UNIVERSITY OF EASTERN FINLAND Faculty of Social Sciences and Business Studies Department of Business
NETWORKED COMMERCIALIZATION OF MEDICAL INNOVATION – PERSONALIZED MEDICINE
Master’s thesis, Innovation Management Raisa Korhonen (185662)
May 5, 2017
ABSTRACT
UNIVERSITY OF EASTERN FINLAND
Faculty of Social Sciences and Business Studies Business School Master´s Program in Innovation Management
KORHONEN, RAISA: Networked Commercialization of Medical Innovation-Personalized Medicine. Lääketieteellisen innovaation verkostoitunut kaupallistaminen -Yksilöllistetty lääketiede.
Master's thesis, 71 pages
Supervisor: Professor Hanna Lehtimäki May 2017
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Keywords: commercialization, network, personalized medicine, qualitative content analysis The purpose of this study is to explore how the commercialization of medical innovation takes place in a network of actors. The aim is to gain deeper understanding about the commercialization network, in particular what are the actors involved and how do they contribute to the commercialization of medical innovation. The aim is to explore what roles the actors have and what activities do they perform. The goal is also to explore the collaboration between the actors, in other words how are the actors linked to each other and for what purpose. This study also aims to present the commercialization network in an illustrative network picture.
The study was conducted by using the qualitative research approach. The empirical data for the study was formed from the strategy text called “Innovating together. Health Sector Growth Strategy for Research and Innovation Activities. Roadmap for 2016–2018” published by Ministry of Employment and the Economy in June 2016. The data was analyzed by using inductive qualitative content analysis.
The research results indicate that there are 24 actors involved in the commercialization of personalized medicine in Finland. Each of these actors has their own roles and tasks which support the commercialization as well as the innovation activity and growth of the Finnish health sector. The results show that in the strategy document, the central actors in the commercialization of medical innovation are the state of Finland (ministries, government) and the financiers. These actors create the base for commercialization by legislating laws and regulations that are favorable for innovations and by offering funds for research and for other actors in the network. The central activities seek to strengthen the competence base and research in medical innovation. The results address that the collaboration between companies, higher education institutions and research institutes is considered as important for the resource and competence sharing and strengthening the competence base.
This research contributes to the development of personalized medicine by offering information about the actors and their collaboration. This study provides a business studies perspective on research on personalized medicine and increases our understanding how personalized medicine is implemented in the Finnish society. The future development of the field can benefit from an in-depth understanding about the networked competence and resources that contribute to the development of personalized medicine. This study contributes to the existing literature on the commercialization networks by filling the gap in the earlier research and showing the actors, their roles and activities in a specific industry and context.
This study also contributes to the literature on commercialization by extending the three actors´ contribution levels presented in the earlier literature to eight contributions levels.
TIIVISTELMÄ
ITÄ-SUOMEN YLIOPISTO
Yhteiskuntatieteiden ja kauppatieteiden tiedekunta Kauppatieteiden laitos
Innovaatiojohtaminen
KORHONEN, RAISA: Lääketieteellisen innovaation verkostoitunut kaupallistaminen- Yksilöllistetty lääketiede. Networked Commercialization of Medical Innovation-Personalized Medicine.
Pro gradu- tutkielma,71 sivua
Tutkielman ohjaaja: Professori Hanna Lehtimäki Toukokuu 2017
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Avainsanat: kaupallistaminen, verkosto, yksilöllistetty lääketiede, laadullinen sisällönanalyysi Tämän tutkimuksen tarkoituksena on tutkia lääketieteellisen innovaation, yksilöllistetyn lääketieteen, kaupallistamiseen liittyvää verkostoa. Tavoitteena on ymmärtää syvemmin, millaisia toimijoita kaupallistamiseen liittyy ja millaisia rooleja toimijoilla on sekä minkä tekemisen ympärille toiminta keskittyy. Tarkoituksena on tutkia toimijoiden välistä yhteistyötä eli ketkä toimivat yhdessä ja mitä tarkoitusta varten sekä esittää kaupallistamisen verkosto myös toimintaa ja yhteistyötä havainnollistavassa verkostokuvassa.
