Product innovation in small established enterprises : Managing processes and resource scarcity

Abstract: This thesis examines product innovation processes in small established enterprises. The research questions are: (1) what motivates small established enterprises to innovate, (2) how do small established enterprises perform product innovation, and (3) how do small established enterprises manage resource scarcity in their product innovation processes? To answer the research questions, a multiple case study approach was chosen with three small established enterprises as cases and different product innovation processes as embedded units of study. The data collection method used was observation during a period of five months, complemented by interviews and secondary data. Product innovation in small established enterprises seems to be motivated by solving existing customers’ problems and the need for a sustained steady cash flow. A steady cash flow is also found to be a prerequisite during the product innovation processes. Product innovation seems to occur when there is a risk of decreased cash flow and/or when existing customers can be satisfied with new products that increase their loyalty so as to secure future sales, cash flow, and the enterprise’s survival in the long run. Promising innovation ideas alone do not result in product innovation. An innovation idea must also have supportive existing customers for product innovation to occur.Product innovation processes in the studied small established enterprises are found highly context dependent, intertwined in operational processes and made possible by a small organic organization and closeness to existing customers. The product innovation processes are further found to follow a flexible and informal overall scheme optimized for decreasing market and technology uncertainty and risk, dealing with resource scarcity, and facilitating fast and easy commercialization to avoid or moderate dips in cash flow. The design processes within the innovation processes can be linearly structured or cyclical and experimental, depending on the experienced novelty.To manage resource scarcity during the product innovation processes, the studied small enterprises used many different bootstrapping methods in combination. These methods can be divided into three categories according to their overall functions: for using existing resources more efficiently, for increasing resources and to secure a fast payback on resources invested in NPD. The studied small enterprises were due to their resource scarcity further found to favor an innovation strategy, only involving new products done with known technology and targeting existing markets. This way to innovate, which creates new products in a resource-efficient way that are accepted by the enterprises’ existing markets, seems to prevent unsuccessful product innovation, while at the same time excluding technologically radical innovation and innovation targeting new markets. 

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