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Strategic innovation and Ecosystems

in an Industry 4.0 context


Prof. Dr. Paul Matthyssens May 31, 2018 IPMI
Dean Jakarta
Content
1.  Industry 4.0 in a broader context
2.  Strategic innovation capability
3.  Network management capability
4.  Conclusion
Challenging societal context
A Systems View on Sustainability

Reference: Wayne Visser


Circular economy

In the book Waste to Wealth, based on analysis by Accenture,


the circular economy opportunity is valued at $4.5 trillion by
2030 Reference: Wayne Visser
Industry 4.0

The increased use of digital technologies could add $1.36


trillion to total global economic output in 2020 (that’s the size
of South Korea’s economy)
Reference: Wayne Visser
Industry 4.0: Core technologies
Traditional product mindset must be replaced by an IoT mindset:
predictive approach in satisfying needs; continuous optimization and
refresh of products; leverage of ecosystems; information convergence, …
(Metallo et al. 2018, TF&SC)
Platforms
Wide platforms
“…to be the world’s first digital industrial company”
Enterprise PaaS delivered to developers and possibly partners
and business customers.

Multi-sided market logic


Narrow platforms

Roles in platforms (I)


•  Platform enabler (wide-narrow)
•  Engager of customers providing products or services
•  Platform enhancer

Roles in platforms (II)


•  Connecting actors such as LinkedIn
•  Sharing resources such as AirBnB
•  Integrating systems such as Salesforce.com
& 3d party developers

https://www.trumpf.com/filestorage/TRUMPF_Master/
Products/Smart_Factory/Startpage/SmartFactory-startpage-
TruConnect-animation-EN-mit-Startbild.mp4
New market practices
New pricing models
•  Freemium: One side subsidizes other side
•  Adobe: content provider pays
•  SampleLab: free store
•  Compensate: Give away content but sell products or services
•  Selling information (besides products or services) or intermediate info sharing

Servitization of markets: (examples)


•  Repair before failure
•  Uptime selling, Product as a service
Scale network effects
•  Performance based contracts
•  Costs fall with scale
•  Renting or sharing rather than selling
•  But also value increases
•  …and the ‘product’ changes
Industry 4.0 in a broader context:
Conclusions part 1
q  Industry 4.0 impacts every industry: Tech challenges,
Market challenges, Societal challenges, Platform
challenges
q  We have to transform industries and companies, i.e.,
strategically re-invent ‘everything’
q  We will not be able to do it on our own, i.e., we need
partners
Content
1.  Industry 4.0 in a broader context
2.  Strategic innovation capability
3.  Network management capability
4.  Conclusion
Strategic innovation: Academic foundations
•  Matthyssens, P., K. Vandenbempt and L. Berghman (2006), ‘Value innovation in business markets.
Breaking the industry recipe’, Industrial Marketing Management, 35 (August), 751-761.
•  Berghman, L., P. Matthyssens and K. Vandenbempt (2006), ‘Building competences for new
customer value creation: An exploratory study”, Industrial Marketing Management, 35
(November), 961-973.
•  Matthyssens, P., K. Vandenbempt and L. Berghman (2008), ‘Value innovation in the functional
foods industry: Deviations from the industry recipe’, British Food Journal, 110(1), 144-155.
•  Berghman, L., P. Matthyssens and K. Vandenbempt (2012), ‘Value innovation, deliberate learning
mechanisms and information from supply chain partners’, Industrial Marketing Management,
41(1), 27-39.
•  Berghman, L., P. Matthyssens, S. Streukens and K. Vandenbempt (2013), “Deliberate learning
mechanisms for stimulating strategic innovation capacity”, Long Range Planning, 46 (1-2), 39-71.
What’s your industry recipe?
Basic perspectives regarding roles of each chain level

Basic perspectives on industry mission and scope

Shared views on relevant key success factors

Typical organization structures and industry/company routines

Typical expectations concerning the role of suppliers

Matthyssens, P., K. Vandenbempt and L. Berghman (2006)


Breaking industry recipes
Examples from the studied industries:

Price as primary competitive weapon

Efficiency and scale focus

Technology focus

Limited willingness to invest in R&D

Reactive behaviour

Tough power play in the chain (downstream!)

