innovation management along the supply chain of the european aviation industry: measuring its impact...

Innovation Management along the Supply Chain of the

European Aviation Industry: Measuring its Impact on Company’s Success

with Structural Equation Models

Dipl.-Kfm. Andreas Potzner

Doctoral Candidate

Advisor: Prof. Dr. Christopher Jahns

ebs European Business School

Supply Management Institute SMI™ International Research and Training Center for

Purchasing, Logistics and Supply Chain Management

Academy of Management

Atlanta

August 12th, 2006

© Supply Management Institute SMI™ • ebs European Business School • D-65201 Wiesbaden • Tel.: +49 (0) 611 36 018 800 • E-Mail: [email protected] - 2 -

Summary

Stage in the dissertation research:• Proposal defended in March 2006 and halfway through data collection.

Dissertation topic:• Measuring the impact of cooperative idea generation within the supply chain.

Practical contribution:• In both core markets European network airlines are loosing market shares but they could

increase their market shares through a cooperative idea generation with customers and suppliers.

Academic/ scholarly/ theoretical contribution:• It is remarked by Hauschildt that especially in the research field of the success of innovations

(or innovative ideas), cooperation between companies has hardly ever been conducted. (Hauschildt, 2004)

• Scientific theories (e. g. Game Theory, Transaction Cost Theory and the Relational View) are applied to a real world problem.

Primary research methodology employed:• Survey and Structural Equation Modeling

Unit of observation:• Deutsche Lufthansa AG


Problem

&

Market share Cooperative idea generation

&

a. o. Market share

Illustration of the problem and the main research gap.

Solution Result


The firm and its possible innovation partners.

The Firm

• Innovation strategy

• Technical Competence

• Network-Competence

Public Administration

• Subsidy, Infrastructure

• Political Support

• Mediation, Coordination

• Laws, De-Regulations

Co-seller in Systems selling

• Complementary Know-how

• Solving Interface Problems

Consultant

• Innovation Concepts

• Organization of Innovation Processes

• Financial & Admin. Services

• Laws, De-Regulations

Research & Education

• Research, Technical knowledge

• Training, Education

• Junior Employees

Competitor

• Sharing Information

• Joint Basic Research

• Establishing Standards

• Publicity Promotion

Trader, Distributor

• New Trends in Demand

• Early Information about developments of competitors

Supplier

• New Materials, Components

• New Means of Production

• New Systems

Customer

• Market Informant

• Defining new requirements

• Implementation partner

• Reference Appeal

Source: Gemünden (2004).


Focusing on the idea generation within the dissertation.

Phases of the innovation process

Main phases

1. Idea generation 2. Idea acceptance 3. Idea realization

Specification of main phases

1.1 Determination of area of ideas

2.1 Checking of ideas3.1 Concrete realization of the new idea

1.2 Finding of ideas2.2 Construction of plans for realization

3.2 Selling of the new idea to target group

1.3 Suggestion of ideas2.3 Decision for one plan for realization

3.3 Controlling of acceptance

Source: Thom (1980).


Highly relevant problem for the aviation industry:

General:

• Since European countries have financial problems and the liberalization of the aviation industry:

- It is easier for new competitors to enter the market.

- There are more competitors on the market.

- There is a bigger competition for the best price.

- The margins for airlines are getting lower.

Air Freight Market:

• Since there are good insurances for damages the quality is getting less important.

• Integrators are getting more important:

- When analyzing total transport volume as an indicator in 2004, the first (FedEx) and the fourth (UPS) are claimed by integrators. (IATA, 2005)

- When looking at Europe the players DHL and TNT have considerable shares. (IATA, 2005)

Passenger Market:

• Low cost carriers are getting more important:

- In 2005 European low cost carriers had a joint market share of 16 %. (McKinsey & Company, 2005; Auerbach/ Delfmann, 2005)

- In 2010 European low cost carriers will have a joint market share of 24 % (McKinsey & Company, 2005; Auerbach/ Delfmann, 2005).

In both core markets European network airlines are loosing market shares.


Solving the problem via a cooperative idea generation:

• Integration of consumers and suppliers – especially in the field of generating ideas – leads to considerable advantages in competition. (Christiansen, 2000; Cooper, 1999; Handfield et al., 2004; Tether, 2003)

• Cross-company ventures may accelerate technological innovation. (Powell, 2004)

• Consumers and suppliers are, besides the company’s own possibilities, the most important sources for information about innovation. (Tether, 2003)

• Suppliers have a strong direct influence on cost, quality, technology and time-to-market of product innovations. (Handfield et al., 2004)

• Supplier participation in product development projects can help reducing concept-to-customer development time, costs at the same time improving quality and providing innovative technologies that can help capture market share. (Handfield et al., 2004)

Increasing the market shares of European network airlines through a cooperative idea generation with customers and suppliers.


Overview about research gaps.

Main research gap:

• Keeping the focus on the network airlines an extensive literature review shows that there is not a single work concerning:

- Measuring the impact of cooperative idea generation within the supply chain of the European aviation industry,

- specifying the conditions for a cooperative idea generation

- and additionally describing what kind of innovative ideas can be cooperatively generated between the key players of the European aviation industry.

