Innovation, High-Tech Companies, and Faster Horses Methods for Capturing and Integrating Customer Values and How They Are Used in Practice Master of Science Thesis in the Master Degree Programme, Business Design LOIS DIERKS EMMA FOLKESTAD Department of Technology Management and Economics Division of Management of Organizational Renewal and Entrepreneurship – MORE CHALMERS UNIVERSITY OF TECHNOLOGY Gothenburg, Sweden, 2012 Report No. E2012:055 Lois  Dierks  &  Emma  Folkestad   Innovation,  High-­‐Tech  Companies,  and  Faster  Horses           ¨             Innovation,  High-­‐Tech  Companies,  and  Faster  Horses   Methods  for  Capturing  and  Integrating  Customer  Values  and  How  They  Are  Used  in  Practice       © Lois  Dierks  &  Emma  Folkestad,  2012     Department  of  Technology  Management  and  Economics   Chalmers  University  of  Technology   SE-­‐412  96  Göteborg   Sweden   Telephone  +46  (0)31-­‐772  1000   Lois  Dierks  &  Emma  Folkestad   Innovation,  High-­‐Tech  Companies,  and  Faster  Horses         ABSTRACT   Innovation,  High-­‐Tech  Companies,  and  Faster  Horses   Methods  for  Capturing  and  Integrating  Customer  Values  and  How  They  Are  Used  in  Practice   Lois  Dierks  &  Emma  Folkestad   Department  of  Technology  Management  and  Economics   Division  of  Management  of  Organizational  Renewal  and  Entrepreneurship  –  MORE     Chalmers  University  of  Technology                     Companies  today  are  driven  to  deliver  products  to  the  market  at  increasingly  higher  rates,  but  product   launch  is  often  unsuccessful.  Developing  products  that  are  well  aligned  with  what  the  customer  values  is   vital  for  company  success.  Furthermore,  the  creation  of  customer  values   is  the  primary  driver  of  value   for   shareholders   as   well   as   for   stakeholder.   Having   methods   for   capturing   and   integrating   customer   values  is  an  important  part  in  becoming  a  customer-­‐focused  company.   The  purpose  of  this  study  has  been  to  understand  which  methods  are  used  in  companies,  and  why  they   chose  to  use  them.  The  hypothesis,  that  also  helped  scope  the  research,  stated  industry  characteristics   to  affect  the  choice  of  method.  Two  characteristics  that  were  deemed  more   interesting  to  study  were   customers   and   product   lifecycle,   as   these   two   combined   give   a   good   picture   of   the   value   chain   and   covers  both  internal  and  external  perspectives.     To  answer   the   research  question,   four   in-­‐depth   interviews  were   conducted  with   companies   from   two   different   industries,   power   tool   and   telecom,  whereof  both   can  be   characterised   as   being   technology   intensive.   The   choice   of   semi   structured,   in-­‐depth   interviews   was   based   on   theory   supporting   these   methods  when  the  goal  is  to  get  an  understanding  of  underlying  reasons.   The   methods   described   by   theory   and   used   in   the   surveyed   companies   are   customer   surveys,   focus   groups,   storytelling,   laddering,   ethnographic   studies,   product   analysis,   and   customer   co-­‐creation.   Furthermore,  the  companies  also  used  direct  input  on  existing  products  and  prototype  testing.  Most  of   these  methods  are  of   reactive  nature;  purely  proactive  methods  are   rarely  used.  According   to   theory,   reactive  methods  are  not  enough  to  discover   latent  needs,  which  would  provide  a  good  foundation  to   develop   innovative   features.   Utilizing   new   proactive  methods,   where   the   end   user   is   involved   in   the   product  development  process  would  make  customer  values  truly  beneficial.   Factors   that   have   been   found   to   affect   the   choice   of  method   for   capturing   and   integrating   customer   values   include   consumer   characteristics   and   choice  of  business  model   and  need  not   to  be  necessarily   industry  specific,  but  can  instead  be  company  specific.    A  company’s  business  model  affects  the  level  of   end-­‐user   contact   and   directly   influences   the   importance   of   having   established  methods   for   capturing   customer  values.                         Key  words:  Customer  values,  technology  development,  new  product  development,  customer  co-­‐creation,   lead-­‐user,  industry  characteristics,  service-­‐dominant  logic,  value-­‐in-­‐use.     Lois  Dierks  &  Emma  Folkestad   Innovation,  High-­‐Tech  Companies,  and  Faster  Horses         PREFACE  AND  ACKNOWLEDGEMENT   This  thesis  was  carried  out  in  collaboration  with  CIP  Professional  Services,  Gothenburg,  during  the  spring   of   2012.   In   parallel,   we   performed   an   internship   at   the   same   company.   We   are   grateful   for   the   opportunity  to  work  for  CIP  Professional  Services  and  for  the  support  we  have  gotten  during  the  thesis   writing  process.       We  hope  this   thesis  will   increase  the  understanding  of   the  subject,  and  change  the  perspective  of   the   customer  as  a  source  only  suitable  for  incremental  innovation  and  improvements.  90  years  have  passed   since  Henry  Ford’s  spoke  on  what  customer  values  are  good  for,  creating  faster  horses,  and  it  has  been   interesting   to   see   how   the   perspective   have   changed.  We   hope   that   companies   can   learn   from   each   other   by   finding   similarities   and   differences   in   their  methodology   and   include   the   customer   to   larger   extent  on  the  road  to  product  innovation  success.     First  and  foremost,  we  want  to  thank  our  academic  supervisors,  Jonas  Lindgren  and  Emil  Haldorsson  for   their  input  regarding  scoping  of  the  research  area  and  keeping  us  on  the  right  track.  Emil  Haldorsson’s   enthusiasm   and   continuous   feedback   have   helped   shaping   this   thesis   both   in   content   as   well   as   in   structure.  This  thesis  would  not  have  been  the  same  without  this  valuable  support.     We  would  also  like  to  take  the  opportunity  to  direct  great  appreciation  to  the  companies  participating  in   the   study   that,   without   hesitation,   agreed   to   openly   share   experiences   and   practices   relating   to   management  of  customer  values.  Good   input  to  the  study  was  achieved  and  many   interesting  aspects   were  discussed.   Last   but   not   least,   we   would   also   like   to   extend   our   gratitude   to   our   friends   and   families   for   their   continuous   support   during   our   years   of   study   at   Chalmers   University   of   Technology.   It   has   been   five   intensive  years  filled  with  challenges,  and  the  thesis-­‐writing  period  has  not  been  an  exception.  With  this   thesis,  we  are  leaving  our  university  years  behind  us  and  look  forward  to  the  challenges  that  lay  ahead.       ______________________________________   Lois  Dierks  &  Emma  Folkestad     Göteborg,  June  12th,  2012         Lois  Dierks  &  Emma  Folkestad   Innovation,  High-­‐Tech  Companies,  and  Faster  Horses         TABLE  OF  CONTENTS   1   INTRODUCTION   1   1.1   BACKGROUND   1   1.2   PURPOSE   2   1.3   SCOPE  AND  RESEARCH  QUESTIONS   2   1.4   LIMITATIONS  AND  DELIMITATIONS   3   1.5   DISPOSITION   3   2   METHODOLOGY   5   2.1   RESEARCH  METHOD   5   2.1.1   QUALITATIVE  APPROACH   5   2.1.2   GROUNDED  THEORY   6   2.1.3   ITERATIVE  PROCESS   6   2.1.4   HYPOTHESIS  DRIVEN   6   2.1.5   IN-­‐DEPTH  INTERVIEWS   7   2.2   RESEARCH  PROCEDURE   8   2.2.1   SCOPING   8   2.2.2   CREATING  THE  THEORETICAL  OVERVIEW  OF  CUSTOMER  VALUES  AND  RELATED  METHODS   9   2.2.3   CASE  STUDIES   9   2.2.4   SELECTION  OF  INDUSTRIES  AND  DIFFERENTIATING  CHARACTERISTICS   9   2.2.5   CASE  STUDY  INTERVIEWS   10   2.2.6   ANALYSIS  AND  DISCUSSION  OF  EMPIRICAL  RESULTS   11   2.3   QUALITY  OF  RESEARCH   11   2.3.1   CREDIBILITY   11   2.3.2   TRANSFERABILITY   12   2.3.3   DEPENDABILITY   12   2.3.4   CONFIRMABILITY   12   3   THEORY   13   3.1   THE  MARKET  ORIENTED  COMPANY   13   3.1.1   SERVICE-­‐DOMINANT  LOGIC  PERSPECTIVE   13   3.1.2   VALUE-­‐IN-­‐USE   14   3.2   CUSTOMER  VALUES   14   3.2.1   DEFINITION  OF  THE  CONCEPT  CUSTOMER  VALUES   14   3.2.2   THE  IMPORTANCE  OF  CUSTOMER  VALUES   15   3.2.3   CASE  STUDY  -­‐  ERICSSON,  NOKIA  AND  MOTOROLA   17   3.2.4   TECHNOLOGY-­‐BASED  COMPANIES  AND  CUSTOMER  VALUES   18   3.3   METHODS  FOR  CAPTURING  AND  INTEGRATING  CUSTOMER  VALUES   18   3.3.1   REACTIVE  MARKET  ORIENTED  PRODUCT  DEVELOPMENT   19   3.3.2   PROACTIVE  MARKET  ORIENTED  PRODUCT  DEVELOPMENT   19   3.3.3   PROACTIVE  APPROACH  COMPARED  TO  REACTIVE  APPROACH   19   Lois  Dierks  &  Emma  Folkestad   Innovation,  High-­‐Tech  Companies,  and  Faster  Horses         3.4   REACTIVE  METHODS  FOR  CAPTURING  CUSTOMER  VALUES   21   3.4.1   CUSTOMER  SURVEYS   21   3.4.2   FOCUS  GROUPS   22   3.4.3   INDIVIDUAL  INTERVIEWS   23   3.4.4   LADDERING   24   3.4.5   STORYTELLING   24   3.4.6   ETHNOGRAPHIC  AND  PARTICIPANT  OBSERVATION   25   3.4.7   PRODUCT  ANALYSIS   26   3.5   PROACTIVE  METHODS  FOR  CAPTURING  CUSTOMER  VALUES   26   3.5.1   CO-­‐CREATION   26   3.5.2   KEY  STRATEGIES  FOR  PROACTIVE,  CUSTOMER  CO-­‐CREATION   27   3.5.3   CO-­‐CREATION  FOR  OTHERS   29   3.5.4   LEAD-­‐USER  METHOD   30   3.6   CHAPTER  SUMMARY   31   4   EMPIRICAL  RESULTS   32   4.1   COMPANY  A  –  CASE  STUDY   32   4.1.1   THE  COMPANY  AND  ITS  PRODUCTS   32   4.1.2   INDUSTRY  CHARACTERISTIC:  CUSTOMERS   32   4.1.3   INDUSTRY  CHARACTERISTIC:  LIFECYCLE   33   4.1.4   INTEGRATION  OF  CUSTOMER  VALUES  IN  PRODUCT  