Some service addition but not highly valued

Matthyssens, P., K. Vandenbempt and L. Berghman (2006)


Say the Color and not the word
YELLOW BLUE ORANGE
BLACK RED GREEN
PURPLE YELLOW RED
ORANGE GREEN BLACK
BLUE RED PURPLE
GREEN BLUE ORANGE
Routines block our minds
Barriers to new value creation
•  Initiation:
•  ‘closed thinking’, trapped in industry logic
•  dominance of technicality
•  operational > strategic thinking
•  Realization:
•  existing partner relations
•  routines and actual competences
•  limited support top management and ‘executors’
•  Capturing:
•  lack of credibility
•  customers’ service for free attitude
•  poor business case
Value innovation imperatives
Customer and network partner
learning: open-minded market
sensing
Cracking dominant chain logic
(Matthyssens, Vandenbempt & Berghman
2006)

Creating real customer value

Creating internal and external


commitment to new value
concepts

Capturing value

Matthyssens, P., K. Vandenbempt and L. Berghman (2006)


Absorptive capacity rules…
Marketing
practices for
transformation
Marketing
Organizational
practices for
Culture
assimilation

Value Organizational
Marketing
practices for
innovation Structure
recognition capacity

Berghman, L., P. Matthyssens and K. Vandenbempt (2006)


Four types of strategic innovation
Cluster 1 Cluster 2 Cluster 3 Cluster 4

“Value creator” “Value conscious” “Value initiator” “Non-active”

Marketing practices for 7.9 6.9 5.9 3.8


recognition

Marketing practices for 8.0 6.6 5.4 3.7


assimilation

Marketing practices for 7.2 6.6 5.5 4.7


transformation

Organizational Culture 8.2 7.2 6.1 5.1

Organizational Structure 4.0 4.7 5.5 5.8

Cross-functional information 8.7 7.5 6.0 3.8


dissemination

Network information potential 9.0 7.4 7.3 4.5

Network innovation stimulus 7.8 7.1 6.5 5.2

Value innovation capacity 8.2 7.0 5.9 4.5

Berghman, L., P. Matthyssens and K. Vandenbempt (2006)


Drivers of strategic innovation capacity
Industry Deep Environmental Innovative
Other industries End customer
tendencies customer needs information customers

Future
Non-customers
customer needs

Deliberate learning
mechanisms
Critical reflections for Recognition
on customers
H1
Critical reflections
on markets
Deliberate learning H2 Strategic Innovation
Critical reflections
mechanisms
Capacity
on the marketing for Assimilation
approach

Keeping alive Deliberate learning H3


past reflections
mechanisms
for Exploitation
Sharing critical
reflections

Berghman et al. (2013)

Adapt organizational Support Replace Change way


Adapt procedures Prevent chaos
structure new initiatives skills/competencies of working
Managing strategic innovation
MAINTAIN if possible MAINTAIN

Stimulate :
• Prevention of chaos Stimulate :
• Adaption of procedures • Consultation of innovative
• Sharing of critical customer/market customers for new business ideas
reflections • Insights into end-customer needs
• Discussion of customer assumptions
• Retention of past customer/market
reflections

INVEST if possible INVEST


Stimulate :
• Deep customer insight
•Market research of other industries Stimulate:
• Discussion of market assumptions • Market research of future customer needs
•Discussion of marketing approach assumptions • Detection of fundamental changes in industry
•Filing of customer/market reflections • Broad environment scanning
•Replacement of skills • Insight of non-customers
•Change of ways of working
•Support of new projects (even if bad for current
business)

Berghman et al. (2013)


Supply chain information potential
a. Information provision by
customers
b. Information provision by suppliers

H1a H2a H3a


H1b H2b H3b

Deliberate
mechanisms
for recognition

Deliberate Value
mechanisms innovation
for assimilation ability

Deliberate
mechanisms
for exploitation
Berghman, Matthyssens, Streukens & Vandenbempt (2012)
Table 5: Results of the moderator analysis
* Significant at p < 0.05; *** significant at p < 0.001 (2-tailed)

Moderator Hypothesized High- Low- t Result


moderated relationships group group
Stand. Stand.
beta beta

Information from H1a: RECOG à VIab 0.208 0.119 4.31*** H1a accepted
customers H2a: ASSIM à VIab 0.470 0.058 22.15*** H2a accepted
H3a: EXPLOIT à VIab -0.097 0.579 -32.96*** H3a not accepted (negative
effect)

Information from H1b: RECOG à VIab 0.246 0.214 2.05* H1b accepted
suppliers H2b: ASSIM à VIab 0.334 0.184 8.76*** H2b accepted
H3b: EXPLOIT à VIab 0.225 0.231 -0.400 H3b not accepted (non-
significant effect)

LB, PM, SS & KV, IMM 2012


Conclusion part 2: Roadmap market driving
Market sensing
Absorptive capacity Open minded visioning

