Bang & Olufsen The Impact Of The External Network On New Product Development Marie Möckel Martin Sung Borg Cand.merc/MSc in Strategic Market Creation Copenhagen Business School, 2014 Supervisor - Daved Barry, Department of Management, Politics and Philosophy STUs: 176.222 Pages: 99 Executive Summary In today’s world companies rely heavily on external partners like suppliers, customers, research partners or external designers to develop innovative products, as they cannot possess all resources internally. Existing research in innovation management highlights the importance of the external net- work during the product development, especially in design-driven innovation (Verganti, 2009). However, network characteristics such as the relationship strength between different actors, for example the external designers and a company, and their influence on the product development and the success of a product are to a great extent unexplored. One of the few companies that does design-driven innovation but does not employ in-house designers is Bang & Olufsen. B&O outsources the entire design process to external designers and, therefore, depends on their ability to create innovative product ideas. By looking comparatively at the design process of successful and less successful products evidence showed that network characteristics like the relationship strength between the external de- signers and B&O have had an influence on the success of a product. It was found that external designers who had a weak relationship were able to create more successful products than designers who had strong relation- ship to the company. A look at the designers work process showed that their design research, the design discourse, was influenced by indirect knowledge sources, such as previous work experience and not by other network partners such as experts or users. Established literature (Verganti, 2009) points out that design-driven com- panies make use of a wide and diverse external network during the design discourse. However, this was not observed in the case of B&O and another Scandinavian design company, Stelton (Lauritzen, 2012). This indicates the ex- istence of a Scandinavian design-driven innovation approach, however, further research will be needed to confirm this. 2 Acknowledgements “There is not a more pleasing exercise of the mind than gratitude. It is accom- panied with such an inward satisfaction that the duty is sufficiently rewarded by the performance” (Joseph Addison, 1711) Daved Barry our supervisor deserves a big thank you, for the good feedback, creative talks, endless enthusiasm and group arrangements. Bang & Olufsen, nothing could have been done without the help from this company and the very helpful employees. A lot of appreciation goes to all the external designers, who were willing to find some time in their busy schedules for our interviews. Thank you; Knud Funch Søren Bech Jørgen Daucke Timothy Jacob Jensen Øivind Slaatto Jakob Wagner Anders Hermansen Torsten Valeur 3 Table of Contents Executive Summary ..................................................................................2 Acknowledgements ..................................................................................3 Table of Contents .....................................................................................4 List of Tables and Figures ........................................................................6 1. Introduction ..........................................................................................8 1.1 Reserach Question ..........................................................................9 1.2 Research Justification and Motivation .............................................9 1.3 Definition of Key Words ...................................................................11 1.4 Delimitation .....................................................................................13 1.5 Structure of Thesis ..........................................................................14 2. Literature Review ..................................................................................15 2.1 Innovation .......................................................................................15 2.2 Knowledge Sharing Networks .........................................................16 2.3 Network Theory .............................................................................18 2.4 Design-driven Innovation ................................................................19 3. Research Design and Methodology ......................................................21 3.1 Overview of Research Structure ......................................................22 3.2 Research Philosophy ......................................................................23 3.3 Research Approach ........................................................................25 3.4. Research Design and Strategy .......................................................26 3.4.1 Data Collection .........................................................................27 3.4.2 Field Notes, Diagrams and Visualizations .................................28 3.5 Validity, Reliability and Reflexivity of Research ...............................30 4. Theory ..................................................................................................32 4.1 Design-Driven Innovation ................................................................32 4.2 General Network Theory .................................................................37 5. Empirical Presentation ..........................................................................42 5.1 Bang & Olufsen ...............................................................................42 5.2 Presentation of Interviewees ...........................................................45 4 6. Analysis ................................................................................................48 6.1 B&O’s Product Development Process ............................................48 6.2 B&O’s Network ..............................................................................52 6.2.1 Research and Development......................................................52 6.2.2 Suppliers .................................................................................53 6.2.3 Users and sales partners .........................................................54 6.2.4 Designers .................................................................................55 6.3 The Product Portfolio .....................................................................57 6.4 Design Networks ............................................................................59 6.4.1 Group A .......................................................................................60 6.4.2 Group B .......................................................................................71 6.4.3 Comparing Group A and Group B ................................................78 6.5. B&O’s Network Extended ..............................................................81 7. Discussion ............................................................................................82 7.1 Recommendations ...........................................................................95 7.2 Methodological Validity ...................................................................96 8. Conclusion ...........................................................................................98 8.1. Further Research ...........................................................................98 9. Bibliography .........................................................................................100 10. Appendices ........................................................................................107 10.1 - Interviews ..................................................................................107 10.2 Field notes and Concept mapping ...............................................108 10.3. Prototype of BeoSound 8 ...........................................................112 5 List of Tables and Figures Chapter 1 Figure 1.5 - Chapter overview 13 Chapter 3 Figure 3.1 - Overview of research structure 21 Chapter 4 Figure 4.1.a - Radical innovation through technology epiphanies 32 Figure 4.1.b - Network of interpreters 33 Figure 4.2 - Weak and strong tie networks 37 Chapter 6 Figure 6.1. a - The selcetion process 47 Figure 6.1. b - The product development process 50 Figure 6.2 - General overview of B&O‘s external network 55 Figure 6.3 - B&O‘s product portfolio (stand May 2014) 57 Figure 6.4.1. a - BeoLit 12 by Cecilie Manz 59 Figure 6.4.1. b - The design network of A1 61 Figure 6.4.1. c - BeoPlay A9 by Ø. A. Slaatto 61 Figure 6.4.1. d - The design network of A2 64 Figure 6.4.1. e - BeoSound Essence by Frackenpohl Poulheim 65 Figure 6.4.1. f - The design network of A3 66 Figure 6.4.1. g - BeoSound 8 by David Lewis/ Torsten Valeur 67 Figure 6.4.1. h - The design network of A4 68 Figure 6.4.2. a - BeoSound 5 Encore by Anders Hermansen 70 Figure 6.4.2. b - The design network of B1 71 Figure 6.4.2. c - BeoLab17 by Torsten Valeur 72 Figure 6.4.2. d - The design network of B2 74 Figure 6.4.2. e - BeoLab 11 by David Lewis 74 Figure 6.4.2. f - The design network of B3 75 Figure 6.4.3. a - Comparison of direct contacts 77 Figure 6.4.3. b - Comparison of knowledge sources 78 6 Figure 6.5. - B&O‘s external network, inlcuding the designers‘ networks 80 Chapter 7 Figure 7. a - The knowledge base for weak tie