Some further research gaps:• The current research for success factors is characterized by considerable methodological

deficits. (Hauschildt, 2004)

• Within the research of success factors of innovations the aspect of cooperation of supply chain partners has hardly been analyzed so far. (Hauschildt, 2004)

• “Whilst supply chain analysis and supply chain management has achieved a firm basis in literature, attention to the processes of market induced innovation in and through chains and networks is relatively new.” (Trienekens et al., 2003)


Leading research questions of the dissertation.

Research Question I:

What kind of innovative ideas are suitable for a

cooperative idea generation between airlines and their

customers & suppliers?

Research Question II:

When is it possible to make a cooperative idea generation between airlines and their


Research Question III:

How does the cooperative idea generation between airlines and their

customers & suppliers affect cost, time and quality as well as the airlines

innovation success and their individual company’s business success?M

ain

qu

esti

on

Fu

nd

am

en

tals


Hypothesis 1: A cooperative idea generation between airlines and their customers & suppliers is better for an innovation with a lower degree of innovativeness. Incremental innovation:

• Takes place in known markets with known fields of application.

• Usually no new technologies are introduced.

• Ways and means are new.

• During the last 25 years about two thirds of successful innovations are incremental innovations.

Radical innovation:

• Is characterized by a high degree of novelty and complex changings in the firm.

• Radical innovations bear a higher economic risk than incremental innovations.

• The chances of a market success are higher, the more they satisfy customer‘s needs.

pace makertechnology

keytechnology

basetechnology

today‘smarket

extended market

completelynew market

incrementalinnovation

radicalinnovation

Source: Pleschak, Sabisch (1996).




When is it possible to make a cooperative idea

generation between airlines and their customers &

suppliers?



innovation success and their individual company’s business

success?


Hypothesis 2 & 3: A cooperative idea generation between airlines and their customers is better for a product innovation and with their suppliers better for a process innovation. Customers:

• Customers are typically partners for product innovations.

• Intensive and daily use of producer‘s products.

• They know the limits of product application.

• They can communicate their experiences and possible troubles. Moreover, they can set miles stones for innovation.

• Special role of lead users.

Supplier:

• Suppliers are typically partners of process innovations.

• They can contribute to process innovation success of focal company by providing better or new machines.

• Administrative / organizational adjustment and product modification enable process optimization at the focal company (e. g. Just-in-Time delivery or shortened lead times).

• Suppliers can sensitize focal company on new products (e. g. better satisfaction of needs, higher reliability of delivered product) and in this way contribute to success.

Product innovations:

• Through product innovations a new kind of product is created. It enables the consumer to fulfill new purposes or it fulfills an existing purpose in a completely new way.

• Objective: Improving effectiveness (thereby it is also possible to gain efficiency).

Process innovations:

• Process innovations are new combinations of factors. This changes make the production of a good either cheaper, faster or improve the quality of the produced good.

• Objective: Increasing the efficiency.

Source: Hauschildt (2004), Gemünden (2001).






suppliers?




success?


Hypothesis 4 - 14: In accordance with the chosen form and intensity of an innovation cooperation special requirements have to be fulfilled.

trust

absorptive capacities

duration

investments

transparency

experiences

fundamental fit

strategic fit

cultural fit

uncertainty

cost-benefit-sharing

political requirements

legal requirements






suppliers?




success?


cost reduction

time reduction

quality increase

success of product innovatio

n

success of process innovatio

n

company’s success

A theoretical research model for the third research question.

= formative construct

= reflective construct






suppliers?




success?


Explanation of the empirical research.

1. Research type: Quantitative

2. Format: Standardized questionnaire

3. Methodology of asking: Using an online tool of Lufthansa for questionnaires

4. Target group:1. Lufthansa Cargo AG (freight): Sales, Purchasing, Network Development, Innovation,

Strategy

2. Deutsche Lufthansa AG (passenger): Sales, Purchasing, Innovation, Marketing

5. Unit of observation and sample size:1. Lufthansa Cargo AG (freight): 60-100 participants

2. Deutsche Lufthansa AG (passenger): 60-100 participants

6. Geographical scope: Europe

7. Timeframe: August 2006 and September 2006

8. Analysis of data:1. Research questions 1 & 2: SPSS

2. Research question 3: SmartPLS


Some open questions are left.

1. How can I justify that I only ask Lufthansa (air freight market and passenger market)?

2. How many participants do I need for using SPSS?

3. Is it to much for one dissertation?

4. Do you have any relevant literature concerning my topic?


Thank you very much for your attention and support!

Back up Slides


Cooperation is a hybrid form between market and hierarchy.

In general there are three forms of organization:

• market,

• hierarchy,

• cooperation.

In business science there are plenty of papers concerning the term cooperation and its meaning.

In this lecture we define cooperation as follows:

• A cooperation is a national or international collaboration – either voluntary or contractually – between legally and – at least in the beginning –economically independent entities (companies, universities, research institutes, organizations or institutions).

Source: Williamson (1991) and Schüller (2002).


