed, innovations was greater for enterprises that reported new to the enterprise’s market innovation. Exhibit 10 shows the difference in the use of user innovation between service sector and manufacturing firms 3 . The indication is that manufacturing firms are slightly more active in adopting and commercializing user innovations that service sector’s firms.

Exhibit 10

Utilization of user innovations in service and manufacturing enterprises

60" 50" Products"modified"by"users," 40" low"importance" %" 30" Products"modified"by"users," medium"importance" 20" Products"modified"by"users," high"importance" 10" 0" Manufacturing" Services"
60"
50"
Products"modified"by"users,"
40"
low"importance"
%" 30"
Products"modified"by"users,"
medium"importance"
20"
Products"modified"by"users,"
high"importance"
10"
0"
Manufacturing"
Services"

Source: Statistics Finland

60" 50" Products"developed"by" 40" users,"low"importance" %" 30" Products"developed"by" users,"medium"importance" 20" Products"developed"by" users,"high"importance" 10" 0" Manufacturing" Services"
60"
50"
Products"developed"by"
40"
users,"low"importance"
%" 30"
Products"developed"by"
users,"medium"importance"
20"
Products"developed"by"
users,"high"importance"
10"
0"
Manufacturing"
Services"

3 Manufacturing here refers to actual manufacturing -, mining and quarrying - and electricity, gas and air conditioning supply, water supply and waste management.

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5

Conclusions and future work

  • 5.1 Summary findings This is the first time in the history of the CIS that detailed questions have been asked about users as a source of information for innovation and as collaborators in the innovation process. Of course, the importance of users in both categories is a well-established CIS result but the details, which follow are new.

Up to 80 per cent of enterprises with innovation activity reported having incorporated

user information or users in their innovation activity during the survey period Integration of user information and joint development became more common as

enterprise size grows Exploitation of user information and joint development were slightly more common among service enterprises than in manufacturing enterprises

The new questions also probe the user as an innovator and as a source of innovations for the producing enterprise. Here is a summary of the new results.

Incorporation of users was most common among enterprises that developed (radical) new

to the market product innovations Utilization and commercialization of products modified or developed by users was more

common in manufacturing than in surveyed service sectors Integration of products modified or developed by users into production occurs with almost the same frequency among small and large innovating enterprises

  • 5.2 Some implications of the findings The use by producers, of innovative products originating from users is significant, especially as it is linked with ‘new to the market’ innovation by the producing enterprise that incorporates the user’s innovation. The immediate implication is that enterprises and industry associations should be made aware of the importance of user innovation, if they are not already taking advantage of this source.

  • 5.3 Direction for further work The CIS provides a robust framework for further analysis of the results given in this paper. For example, once product innovation is established in the survey, a question follows that asks who developed these product innovations. They choices are:

    • a) Your enterprise by itself

    • b) Your enterprise with other enterprises or institutions*

    • c) Your enterprise by adapting or modifying goods or services originally developed by other enterprises or institutions*

    • d) Other enterprises or institutions*

*include independent enterprises plus other parts of your enterprise group (subsidiaries , sister enterprises, head office, etc.). Institutions include universities, research institutes, non-profits, etc.

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There are two issues here. The first case refers to an enterprise that modifies or develops a process or a product and then transfers it to the producer. If product being transferred is still in need of work before it goes to the market, the response by the producers to the question should be c). If the product is in final form, which is less likely, the response is d). Additional analysis would show how many enterprises that reported using user-modified or user-developed products provided a positive response to c) or d). A strong correlation might suggest that c) or d) responses could be taken as signals of user innovation.

The second issue concerns consumers. They modify or develop products, and there is evidence that in some cases they transfer the resulting product to a producer. However, consumers do not appear in the formulation of the question in CIS about who did the product innovation. A suggestion is to modify the list as follows: Institutions include universities, research institutes, non-profits, individuals, households, and groups. In addition, consumers, as user innovators, are being monitored in Finland by the InFi Project (Tekes, 2013), as is the diffusion of the innovations they create. 19 % of the user innovators transfer their innovation to producing enterprises. Comparing this input with that from enterprises that are user innovators is a subject for future work.

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Acknowledgements

The authors want to express special thanks to Fred Gault for his invaluable insights and support in writing this paper.

References

Ministry of Employment and the Economy (2008), National innovation strategy, Helsinki, Finland.

Ministry of Employment and Economy (2010) Demand and user-driven innovation policy - Framework (Part I) and Action Plan (Part II), Helsinki, Finland, 48/2010.

Gault, Fred (2010), Innovation Strategies for a Global Economy, Development, Implementation, Measurement and Management, Cheltenham: Edward Elgar and Ottawa: IDRC.

Gault, Fred and Eric von Hippel (2009), The Prevalence of User Innovation and Free Innovation Transfers: Implications for Statistical Indicators and Innovation Policy, MIT Sloan School of Management Working Paper no. 4722-09, Cambridge, MA: MIT.

Government of Finland (2009), Government’s Communication on Finland’s National Innovation Strategy to Parliament, VNS, 5/2008, Government of Finland, Helsinki, Finland.

Official Statistics of Finland (OSF) (2012): Innovation [e-publication], ISSN=1797-4399, Helsinki: Statistics Finland [referred: 3.4.2013], Access method:

http://tilastokeskus.fi/til/inn/index_en.html.

Schaan, Susan and Mark Uhrbach (2009), Measuring User Innovation in Canadian Manufacturing, 2007, Catalogue 88F0006X, no. 3, Ottawa: Statistics Canada.

von Hippel, Eric (2005), Democratizing Innovation, Cambridge, MA: MIT Press.

von Hippel , Eric, Jeroen de Jong, Fred Gault, Jari Kuusisto (2013) Statistical Indicator Development for User Innovation and Innovation Transfers in Finland (InFi), Tekes funded project at the University of Vaasa, Finland.

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