Business creation in networks: How a technology-based start-up collaborates with customers in product development

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Abstract

This paper deals with business creation in networks by setting the focus on how technology- based start-up companies collaborate with customers in product development. The aim is to analyze the pattern of customer collaboration by using the industrial network approach as theoretical point of departure. The method consists of a process-based single case study. The focal case is Oxeon, a Swedish rapidly growing university spin-off company commercializing a new technology for making carbon fiber composites. The development of products and applications has taken place in close collaboration with their customers. The paper addresses three research issues, which are related to the timing, mutuality and organizing of the collaboration. The analysis of the Oxeon case results in identification of five crucial aspects on the management of customer collaboration: (i) the need for involving customers early, (ii) the choice of application areas, (iii) the mutual process of choosing and getting chosen as collaboration partner, (iv) the external networking role of the start-up, and (v) the internal organizing of the start-up in relation to its ambitions for external interaction with customers. The results are summarized by formulating a set of propositions that can be taken as starting point for further research.

Introduction

In the current business-to-business (B2B) landscape, inter-organizational collaboration in product development and innovation is an important topic both for managers and academic business researchers. Joint research and development (R&D) activities with suppliers, customers and universities are common parts of the landscape (see e.g. Brem and Tidd, 2012, Cantù and Corsaro, 2015, Cantu et al., 2015, Freytag and Young, 2014). Especially the role of customers and how to involve them in product development have been strongly emphasized in the recent literature (Chang and Taylor, 2016, La Rocca et al., 2016, Lagrosen, 2005, Lynch et al., 2016, Öberg, 2010). The benefits of interacting with customers are many-fold, including for instance that customers can provide detailed information on their problems and needs, give feedback, present ideas for innovative solutions and function as lead-users (Von Hippel, 1986). The literature also reports on challenges for innovating firms regarding, for example, risk sharing and different expectations (Brockhoff, 2003).

To start-up companies, building collaborative relationships with customers is especially important since these firms often have scarce resources (Baum et al., 2000, Coviello and Joseph, 2012). Collaboration is thus needed in order to access complementary resources to be used in the company's commercialization of its inventions (Chorev and Anderson, 2006, Paradkar et al., 2015). As pointed out by Antolin-Lopez, Martinez-del-Rio, Cespedes-Lorente, and Perez-Valls (2015), how to carry out product development collaboration with different partners is a strategic decision for the start-up, since it can reduce both innovation costs and risks. The customer side of the firm is of significance since the customers may possess valuable information about what product they need and want to use and hence what product the start-up should produce (Blank, 2013, Chorev and Anderson, 2006, La Rocca et al., 2013).

How firms develop over time is very much dependent on how they interact in the network and how they manage to establish relationships with different types of external actors (Håkansson & Ford, 2002). It also depends on their expectations and considerations regarding how the future will unfold (Araujo et al., 2014, Corsaro et al., 2012). This holds for established firms as well as for more newly founded companies, including start-ups which are still struggling to develop their business model and build positions in networks (Aaboen et al., 2012, La Rocca and Perna, 2014). However, despite the large number of studies on customer involvement in product development in B2B markets, there is still a need for additional in-depth studies. As pointed out by La Rocca et al. (2016 p.45): “Empirical studies on the customer involvement process in NPD [New Product Development] are rare and there is a tendency to black-box the process through which customers are involved”. Biggemann, Kowalkowski, Maley, and Brege (2013) call for more studies on the process of customer involvement in relation to the development and implementation of customer solutions, which are customized combinations embedded in relational processes between customer and supplier. Also Lynch et al. (2016) pinpoint the further need for approaching the process in terms of operationalizing customer involvement. For start-ups, collaborating with customers in product development appears to be vital, and shedding light on this process is thus a way of contributing to the expressed need for additional studies (Coviello & Joseph, 2012).