DEVELOPMENT   33   4.1.5   METHODS  FOR  CAPTURING  CUSTOMER  VALUES   34   4.1.6   CUSTOMER  VALUES  AND  THE  COMPANY   35   4.2   COMPANY  B  -­‐  CASE  STUDY   36   4.2.1   COMPANY  DESCRIPTION/PRODUCTS   36   4.2.2   INDUSTRY  CHARACTERISTIC:  CUSTOMERS   36   4.2.3   INDUSTRY  CHARACTERISTIC:  LIFECYCLE   36   4.2.4   INTEGRATION  OF  CUSTOMER  VALUES  IN  PRODUCT  DEVELOPMENT   37   4.2.5   METHODS  FOR  CAPTURING  CUSTOMER  VALUES   37   4.2.6   CUSTOMER  VALUES  AND  THE  COMPANY   38   4.3   COMPANY  C  -­‐  CASE  STUDY   39   4.3.1   COMPANY  DESCRIPTION/PRODUCTS   39   4.3.2   INDUSTRY  CHARACTERISTIC:  CUSTOMERS   39   4.3.3   INDUSTRY  CHARACTERISTIC:  LIFECYCLE   40   4.3.4   INTEGRATION  OF  CUSTOMER  VALUES  IN  PRODUCT  DEVELOPMENT   40   4.3.5   METHODS  FOR  CAPTURING  CUSTOMER  VALUES   42   4.3.6   CUSTOMER  VALUES  AND  THE  COMPANY   43   4.4   COMPANY  D  -­‐  CASE  STUDY   44   4.4.1   COMPANY  DESCRIPTION/PRODUCTS   44   4.4.2   INDUSTRY  CHARACTERISTIC:  CUSTOMERS   44   4.4.3   INDUSTRY  CHARACTERISTIC:  LIFECYCLE   45   4.4.4   INTEGRATION  OF  CUSTOMER  VALUES  IN  PRODUCT  DEVELOPMENT   45   4.4.5   METHODS  FOR  CAPTURING  CUSTOMER  VALUES   46   Lois  Dierks  &  Emma  Folkestad   Innovation,  High-­‐Tech  Companies,  and  Faster  Horses         4.4.6   CUSTOMER  VALUES  AND  THE  COMPANY   47   5   ANALYSIS   48   5.1   POWER  TOOL  INDUSTRY   48   5.1.1   INDUSTRY  CHARACTERISTICS  -­‐  SIMILARITIES  AND  DIFFERENCES   48   5.1.2   INTEGRATION  OF  CUSTOMER  VALUES  IN  PRODUCT  DEVELOPMENT   49   5.1.3   METHODS  FOR  CAPTURING  CUSTOMER  VALUES   49   5.1.4   CUSTOMER  VALUES  AND  THE  COMPANY   50   5.2   TELECOM  INDUSTRY   52   5.2.1   INDUSTRY  CHARACTERISTICS  -­‐  SIMILARITIES  AND  DIFFERENCES   52   5.2.2   INTEGRATION  OF  CUSTOMER  VALUES  IN  PRODUCT  DEVELOPMENT   52   5.2.3   METHODS  FOR  CAPTURING  CUSTOMER  VALUES   53   5.2.4   CUSTOMER  VALUES  AND  THE  COMPANY   54   5.3   INTER-­‐INDUSTRY  COMPARISON   56   5.3.1   SIMILARITIES  AND  DIFFERENCES  BETWEEN  THE  INDUSTRIES   56   5.3.2   INTEGRATION  OF  CUSTOMER  VALUES  IN  PRODUCT  DEVELOPMENT   56   5.3.3   METHODS  FOR  CAPTURING  CUSTOMER  VALUES   57   5.3.4   CUSTOMER  VALUES  AND  THE  COMPANY   57   5.4   COMPARING  THEORETICAL  FRAMEWORK  AND  EMPIRICAL  STUDY   59   5.4.1   DEFINITION  OF  THE  CONCEPT  OF  CUSTOMER  VALUES  AND  RELATED  CONCEPTS   59   5.4.2   TECHNOLOGY-­‐BASED  COMPANIES  AND  CUSTOMER  VALUES   59   5.4.3   CUSTOMER  SURVEYS   60   5.4.4   FOCUS  GROUPS   60   5.4.5   INDIVIDUAL  INTERVIEWS  AND  STORYTELLING   60   5.4.6   LADDERING   61   5.4.7   ETHNOGRAPHIC  STUDIES  AND  PARTICIPANT  OBSERVATION   61   5.4.8   PRODUCT  ANALYSIS   61   5.4.9   PROACTIVE  METHODS  AND  CUSTOMER  CO-­‐CREATION   61   5.4.10   METHODS  NOT  USED  BY  COMPANIES   62   6   DISCUSSION   63   6.1   METHODS  USED  IN  SURVEYED  COMPANIES   63   6.2   INFLUENCE  OF  STUDIED  INDUSTRY  CHARACTERISTICS   64   6.3   REASONS  FOR  CHOISE  OF  METHODS  IN  SURVEYED  COMPANIES   64   7   CONCLUSIONS   66   7.1   SUGGESTIONS  FOR  FUTURE  RESEARCH   66   BIBLIOGRAPHY   67   APPENDIX  A  –  INTERVIEW  TEMPLATE   70       Lois  Dierks  &  Emma  Folkestad   Innovation,  High-­‐Tech  Companies,  and  Faster  Horses         LIST  OF  FIGURES   Figure  1  The  five  steps  of  the  research  process  with  input  and  achieved  output  for  each  phase.  The   upward  pointing  arrows  illustrate  iterative  loops.  .......................................................................................  8   Figure  2  The  rationale  of  the  scoping  process  can  be  illustrated  using  a  funnel,  narrowing  an  initially   broad  perspective  until  a  narrow  enough  scope  has  been  identified.  .........................................................  8   Figure  3  Summary  of  industry  characteristics  chosen  for  assessment  in  the  case  studies.  .........................  9   Figure  4  The  opportunity  to  exploit  business  opportunities  by  assessing  customers  unarticulated,  latent,   needs  (Trott,  2005).  ....................................................................................................................................  16   Figure  5  Changes  in  market  share  for  selected  actors,  1995-­‐2005  ............................................................  17   Figure  6  Implications  of  limited  face-­‐to-­‐face  interaction.  ..........................................................................  18   Figure  7  Proactive  and  reactive  methods  related  to  the  product  development  process.  ..........................  20   Figure  8  The  four  phases  of  customer  surveys  (Kennet  &  Salini,  2012).  ....................................................  21   Figure  9  Connections  between  attributes  and  values  (Reynolds  &  Gutman,  1988).  .................................  24   Figure  10  Storytelling  technique  (Koll  et  al.,  2010).  ...................................................................................  24   Figure  11  Key  strategies  for  proactive  customer  co-­‐creation  (Kristensson  et  al.,  2008).  ...........................  27   Figure  12  The  lead-­‐user  market  research  method  (Herstatt  &  von  Hippel,  1992).  ....................................  30   Figure  13  The  product  development  process  of  Company  A.  ....................................................................  33   Figure  14  Proactive  and  reactive  inputs  to  technology  development  for  Company  A.  ..............................  35   Figure  15  The  product  development  process  of  Company  B.  ....................................................................  37   Figure  16  Proactive  and  reactive  inputs  to  the  product  development  of  Company  B.  ..............................  38   Figure  17  The  product  development  process  of  Company  C.  ....................................................................  40   Figure  18  The  feature  management  department's  contribution  to  the  product  development  process.  ..  41   Figure  19  Proactive  and  reactive  inputs  to  the  product  development  process  of  Company  C.  .................  43   Figure  20  The  product  development  process  of  Company  D.  ....................................................................  45   Figure  21  Proactive  and  reactive  inputs  to  the  product  development  process  of  Company  D.  .................  47       Lois  Dierks  &  Emma  Folkestad   Innovation,  High-­‐Tech  Companies,  and  Faster  Horses         LIST  OF  TABLES   Table  1  Comparison  of  companies  within  the  power  tool  industry  ...........................................................  51   Table  2  Comparison  of  companies  within  the  telecom  industry.  ...............................................................  55   Table  3  Inter-­‐industry  comparison  .............................................................................................................  58   Table  4  Comparing  theoretical  frameworks  used  by  the  interviewed  companies  .....................................  62       Lois  Dierks  &  Emma  Folkestad   Innovation,  High-­‐Tech  Companies,  and  Faster  Horses   1       1 INTRODUCTION   In  this   initial  chapter,   the  background  of  the  thesis  will  be  presented.  With  this   in  mind,   the  purpose   is   derived.  From  this,  the  scope  is  set  and  the  research  questions  posed.  The  limitations  and  delimitations   done  are  explained.  Finally,  the  disposition  of  the  rest  of  the  paper  is  described.   1.1 BACKGROUND   “If  I  had  asked  people  what  they  wanted,  they  would  have  said  faster  horses.”   -­‐  Henry  Ford  (Wikiquote,  2011)   Ensuring   long-­‐time   profitability   with   high   shareholder   and   stakeholder   values   are   important   to   most   companies.  What   should   be   remembered   is   that   what   enables   all   other   kinds   of   values   created   in   a   company,   is   the   creation  of   value   for   the   customer   (Khalifa,  2004).  However,  understanding  what   the   customer   will   value   is   not   always   straightforward,   as   demonstrated   in   the   classic   Henry   Ford   quote   above.   A  traditional  view  on  how  to   improve  company  profitability,  and  thereby  shareholder  and  stakeholder   values,  is  to  look  internally.  The  early  1980s  saw  a  rise  in  popularity  of  methodologies  focused  on  quality   and   operations   management,   aiming   at   streamlining   organizational   structure,   speeding   up   internal   processes,  and  thereby  improving  product  quality.  However,  the  customer  of  today  is  more  demanding,   competition  has   intensified  as  a   result  of   globalization  and  emerging   slow-­‐growth  economies   calls   for   new  ways  to  achieve  and  maintain  a  competitive  advantage,  seeking  it  beyond  quality  (Woodruff,  1997).   As  a   result  of   the  changes  on  the  market,  companies  are  driven  to   reduce  their  product  development   cycle   times   (Flint,   2002).  Novel  products   are   introduced   to   the  market  with   increasing   speed,  but   the   rate  of  financially  unsuccessful  products  is  high,  in  some  categories  as  high  as  70-­‐80  %.  Companies  have   adapted   different   strategies   for   solving   this   issue,   with   some   aiming   for   improving   the   quality   and   performance  of  the  offerings.  Others  have  focused  on  being  better  at  fulfilling  the  emotional  needs  of   the  customer.  No  matter  which  approach  is  used,  a  common  denominator  is  that  the  customer  is  placed   in  centre,  requiring  companies  to  understand  the  external  market  (Lake  &  Lunde,  2008).   