Sense making

Questioning one’s frames Multiple interpretation

Translation to market & organization

Breaking industry recipes Defining value chain proposition

Value capturing

Clear business case & story Market driving marketing


Content
1.  Industry 4.0 in a broader context
2.  Strategic innovation capability
3.  Network management capability
4.  Conclusion
Network management: Academic foundations
•  Van Bockhaven, W., P. Matthyssens and K. Vandenbempt (2015), “Soft Power in the Development of Collective
Institutional Entrepreneurship in B2B”, Industrial Marketing Management, 48, July, 174–186.
•  Van Bockhaven, W., P. Matthyssens and K. Vandenbempt (2015), “Drivers of institutional innovation in networks:
Unleashing the innovation potential of domesticated markets”, Journal of Business & Industrial Marketing, 30 (3/4),
414-435.
•  Van Bockhaven, W., P. Matthyssens and K. Vandenbempt and (2013), “Structural antecedents of institutional
entrepreneurship in industrial networks: A critical realist explanation”, Industrial Marketing Management, 49(3),
April, 405-420.
•  Van Bockhaven, W. and P. Matthyssens (2017), “Mobilizing a network to develop a field: broadening business
actors' mobilization analysis toolkit”, Industrial Marketing Management, 67 (November), 70-87. [ISI 3.166]
Innovation networks are most challenging

(Möller & Rajala, 2007)


What to do when developing new fields? Mobilize others!
NxtPort have selected Microsoft, Nallian and Proximus as their partner for
delivering, setting up and operating the NxtPort platform.
Nallian's Data Sharing Platform and its deep experience in collaboration in complex
data sharing-based communities, married to the broad technical infrastructure offering
from Microsoft and Proximus' experience in building developer marketplaces and
integrating IoT data, form a unique team that will support NxtPort in this exciting and
innovative project.
Formulating a network mobilization strategy for
innovations
•  Identification: Who are the relevant stakeholders in the industry or new field?
•  Perception: How do they perceive the new value concept? By what value
attributes are stakeholders triggered. Do they differ in these?
•  Reception: How ‘receptive’ are the different stakeholders regarding the new
value concept? How ‘sophisticated’ is their cognitive appreciation and how
enthusiastic are they (affective appreciation).
•  Mobilization: How can one mobilize and align the network and overcome
resistance?
Approach
Problem Core theories
Disruptors are faced with deeply Strategic nets/industrial network
institutionalized habits, norms and perspective underscores our
regulations. Existing strategic nets mobilization analysis framework.
literature does not detail the Stakeholder and social movement theory
dialectical processes of actor enrich the frame as they give insight
mobilization and how these can be into the micro foundations of
steered by the mobilizer collective agency.

Research question Study design, data


What voids in analytical frames will a Case study on personalized medicine
business actor face while trying to mke Refective action research
sense of the behavioral challenges Issue identification
involved in network mobilization to Single case study (health care context)
develop a field? with rich data collection (28 interviews)
Triangulation, systematic combining
Tool development
Case context: Health care in Belgium

Source: Boston Consul;ng Group (2010). Pu#ng Value-Based Health Care into Prac7ce in Sweden.
1st line
Specialist
deliverer
Personalized medicine as answer but…
s
s

it is underutilized
Patient1

Industry citizens
Payers
²

Care Regulato
facilities rs

Started as marketing problem, but turned out to be a sociological one…


•  PM requires a new health care value system and a new field, but stakeholders are politicized
and their identification in the regular stakeholder analyses is too reactive and one-dimensional;
•  It is also unclear who is relevant and can act as… intermediaries to help developing the new field;
•  How can the credibility gap be overcome and legitimacy be created? (indirect influence paths and power games)
The network mobilizer needs to gain insight in moral and cultural drivers of key influencers;
•  Insight into perceptions and meaning systems leads to a different understanding of the problem round which the
mobilization occurs (neglected in ST); mobilizers lack this insight and cannot translate into value offerings for each
Stakeholder.
Tool 1: Utility functions (voids 1 & 6)
Stakeholder interests differ…

