- To consider the pros and cons of co-development in successful organizations with competing goals;
- To learn the capabilities and limitations of machine learning, natural language processing (NLP), and other artificial intelligence tools;
- To evaluate the strategy involved in a project that presents an opportunity and a reputational risk;
https://www.prnewswire.com/news-releases/with-watson-financial-services-ibm-launches-cognitive-era-of-regtech-300473569.html
Questions:
What challenges emerged for IBM and MDAnderson during co-development? How did these challenges hinder the development of prototypes and trials in the field?
The technology involved a mixture of NLP and machine learning. Was it tailored too tightly to Jeopardy?! If IBM and MDAnderson tried this today (or just waited a few years), would they have a different experience?
How Do Strategy and Leadership Styles Jointly Affect Co‐development and Its Innovation Outcomes? How Do Strategy and Leadership Styles Jointly Affect Co-development and Its Innovation Outcomes?* Ruth Maria Stock, Nicolas A. Zacharias, and Armin Schnellbaecher Co-development with customers attracts considerable interest as a means to improve companies’ product innova- tiveness and performance. Forward-thinking companies integrate co-development within their business models, but many remain uncertain about which levers best foster its implementation. This study therefore takes a top- down perspective on ways to stimulate co-development with customers. Relying on boundary theory and its wider contextualization in relation to resource dependence theory, the authors argue that an innovation-oriented strate- gy, combined with transformational and transactional leadership, represents senior management levers for driving general openness and providing strategic directions for innovation, which then helps bridge the boundary with customers and facilitate the co-development of new products. Data from 135 managers and 415 subordinates reveal that some senior management levers can foster co-development. Specifically, the results of the hierarchical regression analyses confirm the hypothesized positive interaction effect of innovation-oriented strategy and trans- formational leadership, whereas the combination of innovation-oriented strategy and transactional leadership is not beneficial. The strength of innovation-oriented strategy as an important senior management lever differs for goods and services, which is not the case for the other two levers. Finally, this study provides a more fine- grained perspective on the new product frequency outcomes of co-development, by relying on organizational learning theory. Most research is restricted to linear relationships, but the current investigation unveils an inverted U-shaped relationship between co-development and companies’ new product frequency. Hence, compa- nies can profit from co-development at lower and medium levels, but the common notion of “the more, the better” does not apply to an unlimited degree for co-development. Practitioner Points � Senior managers should implement an innovation- oriented strategy to provide guidance regarding the company’s innovation generation goals in co- development projects. � Companies need to support organizational members with adequate freedom and flexibility in terms of co-development projects, instead of focusing on fixed goals, expectations, or rewards. � If they offer services in particular, companies should initiate appropriate training and coaching for senior managers, to help them better motivate and lead organizational members with a transformational leadership style. � Co-development can be fostered by senior managers from the top but also should be tracked, using man- agement tools and key performance indicators, to recognize negative efficiency trends as early as possible. Introduction C o-development with customers to generate new goods and services has become a strate- gic topic on virtually every company’s agen- da (Matthing, Sand�en, and Edvardsson, 2004; Payne, Storbacka, and Frow, 2008; Prahalad and Ramaswamy, 2000), because it can contribute to better product–mar- ket fit and increase the chances of product success in the market (Gruner and Homburg, 2000; Neale and Corkindale, 1998). Furthermore, co-development—or the joint development of new products with customers through interaction and participation at various stages of the new product development process (Athaide, Stump, and Joshi, 2003; Carbonell, Rodr�ıguez- Escudero, and Pujari, 2009; Hsieh and Chen, 2005)— can shorten new product development cycles and increase the speed to market, which eventually benefits Address correspondence to: Ruth Maria Stock, Technische Uni- versit€at Darmstadt, Hochschulstraße 1, 64289 Darmstadt, Germany. E-mail:
[email protected] *The authors express gratitude for financial support from the F€orderverein f€ur Marktorientierte Unternehmensf€uhrung, Marketing und Personalmanagement e.V (Association of Supporters of Market-Oriented Management, Marketing, and Human Resource Management). They also thank Sebastian Dreher, Ines Reiferscheid, and Florian Totzauer for their helpful comments on previous drafts of this article. J PROD INNOV MANAG 2017;34(2):201–222 VC 2016 Product Development & Management Association DOI: 10.1111/jpim.12332 downstream variables, such as company performance (Lau, Tang, and Yam, 2010; Sherman, Souder, and Jenssen, 2000). Forward-thinking companies thus inte- grate co-development into their business models. When Millennium Pharmaceuticals was founded, for example, senior management chose to focus solely on the early stages of drug development and foster part- nerships with larger customer companies (e.g., Pfizer, Merck) to handle clinical trials and commercialization. As it grew, Millennium Pharmaceuticals’ strategic evo- lution enabled it to leverage these co-development relationships in other parts of its operations (Ches- brough and Schwartz, 2007). Despite the strategic relevance of co-development for practitioners, many companies remain uncertain about which levers can best foster its implementation. Extant research provides valuable insights into ways to organize successful co-development with customers (e.g., Athaide et al., 2003; Carbonell et al., 2009; Hoyer, Chandy, Dorotic, Krafft, and Singh, 2010), but suggestions for fostering co-development from the top are rare. This gap is surprising, considering the vast number of studies that highlight the important influ- ence of senior managers on companies’ innovativeness (e.g., Galasso and Simcoe, 2011; Yadav, Prahbu, and