Narver  &   Slater   (2009)   showed   that   there   is   a   relationship   between  market   orientation   and   business   profitability.  A  market-­‐oriented  company  has  the  best  chance  of  succeeding  in  effectively  and  efficiently   creating   superior   value   for   customers.   According   to   a   poll  made   in   2007,   the   top   concern   of   CEOs   is   building  customer  relationships  in  relation  to  stimulating  innovation.  This  insight  is  crucial,  as  it  builds  on   an   understanding   that   innovation   does   not   create   business   value   unless   it   improves   customer   experience  (Lake  &  Lunde,  2008).  Similarly,  allocating  resources  to  improve  internal  processes  to  create   a  streamlined  organization  might  be  financially  unjustified  if  factors  related  to  these  are  not  correlated   with  customer  requirements  and  wishes  (Woodruff,  1997).       Lois  Dierks  &  Emma  Folkestad   Innovation,  High-­‐Tech  Companies,  and  Faster  Horses   2       1.2 PURPOSE   In  light  of  this  background,  the  increased  importance  of  market  orientation  for  companies  is  clear.  Being   able  to  capture  customer  values  as  well  as  to  integrate  these  in  the  product  development  processes  is  a   first  step  towards  this  goal.  However,  finding  the  appropriate  approach  to  do  this  can  be  difficult.  Some   processes  and  methods  for  successfully  capturing  and  implementing  customer  values  in  R&D  decisions   and  technology  planning  are  likely  to  be  similar  no  matter  industry  context.  On  the  contrary,  some  are   likely  to  be  modified  to  match  industry  characteristics.  Identifying  context  based  practice  and  underlying   drivers  will   facilitate  for  companies  to  apply   lessons  from  other   industries,  by   identifying  own  industry   characteristics   and  match   these  with  drivers   for  methods  and  processes   for   capturing  and   integrating   customer  values.  Consequently,  the  purpose  of  this  study  will  be:   Identify   methods   and   processes   for   capturing   and   implementing   customer   values   and   investigate   to   what   extent   these   are   independent   or   context   dependent   on   industry   characteristics.    The  purpose  is  to  improve  the  strategic  decision  making  process  for  R&D   and  technology  planning.   1.3 SCOPE  AND  RESEARCH  QUESTIONS   Within   the   scope   of   this   thesis   there   are   three  main   research   objectives.   First,   finding  methods   and   processes   used   for   capturing   customer   values   in   organizations   with   the   purpose   of   utilizing   these   in   technology  planning  strategies.  Second,  the  study  also  aims  to  find  industry  characteristics  that  drive  the   organization’s  choice  of   these  methods  and  processes.  Finally,   the   third  objective   is   to   investigate   the   extent  of  practical  utilization  of  the  identified  methods  and  processes.  Elicited  practices  from  different   companies   and   industries   will   be   analysed   to   determine   which   processes   and   choices   that   are   independent,  dependent  on  industry  characteristics  or  if  other  factors  influence  the  choice  of  company   strategy  regarding  these  questions.     The   scope   has   been   broken   down   into   smaller   parts,   a  main   research   question   framed  by   three   sub-­‐ questions,  that  facilitates  addressing  the  core  issue  by  dividing  the  overall  subject  into  specified  areas.     Research  Question   What   existing   methodologies   and   processes   for   capturing   and   integrating   customer   values   in   technology   planning,   research   and  development   are   used   by   companies,   and   why  are  they  used?     To  ensure   that  all   relevant  perspectives  are   taken   into  account  when  answering   this  primary   research   question,  three  sub-­‐questions  have  been  formulated:    To  what  extent  is  state  of  the  art  theory  on  capturing  and  integrating  customer  values  in   technology  planning,  research  and  development  used  in  industry  practice?   Are   there   specific   industry   characteristics   that   directly   influence   the   choice   of   methodologies   used   and   how   customer   values   are   integrated   in   the   product   development  process?   Lois  Dierks  &  Emma  Folkestad   Innovation,  High-­‐Tech  Companies,  and  Faster  Horses   3       Are   current   used   practices   for   capturing   and   integrating   customer   values   in   strategic   technology  decisions  depending  on  specific  industry  characteristics?     1.4 LIMITATIONS  AND  DELIMITATIONS   Out  of   the   three  behavioural  components   that  Narver  &  Slater   (1990)  points  out  as  parts  of  a  market   oriented   company   -­‐   customer   orientation,   competitor   orientation   and   inter-­‐functional   coordination   -­‐   competitor   orientation   is   outside   the   scope  of   this   thesis.   In   relation   to   inter-­‐functional   coordination,   only  those  parts  relating  to  technology  development  will  be  included.   For  the  empirical  part  of  the  study,  four  companies  from  two  different  industries  will  be  studied.  This  is   done   to   limit   the   amount   of   parameters   that   needs   to   be   taken   into   account   for   the   analysis.   The   companies  assessed  will  be  based   in  Sweden  owing  geographical  constraints.  A   limited  set  of   industry   variables  will  be  assessed  in  order  to  derive  potential  correlation  between  external  factors  and  choice  of   internal  processes.   Customer   values   can   be   used   as   a   base   for   many   strategic   decisions   within   organizations,   such   as   business  modelling  and  design  of  market  offers.  However,   the  focus  of   this   thesis  will  only  be  on  how   customer  values  are  used  for  planning  and  conducting  technology  development.  The  study  focuses  on   technology  intensive  companies  who  are  heavily  dependent  on  technology  in  the  product  development   process.    Finally,  only  existing  methodologies  and  frameworks  will  be  taken  into  account.  It  is  not  within   the  scope  of  this  thesis  to  propose  new  ones.   1.5 DISPOSITION   CHAPTER  2  –  METHOD   In   the   methodology   chapter,   applicable   theories   are   described.   The   research   process,   how   aforementioned   theories   relate   to   it   and   how   the   quality   of   the   research   has   been   ensured   is   also   introduced.   Criticism  of   chosen   process   and   literature   is   included.   The   underlying   logic   of   the   chosen   industries  and  characteristics  is  discussed.   CHAPTER  3  –  THEORETICAL  FRAMEWORK   The   theoretical   framework   has   been   sorted   into   three   main   parts:   company   orientation,   customer   values,   and  methods   for   capturing   these.   Combined,   they   aim   to   provide   a   theoretical   foundation   to   compare  and  analyse  industry  practices  for  capturing  and  analysing  customer  values.     The  first  part  starts  by  introducing  the  concept  of  the  market-­‐oriented  company,  to  provide  a  setting  in   which  the  following  theory  will  be  easier  to  understand.  Common  terms  and  concepts  in  relation  to  the   research   field   of   customer   values   areas   are   also   described.   The   second   part   explains   the   concept   of   customer   values   from   various   angles,   and   argues   for   the   importance   of   this   concept.   A   contrasting   approach   to   product   improvement   is   presented   in   the   form   of   Total   Quality   Management.   This   exemplifies   the   difference   between   customer   focus   and   customer   understanding   explained   from   a   company  perspective,  focused  on  technology-­‐based  companies  and  the  importance  of  customer  values.   This  section  also  includes  an  illustrative  example  based  on  Ericsson,  Nokia  and  Motorola.  The  third  and   Lois  Dierks  &  Emma  Folkestad   Innovation,  High-­‐Tech  Companies,  and  Faster  Horses   4       final   part   focuses   on   different   methods   for   capturing   and   integrating   customer   values.   To   provide   a   foundation,   a   description   of   the   differences   between   reactive   and   proactive   approaches   to   product   development   and   customer   value   integration.   Categorized   by   their   dominant   reactive   or   proactive   nature,  a  wide  range  of  methods  is  subsequently  described  with  the  purpose  of  identifying  well-­‐known   methods  theoretically  available  for  companies  to  implement.       CHAPTER  4  –  EMPIRICAL  STUDY     This   chapter   presents   the   objective   results   from   the   case   study   interviews  made.   The   interviews   are   presented   separately   for   each   company   and   are   made   anonymous.   For   each   interview,   company   background,   customer   and   lifecycle   characteristics,   and   methods   for   capturing   customer   values   are   described.     CHAPTER  5  –  ANALYSIS     The   analysis   compares   the   companies   assessed   in   the   empirical   study   in   the   previous   chapter,   highlighting   similarities  and  differences,  within   industries  as  well   as  between   industries.  The  empirical   study   results   are   also   compared   with   the   theoretical   framework   of   chapter   3.   Relating   industry   characteristics   to   the   previously   described   company   practices   aim   to   distinguish   context   based   and   independent  practices.  