Against this background, the aim of this paper is to analyze the pattern of customer collaboration in product development for a technology-based start-up. A pattern is a descriptive regularity in the development of phases of a process over time (Bizzi & Langley, 2012). This aim is achieved by using one in-depth single case study. It deals with Oxeon, which is a Swedish high-growth company with origin in university research. Its business builds to a large extent on fruitful R&D collaboration with various types of counterparts, primarily customers, suppliers and research organizations. The collaboration takes place in inter-organizational relationships that Oxeon has established during different phases of its development, which started some ten years ago. Oxeon is operating in a B2B market where the customers consist of other firms, more precisely, composite manufacturers. This paper contributes to the current literature on customer involvement in product development by using a process-based single case study approach (Biggemann et al., 2013, La Rocca et al., 2016). Furthermore, by identifying patterns in this development, and related management issues, the paper adds to the literature on start-ups' customer relationship development (Aaboen et al., 2017, Coviello and Joseph, 2012) by providing detailed knowledge on how start-ups develop products and applications through interaction with customers.

The paper is structured in the following way. First, we present our theoretical framework followed by a method description. The case of customer collaboration in product development in Oxeon is then presented and subsequently analyzed. This is followed by a Discussion section. Thereafter, in the concluding section, the findings are summarized by formulating a set of propositions. Some managerial implications are also included.

Section snippets

Theoretical framework

This paper takes its main theoretical starting point in the Industrial Network Approach (INA) for studying firms operating in B2B markets. Here, the business exchange to a large extent takes place in business relationships, which in different ways are connected to each other and form network-like structures (Håkansson et al., 2009, Håkansson and Snehota, 1995). Individual firms are thus parts of networks where they for commercial purposes interact with other firms and organizations acting

Method

This paper is based on a qualitative research approach, more precisely a case study method that enables the study of a focal phenomenon in its context (Dyer and Wilkins, 1991, Easton, 2010, Flyvbjerg, 2006). The focal phenomenon is a start-up's collaboration with customers in product development. The present paper includes a longer description of one case – Oxeon. The use of the single case study approach has allowed us to capture the complex patterns of collaboration in a detailed way. As

The case of customer collaboration in product development at Oxeon

Oxeon is a spin-off from a University of Technology (UniTech, made anonymous) founded in 2003. It is commercializing a unique technology for making reinforcement fabric used in the manufacture of high-performance composites, mainly carbon fiber reinforced polymers. The fabric Oxeon produces, and markets under the tradename TeXtreme®, is currently sold primarily to firms involved in the manufacture of sporting goods but also to firms in other industries such as racing cars, bicycles and

Case analysis

There is already plenty of evidence in the literature that R&D collaboration with external actors, not least customers, is an important activity when commercializing new technology (see e.g. Håkansson & Waluszewski, 2007). The more interesting question is how to organize collaboration with customers. Based on our research issues formulated in Section 2.3, the case analysis below centers on the timing of customer collaboration, the mutuality of the collaboration, and the organizing of start-ups

Discussion

Altogether, based on the case analysis above centering on our three research issues, related to timing, mutuality and organizing, we have identified five crucial aspects concerning collaboration in product development for a start-up: (i) the need for involving customers early, (ii) the choice of application areas, (iii) the mutual process of choosing and getting chosen as a collaboration partner, (iv) the external networking role, and (v) the internal organizing in relation to the ambitions for

Concluding remarks

This paper deals with business creation in networks by setting the vital process of customer collaboration in product development for technology-based start-ups in focus. The case analysis shows that customer collaboration is important to start-ups in order to get established in business networks, realize sales, and start growing (Aaboen et al., 2017, Chorev and Anderson, 2006, La Rocca et al., 2013). Returning to the aim of the paper, the pattern of customer collaboration that emerges is one

Acknowledgements

The authors are thankful to Forskningsstiftelserna Handelsbanken (Jan Wallanders och Tom Hedelius Stiftelse) for financial support that enabled the research presented in the paper.

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