Tutkimus toteutettiin noudattaen laadullista tutkimustapaa. Tutkimuksen empiirinen aineisto muodostui työ- ja elinkeinoministeriön kesäkuussa 2016 julkaisemasta strategia tekstistä
”Yhteistyötä ja työnjakoa. Terveysalan tutkimus- ja innovaatiotoiminnan kasvustrategia.
Tiekartta 2016–2018”. Tutkimustulosten analyysi toteutettiin käyttäen induktiivista sisällönanalyysiä.
Tutkimustulokset osoittavat, että Suomessa yksilöllistetyn terveyden kaupallistamiseen ja kehittymiseen liittyy 24 toimijaa. Jokaisella toimijalla on oma roolinsa ja tehtävänsä, jotka tukevat niin kaupallistamista kuin terveysalan innovaatiotoimintaa ja kasvua. Tulokset osoittavat, että keskeisimpinä toimijoina lääketieteellisen innovaation kaupallistamisessa ovat Suomen valtio (ministeriöt, hallitus) sekä rahoittajat. Nämä toimijat luovat kaupallistamistoiminnan pohjan mukauttamalla lainsäädäntöä innovaatiomyönteisemmäksi sekä tarjoamalla rahoitusta tutkimustyölle sekä verkoston muille toimijoille. Keskeisimpinä toiminnan alueina ovat osaamispohjan vahvistaminen ja tutkimustyö. Tulokset osoittavat, että yritysten, korkeakoulujen ja tutkimuslaitosten yhteistyö on tärkeä tekijä osaamisen ja resurssien jakamisessa ja sitä kautta osaamispohjan vahvistumisessa.
Tämä tutkimus edistää yksilöllistetyn lääketieteen kehittymistä Suomessa tarjoamalla tietoa toimijoista, heidän rooleistaan sekä yhteistyöstä. Tutkimus tarjoaa kauppatieteellisen näkökulman alan tutkimukseen sekä lisää ymmärrystä yksilöllistetyn lääketieteen jalkauttamisesta suomalaiseen yhteiskuntaan. Tulevaisuudessa alan kehittyminen voi hyötyä yksilöllistetyn lääketieteen kehittymiseen myötävaikuttavasta verkostoituneen osaamisen ja resurssien syvällisestä ymmärryksestä. Tämä tutkimus edistää innovaation kaupallistamiseen liittyvää verkostokirjallisuutta osoittamalla kaupallistamiseen liittyvän verkoston toimijat, roolit ja tehtävät tietyllä alalla ja tietyssä kontekstissa. Lisäksi tulokset tukevat aiempaa kaupallistamisen kirjallisuutta laajentamalla toimijoiden myötävaikutuksen tasoja aiemmassa kirjallisuudessa esitetystä kolmesta tasosta kahdeksaan tasoon.
ACKNOWLEDGEMENTS
First, I would like to thank my supervisor Professor Hanna Lehtimäki for encouraging and guiding me throughout the whole thesis process as well as for introducing me the interesting
phenomenon called personalized medicine.
Thank you for your help and support.
I also want to thank my family for their support during the whole university studies.
Thank you for believing me and pushing me forward.
Special thanks to my twin sister and my fiancé.
Thank you for listening, encouraging and being patient with me.
Without you, this would not have been possible.