Input  from  customer  values  are  mapped  according  to  the  product  development   process   to   depict   a   clearer   picture   of   driving   industry   characteristics   and   its   influence   on   practices   chosen  for  capturing  and  integrating  customer  values.   CHAPTER  6  –  DISCUSSION     Based  on  the  logic  correlations  in  the  previous  chapter,  this  section  adds  an  argumentative  perspective   to   the   capturing   and   integration  of   customer   values   and  driving   forces   affecting   choice   of   practice.   It   discusses  what  industries  can  learn  from  each  other,  why  companies’  practices  differ  and  whether  it   is   possible   to   distinguish   guidelines   with   regards   to   the   choice   of   method.   Opinions   regarding   the   analytical  results  and  the  subject  as  such  are  presented.  The  relation  between  frameworks  proposed  by   academia  and  the  methodologies  used  by  the   interviewed  companies   is  also  assessed.   In  addition,  the   aim   with   this   discussion   is   to   elaborate   on   identified   discrepancies   in   the   analysis   to   derive   causes,   consequences  and  remedies  that  cannot  be  related  to  the  assessed  industry  variables.     CHAPTER  7  –  CONCLUSIONS     In  the  final  chapter,  the  research  questions  are  answered  with  the  help  of  the  analysis  and  discussion.   The   hypothesis   driven   approach   will   shape   the   answer   to   also   verifying   or   falsifying   the   stated   hypothesis   in   the   introduction.   Practiced  methods   are   presented   in   combination  with   identified  main   drivers  and  causes.  Without  adding  new   information,   the   findings  of   the   thesis  will  be  summarized   to   provide  condensed  conclusions  of  the  study.     Lois  Dierks  &  Emma  Folkestad   Innovation,  High-­‐Tech  Companies,  and  Faster  Horses   5       2 METHODOLOGY   This  section  describes  the  methodology  used  in  order  to  answer  the  research  questions  in  section  1.3  and   also  measures  taken  to  ensure  quality  of  the  study.  Describing  the  methodology  will  provide  the  reader   with   information   regarding   how   the   study   has   been   conducted,   benefits   of   used   method   as   well   as   limitations   with   the   chosen   approaches.   At   first,   a   summary   of   the   research   process   is   provided   as   a   foundation  for  applying  the  chosen  methodologies  on.  Subsequently,  theory  of  chosen  methodologies  is   presented  followed  by  a  detailed  description  of  the  research  process,  assessing  the  process  step  by  step.   Finally,  actions  for  quality  insurance  of  the  study  are  presented  from  four  perspectives.     2.1 RESEARCH  METHOD   In  brief,  the  chosen  methodology  is  based  on  a  literature  study  complemented  with  a  qualitative  study   in   the   form   of   interview-­‐based   case   studies.   Initially,   a   theoretical   foundation   was   made   reading   material   in  relation  to  customer  values  and  relating  methods  followed  by  an  empirical  study  where  in-­‐ depth  interviews  have  provided  an  applied  industry  perspective  to  the  subject.     Before  describing  theoretical  implications  of  the  chosen  research  methodology,  a  short  summary  of  the   research  process  is  outlined.  In  short,  the  research  process  contains  the  following  steps:     1. Scoping  of  research  area,  formulation  of  hypothesis  and  phrasing  of  research  questions.     2. Conducting  a  literature  study  to  establish  an  overview  of  available  frameworks  and  concepts  in   relation   to   customer   values,   its   importance   for   product   development,   and   industry   practices   used  today.     3. Empirical  research  in  the  form  of  case  studies  of  technology-­‐intensive  companies.   4. Theoretical  and  empirical  findings  are  analysed  to  answer  stated  research  questions  and  verify   or  falsify  the  hypothesis.     2.1.1 QUALITATIVE  APPROACH   Qualitative   research  seeks   to  understand  a  given   research  problem  or   topic   from  the  perspective  of  a   local  population  and   is  effective   in  obtaining  culturally  specific   information  regarding  values,  opinions,   and  contexts  (Denzin  &  Lincoln,  2000).  Qualitative  data  is  varied  in  nature  and  refers  to  any  information   possible  to  capture  and  that  is  not  numerical.     Denzin  &  Lincoln   (2000)  describes   the  general   framework  of  qualitative   research  methodologies   to  be   explorative,  using  instruments  allowing  flexible  and  iterative  style  of  eliciting  and  categorizing  responses   to  questions  such  as  semi-­‐structured  interviews.  The  analytical  objectives  are  to  describe  variation  and   explain  relationships.  Questions  are  rather  open-­‐ended  than  closed.  Also,  some  aspects  of  the  study  are   flexible   such  as   the  wording  of  particular   interview  questions  as   the  participant   responses  affect  how   and  which  questions  that  will  be  asked  next.  Finally,  the  study  design  is  iterative,  that  is,  data  collection   and  research  questions  are  adjusted  according  to  what  is  learned.     The  choice  of  using  a  qualitative  approach  in  this  study  is  based  on  the  strength  of  qualitative  research   to   provide   textual   descriptions   of   how   people   experience   given   research   issues.   The   nature   of   the   Lois  Dierks  &  Emma  Folkestad   Innovation,  High-­‐Tech  Companies,  and  Faster  Horses   6       research   questions   of   this   study,   namely   finding   a   variety   of   methods   and   processes;   map   out   differences  and   similarities  between   industries;   and  understand   the  underlying   rational  of   the   chosen   approaches,  match  well  with  the  characteristics  of  a  qualitative  approach.     2.1.2 GROUNDED  THEORY   The  chosen  standpoint  is  in  grounded  theory,  a  qualitative  research  approach  originally  developed  in  the   1960’s,  and  aims  to  develop  theory  about  the  area  of  interest  and  also  ground  it  in  observation.       Trochim  (2006)  describes  the  generic  grounded  theory  process  in  a  series  of  steps.   1. Generative   questions   are   raised  with   the   intention   of   guiding   the   research   and  maintaining   a   dynamic  approach  to  the  research  rather  than  confine  the  research  or  make  it  static.     2. As  data  is  gathered,  core  theoretical  concepts  are  identified.     3. Tentative  linkages  are  developed  based  on  the  theoretical  core  concepts  and  data.  As  the  early   phase  of  the  research  is  open  it  enables  the  research  to  target  found  problems.     4. Verification  of  the  theoretical  core  concepts  and  summary  of  findings  follow.     Taking   a   starting   point   in   grounded   theory   enables   the   direction   of   the   research   to   be   based   on   information  collected,  as  opposed  to  formulating  a  research  question  before  data  collection  commences   and  focusing  on  finding  information  to  answer  that  specific  question.  Within  the  chosen  field,  the  area   where   further   research   development   would   be   of   relevance   was   not   known   when   the   study   begun.   Therefore,  a  foundation  in  grounded  theory  was  deemed  to  be  fitting  to  ensure  a  relevance  of  the  study.   2.1.3 ITERATIVE  PROCESS   As   qualitative   methodology   requires   a   thorough   understanding   of   important   questions   to   ask,   an   iterative  approach  has  been  adopted.  Initial  research  questions  and  thesis  scope  was  modified  according   to   theoretical   findings,   to   better   suit   discovered   limitations   of   current   research   available.   Also,   the   interview  process  has  been   iterative,  as  questions  have  been  emphasized  or  added  based  on   learning   and  insights  from  the  initial  ones.     2.1.4 HYPOTHESIS  DRIVEN   The  initial  part  of  the  theoretical  study  provides  an  introduction  to  the  concept  of  customer  values  and   its   importance   in  becoming  a  market  oriented  company.  This   introduction  will  constitute  a   foundation   for   deeper   theoretical   studies.   It   will   also   fulfil   the   function   of   being   a   basis   for   stating   a   hypothesis   regarding  choice  of  industries  as  well  as  for  formulating  interview  questions.  Further  theoretical  studies   will   be   conducted   to   find   frameworks   for   capturing   and   integrating   customer   values   into   technology   development,  which  might  be  of  use  for  companies  involved  and  contribute  to  a  best  practice  approach.   For  all  theoretical  studies,  articles  published  in  academic  journals  will  be  the  main  source  of  information.   With  support   in  theoretical  studies,  a  hypothesis  regarding  contrasting   industries  has  been  formulated   to  enable  purposive  sampling  of  companies.   The  choice  of  methods  and  processes  for  capturing  and  integrating  consumer  values  are   dependent   on   specific   industry   factors,   such   as   product   or   service   orientation   and   supplier  or  end  consumer  focus.   Lois  Dierks  &  Emma  Folkestad   Innovation,  High-­‐Tech  Companies,  and  Faster  Horses   7       As  the  grounded  theory  approach  lacks  clear  structure  of  when  the  study  ends  and  how  to  conclude  the   findings,   it   is   combined   with   a   hypothesis   driven   approach.   Using   the   initial   theoretical   studies   as   foundation,  the  core  theoretical  concepts  of  grounded  theory  have  been  formulated  as  hypotheses.    