statfi-udia130415the role of the user in innovation - results from the finnish community...

7/30/2019 StatFi-UDIa130415The role of the user in innovation - Results from the Finnish Community Innovation Survey (CIS

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The role of the user in innovationResults from the

Finnish Community Innovation Survey

(CIS 2010)

.

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


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Contents

1 Introduction 3

2 The role of users in innovation activity 2008-2010 4

3 New questions on users and their contribution to the activity of innovation 5

4 New findings concerning users and their contribution to the activity of innovation 8

4.1 Users as a source of information for innovation 9

4.2 Co-creation of innovation with users 10

4.3 Commercialization of user innovations 10

5 Conclusions and future work 13

5.1 Summary findings 13

5.2 Some implications of the findings 13

5.3 Direction for further work 13


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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 ofjobs 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 toinform 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 ofinformation 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 inthe 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 theimportance 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. Asignificant 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 createsfoundation 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 tonovelty, 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 neededto 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 populationcovered more than 8000 enterprises; 3,955 enterprises in manufacturing

1and 4,267 enterprises in

service sectors. Enterprises with 250 or more employees were targeted by a census, while simplerandom 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 datafrom almost 2,200 enterprises.

1Manufacturing 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 representingclients 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.)

The survey also asks innovation-active enterprises if they co-operated on any of their innovation

activities with other enterprises or institutions2. 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.

High%

importance

Medium%

importance

Low%

importance

Own%enterprise%or%enterprise%group 62.1 25.0 5.6

Suppliers%of%equipment,%materials,%components,%or%software 14.8 46.6 25.9

Clients%or%customers 39.5 35.9 14.7

Competitors%and%other%enterprises%in%the%sector 11.5 44.5 30.6

Consultants,%commercial%labs,%or%private%R&D%institutes 3.8 23.9 40.0

Universities%or%polytechnics 4.5 21.8 33.0

Government%or%public%research%institutes 2.8 12.0 35.0

Conferences,%trade%fairs,%exhibitions 7.3 37.5 37.6

Scientific%journals%and%trade/technical%publications 3.7 28.9 46.8

Professional%and%industry%associations 3.2 16.0 41.3

Source:%Statistics%Finland


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Exhibit 2: The importance of innovation co-operation partners during the three years

20082010. (Enterprises with innovation activities relating to products andprocesses.)

Exhibit 2 presents also the perceived importance of different types of co-operation partners ininnovation activities during the three years 20082010. The figures concern enterprises with

innovation activity relating to products and processes. Presented ratings of importance are basedon 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. Onlyenterprises 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 processand 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 inTables 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 ofinnovation

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 typeof 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 20082010.

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

High%

importance

Medium%

importance

Low%

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


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innovation activities and in the production of your innovative products and howsignificant 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 onfinding 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

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

1. The first question focuses on the methods by which businesses seek to develop betterunderstanding of users and their needs. These include customer feed back systems,

market studies, consumer panels, focus groups, interviews and various other alternativeways to research user needs, e.g. ethnography. It elaborates on the question about

external sources of information feeding in to firms innovation activities, as presented inthe Exhibit 1.

2. The second question explores the role of users as co-creators of innovations and newcontent. Here, the possible tools include development forums, platforms facilitating userideas capture and other types of contributions, innovative user communities, software and

content production with users, and crowdsourcing activities. It elaborates on the questionabout 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 aboutadopting and commercialization of user innovations. Here user innovations include new

and modified products developed by users. More specifically, the question includes caseswhere:


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Customers and users modified existing products, and the enterprise wasresponsible for further development, production and market introduction of the

product.

Customers and users developed a new product that the enterprise took into itsproduction 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 thistype 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 StatisticsFinland 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 FinnishR&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 andterminology 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 activityof innovation

Here, the key survey results describing the modes of user-driven and user innovation arepresented. User orientation (utilization of user information, co-creation with users and

commercialization of user innovations) was most common among those enterprises that hadlaunched new products on the market between 2008 and 2010. The results apply to the

enterprises that were engaged in innovation activities in 20082010. Their share of all enterpriseswas 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 theperiod 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 whichhas implemented organisational or marketing innovations.

Altogether 46 per cent of all enterprises had innovation activity related to products or processesduring the period 20082010. 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 activitiesfrom external sources.