Chandy, 2007) and performance (e.g., Bertrand and Schoar, 2003; Iaquinto and Fredrickson, 1997). Although some studies note the influence of senior managers’ leadership styles on innovation (e.g., Elen- kov and Manev, 2005; Osborn and Marion, 2009), to the best of the authors’ knowledge, no investigations address how senior managers might strategically sup- port co-development. Yet strategy and leadership both drive innovation in general (Jung, Chow, and Wu, 2003; Yadav et al., 2007). By combining these con- cepts, the current study contributes to a deeper under- standing of how companies can drive co-development from the top. Specifically, it addresses the following research question: How does the interplay of strategy and leadership styles of senior managers relate to co- development? This study also includes the outcomes of co- development for new product frequency, which refers to the rate of introduction of new products (e.g., Katila, 2002; Stock and Zacharias, 2011). On the one hand, co-development can generate multiple benefits for companies, such as increased knowledge about cus- tomer needs (Fang, 2008; Narver, Slater, and MacLa- chlan, 2004), heightened efficiency (Hoyer et al., 2010; Payne et al., 2008), and improved innovation speed (Carbonell et al., 2009). Therefore, companies can introduce innovative products more frequently. On the other hand, companies confront increasing volumes of customer information when they engage in more co-development (Hoyer et al., 2010), which may decrease the speed of innovation and thus new product frequency. These arguments indicate that a simple log- ic, such as “the more co-development, the better or worse,” is insufficient, and a nonlinear influence of co- development might exist. Thus, the second research question asks: How is co-development related to new product frequency? Extant research emphasizes significant differences between goods and services, which may influence co- development processes too (e.g., Nijssen, Hillebrand, Vermeulen, and Kemp, 2006; Stock, 2011). Due to the unique characteristics of services—intangibility, insep- arability, heterogeneity, and perishability (Lovelock and Gummesson, 2004)—their development process tends to be less formalized or standardized and thus requires more intensive information exchanges than the development process for goods (Ettlie and Rosen- thal, 2011). The effectiveness of senior management levers may vary, depending on whether they are applied to the co-development of goods or services. Therefore, the third question this study seeks to answer is: Are strategy and leadership styles differentially BIOGRAPHICAL SKETCHES Dr. Ruth Maria Stock is a Professor of Marketing and Human Resource Management at Technische Universit€at Darmstadt, Germany. She is visiting scholar at the Sloan Business School at MIT Boston and foun- der of the Future Innovation Lab, Darmstadt. She has published in vari- ous forums including Journal of the Academy of Marketing Science, Research Policy, Journal of Product Innovation Management, and Psy- chology & Marketing. Her primary research areas are innovation man- agement, customer relationship marketing, and future of work. Dr. Nicolas A. Zacharias is an assistant professor at the Department of Innovation and Entrepreneurial Marketing at Technische Universit€at Darmstadt, Germany. He holds a master’s degree in business adminis- tration with mechanical engineering and a Ph.D. in marketing from the same institution. He has published in various journals in the areas of marketing and innovation management including Journal of the Acad- emy of Marketing Science, Journal of Product Innovation Manage- ment, International Journal of Research in Marketing, and Journal of Business Research. His primary research interests are strategic tech- nology and innovation management, innovation and entrepreneurial marketing, and open innovation. Mr. Armin Schnellbaecher is a doctoral candidate in the Department of Marketing and Human Resource Management at Technische Uni- versit€at Darmstadt, Germany. He received his master’s degree in busi- ness administration with mechanical engineering from the Technische Universit€at Darmstadt, Germany. His research focuses on innovation management, and in particular the innovation generation in business- to-business relationships. 202 J PROD INNOV MANAG 2017;34(2):201–222 R. M. STOCK ET AL. associated with the co-development of goods and services? In addressing these research questions, this study offers multiple contributions for research and manage- rial practice. First, it takes a top-down perspective on the senior management levers of co-development. Relying on boundary theory (Aldrich and Herker, 1977) and its wider contextualization in relation to resource dependence theory (Pfeffer and Salancik, 1978), this study investigates how senior management levers foster co-development. An innovation-oriented strategy, as “the degree to which a company’s strategy focuses on driving innovativeness” (Stock and Zachari- as, 2011, p. 873), provides guidance for appropriate company behavior (Gatignon and Xuereb, 1997). In addition, senior managers might open their companies by providing transformational leadership, which involves intellectual stimulation, individualized consid- eration, and charisma (Bass, Avolio, Jung, and Berson, 2003; Howell and Avolio, 1993), or transactional lead- ership, which represents the extent to which senior managers clarify what they expect from employees (Jansen, Vera, and Crossan, 2009; Vaccaro, Jansen, Van Den Bosch, and Volberda, 2012). By investigating these senior management levers and their interactions, this article enriches the co-development field with knowledge about these largely neglected antecedents. Second, this study provides a richer understanding of the new product frequency outcomes of co- development and sheds light on the underlying mecha- nism for the nonlinear relationship between co- development and the frequency of new product intro- ductions. New product frequency is a particularly valu- able measure in this context, because it augments the scientific discourse with a portfolio perspective on innovative products. In line with organizational learn- ing theory (Levitt and March, 1988; March, 1991), new knowledge and the difficulty of disseminating this knowledge, by transforming it into new product devel- opment projects, results in a nonlinear impact of co- development. Third, goods or services provide contingency fac- tors that can alter the effects of senior management levers on co-development. The results