In   the  analysis,   industry  variables  will  be  correlated  with  the  interviews  in  order  to  find  patterns  with  the   aim  to  find  context  based  and  independent  best  practice  processes.  This  analysis  will  enable  verification   or  falsification  of  the  hypothesis.   2.1.5 IN-­‐DEPTH  INTERVIEWS   The   interview   methodology   that   has   been   chosen   for   this   study   is   a   blend   between   structured   and   unstructured   interviews.  Using  an   interview   template  containing  both  open  ended-­‐  and  detail   specific   questions,  the  interviews  were  modified  depending  on  the  responses  provided  by  the  interviewee.    The   same  interview  template  was  used  in  all   interviews,  but  additional  oral  questions  based  on  knowledge   from   previous   interviews   were   included.   However,   using   the   same   interview   template   ensured   the   acquisition  of  comparable  and  equivalent  data.  The  interview  template  can  be  found  in  Appendix  A.   Interviews  have  been  conducted  with  four  companies  from  two   industries,  categorized  and  chosen  on   factors  that  are  derived  from  the  preceding  theoretical  study.  Eijvegård  (2009)  points  out  some  of  the   benefits  with  a  personal   interview  over   a   survey  being   the  possibility   for  elaborated  answers,   greater   openness,  and  opportunity   to  add  questions  during   the   interview.  This  has  been   important,  as   factors   have   been   surfacing   during   interviews   that   were   not   previously   considered,   calling   for   further   investigation.   In   order   to   derive   potential   correlation   between   external   factors   and   choice   of   internal   process,   a   number   of   industry   variables   have   been   assessed   for   all   interviewed   companies.   To   spur   liberty   to   speech   and   to   ensure   the   quality   of   the   study,   assessed   companies   have   been   made   anonymous.         Lois  Dierks  &  Emma  Folkestad   Innovation,  High-­‐Tech  Companies,  and  Faster  Horses   8       2.2 RESEARCH  PROCEDURE   Breaking  down  the  research  process  into  work  packages,  the  procedure  can  be  divided  into  five  different   phases,  each  providing  the  foundation  to  proceed  to  the  next  step  in  the  research  process,  collectively   building  on  each  other  towards  understanding  customer  values  methodology.  The  five  process  steps  are   shown  in  Figure  1,  providing  an  overview  of  sources,  function  and  output.     2.2.1 SCOPING   Scoping   the   research   has   to   be   done   for   practical   reasons   such   as   time   and   geography   restrictions.   A   well-­‐scoped   research   question   will   also   guide   the   research   and   ensure   that  focus   is  kept  throughout  theory,  empirical  studies,  and   the  analysis  resulting  in  an  answer  to  the  research  question.   The  scoping  process  is  visualised  in  Figure  2.   An   iterative  approach   to   scoping   the   research  question  has   been  undertaken.  Initially,  the  scope  was  discussed  with  the   company   that   assigned   the   thesis.   This   preliminary   scope   was   the   foundation   of   the   initial   theory   studies,   mainly   focusing   on   the   concept   of   customer   values   and   how   they   relate  to  company  success,  with  special  focus  on  technology   development   and   technology   intensive   companies.   With   a   basis  in  this  theoretical  study,  the  scope  was  reassessed  and   clarified   through   continuous   discussions   and   knowledge   regarding  theoretical  standpoints.   FIGURE  1  THE  FIVE  STEPS  OF  THE  RESEARCH  PROCESS  WITH  INPUT  AND  ACHIEVED  OUTPUT   FOR  EACH  PHASE.  THE  UPWARD  POINTING  ARROWS  ILLUSTRATE  ITERATIVE  LOOPS.   FIGURE  2  THE  RATIONALE  OF  THE  SCOPING   PROCESS  CAN  BE  ILLUSTRATED  USING  A   FUNNEL,  NARROWING  AN  INITIALLY  BROAD   PERSPECTIVE  UNTIL  A  NARROW  ENOUGH   SCOPE  HAS  BEEN  IDENTIFIED.   Lois  Dierks  &  Emma  Folkestad   Innovation,  High-­‐Tech  Companies,  and  Faster  Horses   9       2.2.2 CREATING  THE  THEORETICAL  OVERVIEW  OF  CUSTOMER  VALUES  AND  RELATED  METHODS A   literature   study   constitute   the   foundation   of   scientific   research   since   it   provides   direction   and   relevance  for  the  research  performed.  The  literature  study  in  this  thesis  was  initiated  to  get  an  overview   of   the   field   of   customer   values,   its   importance   for   technology   intensive   companies   and   to   map   out   existing  methods  for  capturing  these  values.   The  literature  study  was  initiated  as  soon  as  a  framework  for  the  research  scope  was  set  and  continued   alongside  with  further  specification  of  research  scope  and  clarification  of  research  questions.  Also,  the   literature  study  has  been  reassessed  based  on  results  from  the  case  studies,  complementing  with  theory   on  methods  discussed  in  the  interviews.     There  are  aspects  to  consider  when  undertaking  a  literature  study:  reading  various  sources,  authenticity,   credibility,  and  representativeness  (Denscombe,  1998).  Authenticity  of  the  material  is  considered  to  be   high,  as  it  mostly  constitute  of  academic  articles  derived  from  universities  and  industry  journals  accessed   through   university   databases.   Multiple   sources   has   been   used,   however,   information   regarding   proactive   methods,   describing   product   development   processes   involving   the   customers,   are   to   large   extent  derived  from  publications  by  a  single  group  of  researchers  within  the  field.  While  using  the  latest   research,  which  few  have  had  time  to  respond  to  or  conduct  similar  research  on,  it  is  a  risk  of  obtaining   biased  material.   2.2.3 CASE  STUDIES   The   research   method   of   case   studies   is   defined   by   Yin   (2004   p.15)   as   “…   a   way   of   investigating   an   empirical  topic  by  following  a  set  of  pre-­‐specified  procedures”.  Trochim  (2006)  identifies  the  concept  of   case   studies   as   an   intensive   study   of   a   specific   context   and   states   that   it   can   be   conducted   using   a   combination  of  methods,  whereof  interviewing  and  written  documents  have  been  chosen.  Furthermore,   Yin  argues  case   studies   to  be  a  good  method  when  answering  explorative  questions   such  as  how  and   why.  Hence,   the  case  study  should  be  seen  as  a  suitable  approach  for  our  purpose  to   investigate  how   companies  capture  customer  values,  how  these  are  implemented,  and  why  they  choose  these  methods.   The  explorative  nature  of  case  studies  emphasizes  the  importance  of  understanding  the  complexity  and   context  of   the  case   that  one   is   studying.  Hence,   the   interviews  constituting   the  case  studies  were  not   conducted  until  the  theoretical  framework  was  set.  Extensive  preparations,  by  reading  each  company’s   annual  report,  webpage,  and  other  information  found  important,  was  performed  prior  each  interview.   2.2.4 SELECTION  OF  INDUSTRIES  AND  DIFFERENTIATING  CHARACTERISTICS   From   reading   current   literature   on   customer   values,   the   importance  of  this  concept  for  organizations,  and  how  to   use   customer   values   in   the   technology   development   process,   it  was  unclear  how  companies   could   implement   the  processes  and  methods  described.  Aspects  relating  to   the   business   model   was   not   assessed   at   all   and   surprisingly   little  critique  was  to  be  found  on  the  matter.   After   discussion,   the   choice   of   differentiating   FIGURE  3  SUMMARY  OF  INDUSTRY   CHARACTERISTICS  CHOSEN  FOR  ASSESSMENT  IN   THE  CASE  STUDIES.   Lois  Dierks  &  Emma  Folkestad   Innovation,  High-­‐Tech  Companies,  and  Faster  Horses   10       characteristics  to  investigate  in  the  case  study  fell  upon  customer  segment  characteristics  and  product   lifecycle  characteristics,  as  seen  in  Figure  3.  These  two  characteristics  combined  give  a  good  picture  of   the  value  chain  and  covers  both  internal  and  external  perspectives  of  a  company’s  business  model.  The   customer   perspectives   aims   to   investigate   the   relationship   between   company   and   customer,   what   segments   the   company   targets,   how   sales   are   made,   who   the   end   user   is,   if   the   relationship   is   continuous   and   the   level   of   technology   push   vs.   market   pull.   As   a   complement,   the   lifecycle   characteristic  aims  to  provide  understanding  of  the  timeframe  of  technology  development  and  purchase   patterns.  Development  time  from  ideation  to  product  launch  is  assessed  as  well  as  frequency  of  product   replacement,  technology  durability  and  ratio  between  technology  upgrades  and  new,  disruptive  product   launches.     The   two   industries   selected   for   the   case   study,   telecom   and   power   tools,   where   chosen   as   it   was   hypothesized   that   there  would   be   a   difference   in   the   two   characteristics   depending   on   industry.   The   customer  of  telecom  companies  makes  their  product  a  part  of  a  system  that   is  then  communicated  to   the   end   user.   This   differs   from   power   tool   companies,   where   the   end   user   uses   the   product   as   the   company  has  manufactured  it.  The  telecom  industry  is  more  characterized  by  new  innovations  and  high-­‐ tech   solutions,  while   the  power   tool   industry   is  more   traditional,  which  hypothetically   should  make  a   difference   in   lifecycle.   