A total of 80 per cent of the enterprises pursuing innovation activity reported that they hadincorporated user information or engaged users in their innovation process during the survey

period. The majority of these respondents estimated that the procedure was significantly ormoderately 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 informationreceived from customer feedback systems, and 50 per cent of those that practised innovationactivity 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 inascertaining 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 theenterprise size grows.

4.2 Co-creation of innovation with users

The results indicate that users are an important innovation resource and a significant number ofbusinesses are already involved in co-creation activities with users. One-third of the innovatingenterprises 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 developmentactivities 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 theusers 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 manufacturingenterprises (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 customershad 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 indicatethat businesses recognised user innovations, and such innovations represent important inputs in

their innovation processes. In this CIS survey manufacturing businesses are somewhat moreactive 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&Dactivities 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 alsomaking more use of user innovations


0"

10"

20"

30"

40"

50"

60"

Innova.on"

ac.vi.es"rela.ng"

to"products"and"

processes,"and"in;

house"R&D"

Innova.on"

ac.vi.es"rela.ng"

to"products"and"

processes,"and"no"

in;house"R&D"

No"innova.on"

ac.vi.es"rela.ng"

to"products"and"

processes,"and"no"

in;house"R&D"

Products"developed"by"

users,"low"importance"


users,"medium"importance"


users,"high"importance"


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Enterprise size is a factor in the adoption of user innovation. Exhibit 7 illustrates that up to about50 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 smallerones, 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)


Exhibit 8 Importance of user innovations by enterprise size (personnel) 2008-2010*

(user developed products)


0"

10"

20"

30"

40"

50"

60"

10)49" 50)249" 250+"

%"

Products"modified"by"users,"

low"importance"


medium"importance"


high"importance"

0"

10"

20"

30"

40"

50"

60"

10)49" 50)249" 250+"

%"




users,"medium"importance"




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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 thatreported also the introduction of product innovations new to the market.

Exhibit 9 Novelty aspect of user innovations


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 modifiedinnovations 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 importantobservation is that the influence of user modified, or developed, innovations was greater for

enterprises that reported new to the enterprises market innovation. Exhibit 10 shows thedifference in the use of user innovation between service sector and manufacturing firms3. The

indication is that manufacturing firms are slightly more active in adopting and commercializing

user innovations that service sectors firms.

Exhibit 10 Utilization of user innovations in service and manufacturing enterprises


3 Manufacturing here refers to actual manufacturing -, mining and quarrying - and electricity, gas and air

conditioning supply, water supply and waste management.

0"

10"

20"

30"

40"

50"

60"

70"

Product"

innovaons,"

only"new"to"the"

firm"

Product"

innovaons,"

new"to"the"

enterprise's"

market"

No"product"

innovaons"

%"Products"modified"by"users,"

low"importance"


medium"importance"


high"importance"0"

10"

20"

30"

40"

50"

60"

70"

Product"

innovaons,"only"

new"to"the"firm"

Product"

innovaons,"new"

to"the"

enterprise's"

market"

No"product"

innovaons"




users,"medium"importan



0"

10"

20"

30"

40"

50"

60"

Manufacturing" Services"

%"


low"importance"


medium"importance"


high"importance"

0"

10"

20"

30"

40"

50"

60"

Manufacturing" Services"

%"

Products"developed"b

users,"low"importance


users,"medium"import


users,"high"importanc


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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. Ofcourse, 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 incorporateduser information or users in their innovation activity during the survey period

Integration of user information and joint development became more common asenterprise size grows

Exploitation of user information and joint development were slightly more commonamong 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 morecommon in manufacturing than in surveyed service sectors

Integration of products modified or developed by users into production occurs withalmost 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 theusers 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 ofthis 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 whodeveloped these product innovations. They choices are:

a) Your enterprise by itselfb) 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, headoffice, 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 aprocess 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 shouldbe 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 evidencethat 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. Asuggestion is to modify the list as follows: Institutions include universities, research institutes,

non-profits, individuals, households, and groups. In addition, consumers, as user innovators, arebeing 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 producingenterprises. 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 toFred Gaultfor his invaluable insights and supportin 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 ofManagement Working Paper no. 4722-09, Cambridge, MA: MIT.

Government of Finland (2009), Governments Communication on Finlands 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 CanadianManufacturing, 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 fundedproject at the University of Vaasa, Finland.

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