Pa;ents
𝑉𝐴𝐿𝑈𝐸=𝐴𝑐𝑐𝑒𝑠𝑠+𝑄𝑢𝑎𝑙𝑖𝑡𝑦 𝑜𝑓 𝐶𝑎𝑟𝑒−𝑄𝑜𝐿 𝑖𝑚𝑝𝑎𝑐𝑡−𝑅𝑖𝑠𝑘𝑠
−𝐴𝑑𝑚𝑖𝑛𝑖𝑠𝑡𝑟𝑎𝑡𝑖𝑣𝑒 & 𝑙𝑜𝑔𝑖𝑠𝑡𝑖𝑐 𝑏𝑢𝑟𝑑𝑒𝑛
Physicians
𝑉𝐴𝐿𝑈𝐸 = 𝑃𝑟𝑜𝑓𝑒𝑠𝑠𝑖𝑜𝑛𝑎𝑙 ℎ𝑜𝑛𝑜𝑟 + 𝑄𝑢𝑎𝑙𝑖𝑡𝑦 𝑜𝑓 𝐶𝑎𝑟𝑒
+𝑃𝑟𝑜𝑓𝑒𝑠𝑠𝑖𝑜𝑛𝑎𝑙 𝑎𝑢𝑡𝑜𝑛𝑜𝑚𝑦−𝑅𝑖𝑠𝑘𝑠−𝑎𝑑𝑚𝑖𝑛𝑖𝑠𝑡𝑟𝑎𝑡𝑖𝑣𝑒
𝑏𝑢𝑟𝑑𝑒𝑛
Care centers
𝑉𝐴𝐿𝑈𝐸=𝑃𝑟𝑜𝑓𝑖𝑡𝑎𝑏𝑙𝑒 𝑎𝑐𝑡𝑖𝑣𝑖𝑡𝑖𝑒𝑠+𝑅𝑒𝑝𝑢𝑡𝑎𝑡𝑖𝑜𝑛+𝑄𝑢𝑎𝑙𝑖𝑡𝑦
𝑜𝑓 𝐶𝑎𝑟𝑒+𝑃𝑎𝑡𝑖𝑒𝑛𝑡 𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦& 𝑝𝑎𝑡𝑖𝑒𝑛𝑡 𝑠𝑎𝑡𝑖𝑠𝑓𝑎𝑐𝑡𝑖𝑜𝑛
−𝑃𝑟𝑜𝑐𝑒𝑠𝑠 𝑖𝑛𝑒𝑓𝑓𝑖𝑐𝑖𝑒𝑛𝑐𝑖𝑒𝑠
NIHDI (Public
payer)
𝑉𝐴𝐿𝑈𝐸=𝐴𝑐𝑐𝑒𝑠𝑠+𝐴𝑓𝑓𝑜𝑟𝑑𝑎𝑏𝑖𝑙𝑖𝑡𝑦+𝑄𝑢𝑎𝑙𝑖𝑡𝑦 𝑜𝑓 𝐶𝑎𝑟𝑒
−𝐶𝑜𝑠𝑡 𝑜𝑓 𝑐𝑎𝑟𝑒+𝑂𝑣𝑒𝑟𝑎𝑙𝑙 𝑝𝑜𝑝𝑢𝑙𝑎𝑡𝑖𝑜𝑛 ℎ𝑒𝑎𝑙𝑡ℎ−𝐻𝑒𝑎𝑙𝑡ℎ &
𝑠𝑎𝑓𝑒𝑡𝑦 𝑟𝑖𝑠𝑘 𝑓𝑎𝑐𝑡𝑜𝑟𝑠
Tool 2: Mental model maturity map (voids 2 & 4)
Diverse levels of understanding
Tool 3: Value-based influence map (voids 3 & 4)
•  Theory •  Practice
–  Limits of strategic nets perspective in –  Analytical mobilization tools for
regards behavioral challenges of business actors helping in their field
mobilization highlighted: six voids; development or innovative ecosystem
–  Proposition of three tools to capture building;
patterns of unaddressed info needs; –  Use of mobilization intermediaries;
–  Extends cognitive approaches with –  Determinants of stakeholder motivation
affective judgments; to cooperate: higher-order values,
–  Dual subsystem: Value-creation and cultural proximity and “maturity”;
socio-institutional system; –  Identification of mobilization trajectories;
–  Business actors besides stakeholder –  “Wide” view on value-creation systems
perspective. required.
Conclusion of my research on network
mobilization
•  Industry 4.0 •  Network mobilization
–  Industrial Internet of Things and –  Networks can be mobilized.
Services implies new mindset: –  Institutional barriers block
•  Adapted optimized offerings and mass disruption efforts. They can be
customization.
•  Ecosystems ran by platforms. cognitive and affective.
•  Industry transformation and –  Stakeholders have different utility
convergence. functions
•  Value based strategic innovation.
•  PSS. –  Some stakeholders can be used as
•  Network mobilization for industry influence intermediaries towards
disruption. other more difficult to reach SHs.
–  Innovation efforts must be
complemented by institutional
entrepreneurship
Content
1.  Industry 4.0 in a broader context
2.  Strategic innovation capability
3.  Network management capability
4.  Conclusion
The transformation is needed, but… Who
can do this?
Agile leaders able to…
•  detect early trends and do visioning,
•  analogize and interpret digital and sustainable transformation,
•  apply design thinking,
•  think in terms of (multisided) platforms,
•  be network mobilizers,
•  use big data and cloud and have tech/IT acumen,
•  be change agents,
•  lead and motivate professionals in complex jobs,
•  act as intra/enterpreneurs,
•  make wise decisions...
Opening minds
Touching Souls
Energizing Business