Both   companies   are   technology   intensive,   meaning   that   they   are   heavily   dependent   on   technology   in   the   product   development   process.   As   the   purpose   of   the   study   is   to   investigate  customer  values  in  relation  to  the  technology  development  process,  these  type  of  companies   were  seen  as  being  more  relevant.   To  ensure  that  the  companies  interviewed  will  have  input  on  the  concept  of  customer  values,  the  focus   has  been  on  finding  companies  that  are  large  and  that  mention  customer  focus  in  their  official  material,   such  as  annual  reports.   2.2.5 CASE  STUDY  INTERVIEWS   Out   of   four   interviews,   two   have   been   conducted   face-­‐to-­‐face   and   two   using   telephone.   At   first,   the   assessed  companies  have  been  openly  approached  to  find  the  most  suitable  interviewee  for  the  subject   of  the  thesis.  By  sending  a  detailed  description  of  the   interview  topic  along  with  example  questions,   it   has   been   ensured   that   the   interviewee   is   knowledgeable   about   the   field.   This   has   been   considered   essential,  as  the  interview  questions  have  been  of  both  structured  and  open  nature,  probing  for  further   insights   and   company   specific   approaches.   The   structure   of   the   questions   have   been   ensuring   consistency   in   the   interview   results   and   enabled   the   interviewee   to   highlight   areas   that   has   been   emphasized  in  the  theoretical  study  and  as  well  as  by  other  companies.  The  open-­‐ended  questions  have   ensured  to  capture  industry  and  company  specific  details  that  potentially  not  would  be  covered  in  the   preceding  studies  made.       Lois  Dierks  &  Emma  Folkestad   Innovation,  High-­‐Tech  Companies,  and  Faster  Horses   11       2.2.6 ANALYSIS  AND  DISCUSSION  OF  EMPIRICAL  RESULTS     The  purpose  with  the  case  interviews  was  to  gain  insight  in  how  the  company  values  and  practically  use   customer   values   in   their   product   development   process.   Also,   underlying   rational   to   why   these   approaches  are  chosen  was  assessed  from  the  perspective  of  characteristics  relating  to  product  lifecycle   and  customers.  The  interviews  were  aimed  to  understanding  the  work  procedure  and  the  focus  of  the   company  rather  than  obtain  a  detailed  process  description.   The   analysis   first   compared   the   two   companies   within   each   industry   to   find   similarities,   both   in   characteristics  and   in  how  they  work  with  customer  values.  This  was  then  the  basis   for  comparing  the   two   industries   with   one   another   to   find   similarities   and   differences.   The   findings   from   the   literature   study  were  compared  with  the  results  of  the  case  studies  to  find  where  they  coincide  and  where  there   are   disparities.   In   a   discussion,   the   analysis   was   used   to   answer   the   research   question   and   give   suggestions  for  future  research.     2.3 QUALITY  OF  RESEARCH To  ensure  the  quality  of  research  studies,  there  are  some  aspects  that  should  be  assessed.  Traditionally,   the   four   concepts   of   reliability,   objectivity,   internal-­‐,   and   external   validity   are   discussed   in   relation   to   quality   assurance   of   case   studies   (Yin,   1994).   However,   owing   the   qualitative   nature   of   the   chosen   research   methodology,   the   proposed   four   criteria   of   Guba   and   Lincoln   for   judging   soundness   of   qualitative   research   will   instead   be   assessed;   credibility,   transferability,   dependability,   and   confirmability  (Trochim,  2006).     2.3.1 CREDIBILITY   This   criterion   establishes   the   credibility   or   believability   of   the   qualitative   research   results   from   the   perspective  of   the   research  participant.   Since  qualitative   research  aims   to  describe  or  understand   the   field  of  interest  from  the  participant’s  eyes,  only  the  participant  can  judge  the  credibility  of  the  results   (Trochim,   2006).  How   the   interviewees  were   chosen  has   already  been  discussed   in   section   2.2.5.   The   method   used   meant   that   the   interviewee   made   the   decision   that   they   were   able   to   give   credible   answers  to  the  questions.   As   the   interviews   have   been   extensive,  much   information   has   been   summarized.   For   readability   and   clarification  purposes,  and  to  ensure  the  anonymity  of  the  interviews,  some  details  have  been  removed.   In  order  to  make  sure  this  is  an  accurate  summary  of  company  methods  and  processes,  each  company   representative   has   confirmed   the   summarized   version   before   publication   and   has   been   able   to   contribute  with  feedback  and  corrections.     In  order  to  generate  a  more  valid  study,  triangulation  in  the  meaning  of  multiple  sources  has  been  used   to   synthesize   information.   Empirical   studies   at   different   companies   as   well   as   literature   studies   consisting  of  books,  papers  and  other  electronic  sources  constitute  this  variety.         Lois  Dierks  &  Emma  Folkestad   Innovation,  High-­‐Tech  Companies,  and  Faster  Horses   12       2.3.2 TRANSFERABILITY   This  criterion  refers  to  what  degree  the  qualitative  research  can  be  generalized  or  transferred  to  other   contexts.   The   researcher   can   enhance   this   factor   by   thoroughly   describing   the   research   context   and   assumptions  central   to   the   research.  Providing   this   information  will   increase   the  understanding  of   the   prerequisites   for   where   the   information   is   valid   if   a   reader   would   like   to   transfer   the   information   (Trochim,  2006).     Within  the  scope  of  the  thesis,  an  evaluation  of  the  context  of  the  interviewed  companies  is  included.  In   the   study,   underlying   rationale   as  well   as   contexts   affecting   the   answers   are   thoroughly  mapped   and   analysed.  The   level  of   transferability   is  high  as   the  conclusions  explicitly  states  what  methods  that  are   context   dependant.   Furthermore,   the   thesis   relies   on   the   hypothesis   of   companies   varying   their   approach   to   customer   values   depending   on   industry   characteristics.  Owing   the   research  method,   this   underlying  assumption  is  also  thoroughly  discussed  in  the  conclusions  of  the  study.     2.3.3 DEPENDABILITY   When  conducting  quantitative  research,  repetitiveness  is  a  concern,  i.e.  whether  the  same  results  would   be   achieved   if   the   same   research   process  were   repeated.   A   qualitative   approach,   on   the   other   hand,   emphasizes   the  need   for   the   researcher   to   account   for   changes  occurring   in   the   research   setting   and   how  these  changes  affected  the  outcome  (Trochim,  2006).     An   iterative   approach   has   been   used   throughout   the   study,   most   significantly   in   the   initial   phases   restructuring  the  research  questions  but  also  when  conducting  the  interviews  for  the  case  studies.  After   the  initial  interview,  some  questions  have  been  added  to  encourage  further  clarification.  Also,  while  the   first  two  interviews  were  conducted  face-­‐to-­‐face  the  final  two  interviews  were  telephone  interviews.     2.3.4 CONFIRMABILITY   Confirmability   refers   to   the   risk  of   researcher  bias.   To  enhance   the   confirmability,   the   researcher   can   document  procedures  for  checking  data  multiple  times  during  the  study  or  having  the  study  confirmed   by  a  third,  independent  party  (Trochim,  2006).     All  interviews  have  been  recorded  and  transcribed  for  confirmability  purposes.  However,  the  transcribed   interviews  is  not  included  in  the  appendix  for  two  reasons;  first,  for  space  purposes  and  secondly,  owing   the   anonymity   of   the   assessed   companies.   As   mentioned   earlier,   the   summary   of   the   interviews   presented   in   the   empirical   results   have   been   approved   by   each   company   and   also,   the   detailed   transcriptions  have  been  thoroughly  checked  and  rechecked.  Finally,  the  thesis   is  subject  to  horizontal   evaluation   and   critique   where   persons   outside   the   research   group   evaluate   emerging   results   and   provide  comments.  In  this  particular  study,  both  the  assigners  at  the  host  company,  a  formal  mentor  at   Chalmers  University  of  Technology  as  well  as  opposition  students  have  provided  critique.     Lois  Dierks  &  Emma  Folkestad   Innovation,  High-­‐Tech  Companies,  and  Faster  Horses   13       3 THEORY   The  theoretical  framework  is  in  three  parts,  and  all  combined  to  give  a  basis  to  answering  the  research   question.   The   first   part   provides   an   introduction   to   the   market   oriented   company,   and   three   other   recurring  concepts.  The  second  part  explains  the  concept  of  customer  values  from  different  angles,  and   provides   arguments   for   the   concept’s   importance.   A   brief   case   study   presentation   further   emphasizes   this  argument.  The  final  part  describes  different  methods  for  capturing  and  integrating  customer  values,   structured  by  a  proactive  versus  reactive  view  on  technology  development.   