Organizational forms of innovation cooperation: [1/2]

One can distinguish between four types of innovation cooperation, namely (1) horizontal, (2) vertical, (3) diagonal and (4) conglomerate innovation cooperations.(1) Horizontal relationships:

- Between companies of the same industry.

- Companies compete on sales market.

- Value chains of partners are not affected.

- Common between direct competitors in order to save money and time further to get know-how advantages.

- Example: Star Alliance.

(2) Vertical relationships:

- Between companies that are on different tiers of the same value chain (consumer-supplier-relationship).

- Cooperations between producer and supplier are typical.

- Various characteristics (reaching from simple supplier-relationships with manufacturing of components to partnerships in development).

- Exist between producer and customers of products and services as well (e.g. pilot applications of new products).

- Example: Cooperation between Lufthansa and Airbus.Source: Pleschak/ Sabisch (1996).


Organizational forms of innovation cooperation: [2/2]

They subdivide (1) horizontal, (2) vertical, (3) diagonal and (4) conglomerate innovation cooperation.

(3) Diagonal relationships:

- Companies from different industries and different tiers of the value chain cooperate.

- Players are acting on different markets but cooperation on neighboring markets.

- Increasing application on new technology field with broad application spectrum.

(4) Conglomerate relationships:

- Cooperation on markets that are unrelated to the markets of the cooperation partners.

Source: Pleschak/ Sabisch (1996).


References.

Christiansen JA (2000) Competitive Innovation Management. Techniques to Improve Innovation Performance. MacMillan Press ltd., Houndmills et al.

Cooper RG (1999) The Invisible Success Factors in Product Innovation. In: Journal of Product Innovation Management, vol. 16: 115-133. Handfield RB, Ragatz GL, Petersen KJ, Monczka RM (2004) Involving Suppliers in New Product Development. In: Tushman ML, Anderson P

(ed) Managing Strategic Innovation and Change. A Collection of Readings. 2. edn, Oxford University Press, Inc., New York, pp 506-522. Tether BS (2003) The Sources and Aims of Innovation in Services: Variety between and within Sectors. In: Economics of Innovation and

New Technology, vol. 12, No. 6: 481-505. Powell WW (2004) Learning from Collaboration. Knowledge and Network in the Biotechnology and Pharmaceutical Industries. In: Tushman

ML, Anderson P (eds): Managing Strategic Innovation and Change. A Collection of Readings. 2. edn, Oxford University Press, Inc., New York pp 393-401.

Hauschildt J (2004) Innovationsmanagement. 3. edn, Verlag Franz Vahlen GmbH, München. Williamson OE (1991) Comparative Economic Organization: The Analysis of Discrete Structural Alternatives. In: Administrative Science

Quarterly, vol. 36: 269-296. Schüller M (2002) Strategieentwicklung airlinegeführter Supply Chains. Spezifische Erfolgsfaktoren des Supply Chain Managements in der

Luftfracht und Handlungsempfehlungen für Luftfracht-Carrier, Dissertation. Verlag Dr. Kovač, Hamburg. Pleschak F, Sabisch H (1996) Innovationsmanagement. Schäffer-Poeschel Verlag, Stuttgart. Gemünden HG (2004) Innovation Networks: The Karlsruhe and Berlin Studies. In: Albers S (ed): Cross-functional Innovation Management:

Perspectives from Different Disciplines. Betriebswirtschaftlicher Verlag Dr. Th. Gabler/ GWV Fachverlag GmbH, Wiesbaden, pp 37-53. Gemünden HG (2001) Innovationsmanagement als Kooperationsmanagement. In: Albers S, Brockhoff K, Hauschildt J (eds): Technologie-

und Innovationsmanagement: Leistungsbilanz des Kieler Graduiertenkollegs. Deutscher Universitäts-Verlag GmbH, Wiesbaden, pp 117-161.

Thom N (1980) Grundlagen des betrieblichen Innovationsmanagements, 2. edn, Hanstein, Königstein. IATA (2005) Ranking Tables from WATS for 2004. http://www.iata.org/pressroom/wats_freight_flown.htm (call date: 14.12. 2005). Auerbach S, Delfmann W (2005) Consolidating the Network Carrier Business Model in the European Airline Industry. In: Delfmann W,

Baum H, Auerbach S, Albers S (eds): Strategic Management in the Aviation Industry. Ashgate Publishing Ltd., Hampshire, pp. 65-96. McKinsey & Company (2005) Pressemitteilung: McKinsey-Studie: Sinkendes Wachstum belastet Billigflieger.

http://www.mckinsey.de/_downloads/Presse/pm_050623_bb_airlines.pdf (call date: 14.12.2005). Trienekens JH, Hagen JM, Beulens AJM, Omta SWF (2003) Innovation Through (International) Food Supply Chain Development: A Research

Agenda. In: The International Food and Agribusiness Management Review, vol. 6, Iss. 1: 84-98.

innovation management along the supply chain of the european aviation industry: measuring its impact...

Documents

innovation management

dissertation research

problem market

market shares

research field

european aviation industry

main research gap

primary research methodology