3.1 THE  MARKET  ORIENTED  COMPANY   The  concept  of  market  orientation  is  described  by  Saleem  (2011)  as  an  organizational  culture  focused  on   identifying  and  meeting  stated  or  hidden  needs  or  wants  of  customers.  Before  launching  new  products,   companies   study   customer   needs   aiming   to   create   long-­‐term   relationships   and,   in   the   long   run,   maximizing   profits.   In   comparison   to   having   a   product   or   sales   oriented   company   culture,   where   production,   supply,   or   promotion   of   these   are   in   focus   of   management’s   attention,   being   market   oriented   is   stated   to   improve   organizational   innovativeness,   new   product   success,   and   overall   organizational  performance.   Saleem  breaks  down  market  orientation  into  two  categories,  proactive  and  reactive,  and  depending  on   which   the  company  embraces,   customers  plays  an  either  active  or  passive  part   (Witell  et  al.,  2011).  A   reactive   market   orientation   refers   to   a   company’s   attempt   to   capture,   understand,   and   implement   expressed  needs  of  customers.  To  practice  this,  a  company  is  required  to  possess  the  ability  to  formulate   intelligent  questions  and  make  careful  observations  of  customer  behaviour,  enabling  tailoring  products   or   services   to   enhance   customer   value   (Kristensson   et   al.,   2008).     This   market   orientation   puts   the   customer  in  a  passive  role.   Proactive  market  orientation,  on  the  other  hand,  targets  hidden,  latent,  needs  of  customers  resulting  in   opportunities   for  customer  value  of  which  the  customer   is  oblivious.  This  will   require  the  customer  to   play  a   long   term,  active   role,  as  a   collaborating  partner,   jointly   co-­‐creating  value  based  on  discovered   latent  needs  in  collaboration  with  the  company  (Saleem,  2011).     A   study   conducted   by   Narver   in   2004   concluded   that   the   impact   of   proactive  market   orientations   is   larger  on  new-­‐product  success   than  that  of  a   reactive  orientation.  The  practice  of  both  orientations   is   important   to   attract   and   retain   customer   according   to   Kristensson   et   al.   (2008).   However,   since   a   reactive  approach   in  general   is  easier   for  a  business  to   implement,   the   larger  challenge  for  companies   lies  in  discovering  and  identifying  latent  customer  needs.     3.1.1 SERVICE-­‐DOMINANT  LOGIC  PERSPECTIVE   Unlike  a  goods-­‐dominant   logic  view  starting  with  an  existing  market  offering,  a  service-­‐dominant   logic   view  origins  with  an  understanding  of  the  customer’s  problem  and  identifies  products  and  services  that   can   solve   these   problems   (Witell   et   al.,   2011).   When   viewing   value   from   a   service-­‐dominant   logic   perspective,  an  idea  for  future  offerings  is  formulated  in  terms  of  a  service  (a  value-­‐offering)  rather  than   Lois  Dierks  &  Emma  Folkestad   Innovation,  High-­‐Tech  Companies,  and  Faster  Horses   14       in  terms  of  goods  (description  of  technical  content  and  requirements).  The  service-­‐based  idea  is  based   on  a  functional  perspective,  where  the  customer  wants  to  accomplish  something  by  using  a  product.  In   order  to  succeed  with  this  rationale,  a  greater  understanding  of  customers’  problems  and  needs  relating   to  the  actual  use  situation  is  needed.  The  service-­‐based  approach  aims  to  increase  the  value-­‐in-­‐use,  the   concept  explained  in  the  next  section.   3.1.2 VALUE-­‐IN-­‐USE     Value  is  created  when  a  customer  utilizes  a  product  or  good,  and  this  process  is  referred  to  as  value-­‐in-­‐ use.  The  attractiveness  of  a  market  offering  is  dependent  on  whether  it  captures  its  value-­‐in-­‐use,  and  its   true  value   can  only  be  evaluated   from  a   customer  perspective.  Consequently,   the   focus   is  not  on   the   market  offering   itself   but   rather  on   the   customers’   value   creating  process.  Woodruff   (1997)  discusses   the   value-­‐in-­‐use   concept   from   a   hierarchy   perspective.  His   framework,   the   customer   value   hierarchy,   helps   to   specify   exactly  what  managers   should   learn   from   their   customers   and   targets  motivations  of   purchase  beyond  key  buying  criteria  based  solemnly  on  attributes.  The  value  hierarchy  argues  that  the   seller  should  learn  about  consequences  in  use  situations  that  customers  want  or  want  to  avoid  and  the   goals  to  where  these  consequences  lead  up  to.     By   recognizing   that   the   product   does   not   create   value   itself   but   rather   when   the   customer   uses   the   product   induces   a   new   perspective   to   product   development.   When   focus   is   placed   on   customer   perception  and  experience  rather  than  product  features,  greater  value-­‐in-­‐use  can  be  created.     3.2 CUSTOMER  VALUES   In   this   section,   definitions   of   customer   values   from   various   perspectives   are   explained.   Underlying   rationale   to   the   concept   is   provided   as   customer   values   are   described   in   a   company   context   and   exemplified   using   a   case   study.   An   alternative   approach   introduced   to   market-­‐oriented   product   improvement  is  introduced,  Total  Quality  Management  (TQM).  This  methodology  was  introduced  in  the   1980s  and  was  embraced  by  many  companies.  In  this  report,  TQM  serves  to  provide  a  reference  to  what   framework  many  companies  are  working  with  today  and  what  processes  the  concept  of  customer  values   will  build  upon.  The  chapter  ends  with  a  closer  look  at  the  importance  of  understanding  customer  values   for  technology-­‐based  companies,  as  this  is  the  focus  of  the  study.   3.2.1 DEFINITION  OF  THE  CONCEPT  CUSTOMER  VALUES   There   is   not   a   singular   definition   of   customer   values   in   literature,   but   some   common   ground   can   be   found   in   that   customer   values   are   determined   by   customers   rather   than   determined   by   the   supplier   (Woodruff,  1997).   The  difficulty   in  defining   the  concept   can  be  derived   to   the  concept  being  dynamic   and  evolving  over   time  (Khalifa,  2004).   In  his  article,  Khalifa   finds   that  definitions  can  be  grouped   into   three  areas:  value  component  models,  benefits/cost  ratio  models,  and  means-­‐end  models.  It  should  be   noted   that   neither   one   of   these  models   are   complete   by   themselves,   but   rather   give   three   different   angles  in  which  to  approach  the  subject.         Lois  Dierks  &  Emma  Folkestad   Innovation,  High-­‐Tech  Companies,  and  Faster  Horses   15       Value  components  models  regard  the  sum  of  want,  worth  and  need  as  the  determiners  of  a  purchase   decision   by   the   customer.   Another   view   that   fits   under   this   label   is   Kano’s   model   with   dissatisfiers,   satisfiers   and   delighters   (Khalifa,   2004).   Dissatisfiers   are   characteristics   or   features   that   are   taken   for   granted   in   a   product   or   service   for   the   customer   to   consider   buying   it,   but   it   does   not   provide   any   additional   value   once   it   is   there.   Satisfiers   are   expected,   and   the   better   they   are,   the   higher   the   customer  satisfaction.  Delighters  are  not  expected,  but  if  they  are  there,  they  provide  a  positive  surprise   and   thereby   increased   satisfaction.   This   model   can   be   correlated   to   types   of   customer   values,   dissatisfiers   and   satisfiers   are   often   wants   and   needs   the   customer   can   express   while   delighters   are   derived  from  latent  ones  (Khalifa,  2004).     Benefits/cost   ratio   models   see   customer   value   as   the   difference   between   received   benefits   and   occurred  sacrifices,  as  perceived  by  the  customer.  The  benefits  can  be  both  tangible  and  intangible,  and   the  sacrifices  can  be  both  monetary  and  nonmonetary.  These  benefits  and  costs  can  occur  in  preparing   for  the  purchase,  the  actual  purchasing  moment,  and  the  continued  use  (Khalifa,  2004).   The  third  type  of  customer  value  models  identified  by  Khalifa  is  the  means-­‐ends  model.  This  is  described   by  Reynolds  and  Gutman  (1988)  as  being  focused  on  the  connection  between  attributes  that  products   have,  means,  and  the  consequences  that  they  lead  to  for  the  consumer.  The  consequences  will   in  turn   affect   personal   values,   ends   held   by   the   consumer,   either   in   a   positive   or   negative   way.   These   connections  are  often  done  subconsciously,  and  can  be  learned  by  use  of  certain  products  or  services.   3.2.2 THE  IMPORTANCE  OF  CUSTOMER  VALUES   The   connection   between   customer   values   and   profitability   is   apparent   from   many   different   angles.   Shareholder  and  stakeholder  values  are  both   important   to  companies,  but   it   is  worth  bearing   in  mind   that  they  in  turn  are  driven  by  customer  value.  Being  able  to  deliver  superior  customer  value  will  lead  to   loyal  customers,  which  in  turn  is  a  driver  of  financial  performance.  Customers  will  only  remain  loyal  for   as   long   as   they   get   superior   value   from   a   company   as   compared   to   its   competitors.   Focusing   on   customer  retention  is  logical,  since  a  small  increase  in  customer  retention  can  be  connected  to  a  major   increase   in   net   present   value   profits.   All   this   taken   together   is   likely   the   reason   for   most   business   strategy  models  highlighting  the  importance  of  creating  value  for  the  customer  (Khalifa,  2004).   Another  argument   for   the   importance  of   customer  values   is   related   to   its   connection   to  new  product   development  (NPD).  Companies  are  driven  to  reduce  cycle  time  within  their  NPD  processes  to  bring  new   products  to  the  market  faster;  however,  at  the  same  time,  new  products  on  the  market  are  failing  at  a   high   rate.   This   could  be   the   result  of   the  offerings  being  based  on   internally   generated   creative   ideas   without  a  foundation  in  an  understanding  of  customer  values.  Tying  in  to  the  discussion  about  customer   retention   above,   for   companies   to   be   able   to   retain   customers   they   need   to   modify   their   existing   products  and  develop  new  ones.  NPD  takes  time;  consequently,  companies  benefit  from  predicting  early   what  changes  in  customer  values  that  is  likely  to  occur.  A  reactive  approach  will  put  the  company  in  the   risk  of  losing  customers  to  competitors  that  are  better  at  predicting  change.  Still,  many  companies  lack   formal   processes   for   anticipating   future   customer   needs.   Traditionally,   companies   ask   the   customers   about   product   attributes,   which   customers   may   have   a   hard   time   predicting,   especially   in   markets   characterized   by   rapid   technical   change   (Flint,   2002).   Trott   (2005)   highlight   the   importance   for   Lois  Dierks  &  Emma  Folkestad   Innovation,  High-­‐Tech  Companies,  and  Faster  Horses   16       companies   to   challenge   their   existing   products   and   markets   by   pushing   current   product   concepts.   However,   no   matter   how   well   a   company   meets   articulated   needs   of   current   customers   there   is   a   great   risk   of   not   under-­‐ standing  the  views  customers  yet  cannot  express,   unexploited  opportunities  as  shown  in  Figure  4.   The   product   development   cycle   includes   several   phases,  from  brainstorming,  to  development,  and   after   launch.   The   early   part   of   the   process   road   mapping,  also  known  as  the  fussy  front  end,  could   benefit   a   great   deal   from   implementation   of   customer   value   understanding.   Improving   later   parts   of   the   process   will   make   little   sense   if   the   ideas  generated  in  the  first  stages  do  not  have  a  firm  foundation  in  customer  values.  Often  the  first  step   is  connected  to  brainstorming,  creativity,  and  scenario  exercises.  If  these  activities  are  seen  as  a  second   step  after  capturing  customer  values,  and  participants  are  able  to  use  these  values,  the  outcome  is  likely   to  produce   ideas   and   concepts  of  higher   value-­‐in-­‐use.   Thereby,   likelihood  of   repeated   success   can  be   increased,  giving  shorter  product  development  cycle  (Flint,  2002).     Market  offerings  based  on  forecasted  context  of  use  are  more  likely  to  generate  products  and  services   of  new  market  categories  and  thereby  a  better  competitive  position  (Witell  et  al.,  2011).  One  example  of   this   is   the   iPad   released  by  Apple   in  2010.  Besides   selling  3  million   iPads   in  80  days,  Apple   reinforced   their  position  as  an  innovative  market  leader  by  creating  a  product  falling  outside  any  product  category,   targeting  latent  needs  in  their  user  base  (Gruener,  2010).     Kristensson   et   al.   (2008)   brings   up   two   telecommunication   firms   that   undertook   projects   aiming   to   capture   ideas   and   values   from   users.   The   companies   were   interested   in   identifying   real   needs   of   ordinary  people,   their  users,   rather   than   relying  on  views  of  professional  product  developers  who  are   removed  from  everyday  utility  contexts  and  needs  based   in  real   life  settings.  The  fundamental  benefit   with   user   involvement   is   generation   of   solutions   to   real-­‐life   experiences   and   problems   resulting   in   original   and   valuable   ideas,   focusing   on   value-­‐in-­‐use   over   product   specification.   As   infrastructural   technology  solutions  are  standardized,  these  will  not  provide  a  distinguishable  competitive  advantage.   Besides   listening   to   customer’s   expressed   needs,   understanding   latent   needs   taps   in   to   a   pool   of   untapped  opportunities  and  facilitate  launching   innovative  products  with  high  value-­‐in-­‐use.  To  be  able   to   shift   focus   in   product   development   from   reactive  market   orientation   to   proactive,   requires   active   engagement.  Proactive  market  orientation  requires  more  than  an  annual  survey  exploring  retrospective   needs   but   rather   active   collaboration  with   users   (Kristensson   et   al.,   2008).  Witell   et   al.   (2011)   argues   that,   if  possible,  customers  should  be  active   in  market  research  themselves,  being  encouraged  to  take   their   own   initiatives.   The   company   will   be   able   to   create   innovative   market   offerings   that   fewer   competitors   can  match.  Hence,   these  offerings  are  more  profitable  and  have   the  potential   to  provide   distinguishable  competitive  advantage.     FIGURE  4  THE  OPPORTUNITY  TO  EXPLOIT  BUSINESS   OPPORTUNITIES  BY  ASSESSING  CUSTOMERS   UNARTICULATED,  LATENT,  NEEDS  (TROTT,  2005).   Lois  Dierks  &  Emma  Folkestad   Innovation,  High-­‐Tech  Companies,  and  Faster  Horses   17       3.2.3 CASE  STUDY  -­‐  ERICSSON,  NOKIA  AND  MOTOROLA   An  example  of  the  importance  of  understanding  customer  values,  as  well  as  being  able  to  capture  these   needs  and  wants  of  users,  can  be  derived  from  the  telecom  market’s  largest  players  in  the  second  half  of   the  1990s.  Being  the  world’s  largest  mobile  telephone  provider,  Motorola  had  a  well-­‐implemented  total   quality   management,   TQM,   system   and   was   one   of   the   pioneers   in   the   US,   developing   the   quality   management   framework  six-­‐sigma.  Ericsson  had  won   the  Swedish  Quality  Award  on  several  occasions   and  was  known  for  their  superior  quality.     The  studied  period  was  very  successful   for  Nokia,   increasing  their  market  share  with  50  percent  while   Motorola  radically  dropped  their  market  share  with  27  percent  units  and  Ericsson  was  struggling  in  the   same  market  position.  The  change  in  market  share  is  illustrated  in  Figure  5.  Lagrosen  (2001)  argues  that   Ericsson   and   Motorola   did   not   lack   customer   focus   but   rather   customer   understanding   and   that   a   profound  understanding  of  customers’  situation  is  vital  to  foster  innovation  of  real  value.       Many   companies,   especially   in   engineering,   might   have   a   well-­‐implemented   TQM   system   and   be   considered  as  leading  in  quality.  However,  this  type  of  quality  is  not  grounded  in  the  needs  and  wants  of   the   customers,   but   in   the   wants   of   their   personnel.   For   an   innovation   to   be   successful   and   provide   maximum  value,  it  must  be  related  to  the  customer  (Lagrosen,  2001).     Several  companies  also  regard  themselves  as  being  customer  focused.  This  means  that  the  activities  of   the  company  are   intended  to  benefit   the  customer,  but  the  customer   is  still  seen  from  the  company’s   perspective.   Information   about   the   needs   and   wants   of   the   customer   is   collected,   but   it   is   made   to   match  with  a  view  on  the  product  and  its  features  that  originates  from  the  company.  Instead,  companies   should   strive   for   customer   understanding,   getting   insight   into   the   customer’s   perspective   on   the   product,  and  using  the  customer’s  own  framework  (Lagrosen,  2001).       FIGURE  5  CHANGES  IN  MARKET  SHARE  FOR  SELECTED  ACTORS,  1995-­‐2005   Lois  Dierks  &  Emma  Folkestad   Innovation,  High-­‐Tech  Companies,  and  Faster  Horses   18       3.2.4 TECHNOLOGY-­‐BASED  COMPANIES  AND  CUSTOMER  VALUES     Kristensson   et   al.   (2008)   identifies   technology   based   companies   to   be   facing   particular   difficulties   in   capturing   customers’   expressed   and   latent   needs.   While   traditional   companies   frequently   can   use   personal  interactions  to  facilitate  successful  new  service  development  based  on  customer  learning,  the   lack  of   face-­‐to-­‐face   interaction   for   technology-­‐based  businesses  has   several   implications,   illustrated   in   Figure  6.     In  addition,  most  users  of   technology-­‐based  services  have   limited  technological  knowledge  that  would   create   additional   value.   These   factors   combined   results   in   technology-­‐based   companies   experiencing   significant  difficulties  initiating  co-­‐creation  and,  often,  great  efforts  are  required  for  even  capturing  the   expressed   needs   of   customers.   As   a   conclusion,   Kristensson   et   al.   (2008)   regards   technology-­‐based   companies  to  benefit  greatly  from  user   involvement   in  their  new  product  development  process  where   they   can   provide   useful   information,   enabling   these   companies   to  meet   customers’   latent   as   well   as   manifested  needs.  Kristensson  et  al.