Siilinjärvi 5th May 2017 Raisa Korhonen
TABLE OF CONTENTS Abstract
Tiivistelmä
1 INTRODUCTION ... 6
1.1 Networked Commercialization of Innovation ... 6
1.2 The Purpose of the Study... 8
1.3 Key Concepts of the Study ... 9
1.4 Structure of the Thesis ... 11
2 THEORETICAL BACKGROUND ... 13
2.1 Commercialization ... 13
2.1.1 Commercialization Process ... 14
2.1.2 Successful Commercialization ... 16
2.2 Networking ... 19
2.2.1 Innovation Network ... 19
2.2.2 Commercialization Network ... 22
2.2.3 Managing the Network ... 25
2.3 Theoretical Framework in This Study ... 27
3 METHODOLOGY ... 29
3.1 Qualitative Research Approach ... 29
3.2 Data Collection ... 29
3.3 Data Analysis ... 30
3.4 Evaluation of the Methodology ... 34
4 RESULTS ... 35
4.1 The Network of Actors ... 35
4.2 The Contribution Levels ... 51
4.3 Summary of the Key Findings ... 56
5 CONCLUSION AND DISCUSSION... 58
5.1 Summary of the Study ... 58
5.2 Key Contributions... 60
5.3 Managerial Implications ... 65
5.4 Limitations and Future Research ... 66
REFERENCES ... 67
1 INTRODUCTION
1.1 Networked Commercialization of Innovation
The purpose of this study is to increase our understanding about the commercialization of medical innovation called personalized medicine. Moreover, the purpose is to show how the change towards personalized medicine is construed in the network of actors, what the actors are and how they contribute to the commercialization. The focus of this study is on the network and the commercialization.
My study is located to the Finnish healthcare sector. Healthcare is defined as a wide, expensive and complex field that has impact on economies as well as people’s daily lives as it is universally used service (Berry & Bendapudi 2007). The healthcare industry offers an interesting field of research (ibid. 2007) and new innovations. The industry is fast changing and that is why new innovations have become a crucial aspect of all healthcare organizations.
Even though the innovations are required to develop the field further, the challenge is that the implementation of medical innovation is difficult as the health sector is highly regulated by laws. Typically, the innovations in the healthcare sectors are services, new ways of working or technology. (Länsisalmi et al. 2006.) The personalized medicine is one, totally new type of medical innovation.
The personalized medicine is an emerging innovation in Finland. In the future, it is expected to change the whole Finnish healthcare system, professions and services and it will have impact on our daily lives. The implementation of personalized medicine will give multiple advantages to the Finnish society and economy. It will increase well-being, enhance the disease prevention, lower the healthcare costs and give environment for new innovations (Ministry of Social Affairs and Health 2015, 10). The personalized medicine is an interesting and important field of study as it has remarkable impact on healthcare both nationally and globally. More research is needed to accelerate the implementation and change towards the personalized medicine. The successful implementation of personalized medicine requires many actors´ contributions and that is why it is relevant to research what these actors and their roles are. The practical relevance of my research is that it shows what kinds of actors are
expected to construe change towards the personalized medicine and use of genome data especially in Finland.
Previous research on the commercialization of innovation emphasizes the importance of networks. The networks are vital for the successful commercialization because they support the innovation development and the commercialization for example by offering resources such as finance, assistance for marketing, communication and distribution channels. (Aarikka- Stenroos et al. 2014; Aarikka-Stenroos & Sandberg 2012.) The networks support the commercialization of innovation by advancing the value creation for the end customers and for the innovative company but the networks also help to overcome the liability of newness i.e. the lack of resource of reputation or legitimacy. (Partanen et al. 2014; van Hemert et al.
2011.)
Previous research has taken the view that the commercialization network is an extension of the innovation network (Aarikka-Stenroos & Sandberg 2012). It is said that the commercialization is not just the final stage of the innovation process but it should occur throughout the whole process and that is why the commercialization network comprises from similar actors than the innovation development network (ibid. 2012; Simula 2012, 255). The innovation network includes collaboration between people, ideas and innovative organizations such as universities, research institutes, government, small-and-medium sized enterprises (SMEs) and investors. (Ahrweiler & Keane 2013.) On its part, the commercialization network can include the same actors but the main difference is that the required resources and the roles of the actors change when the focus shifts from innovation development to the commercialization. While innovation network aims to combine different resources to create an actual product or service, the commercialization network aims to commercialize the product or create markets for it. (Gottfridsson 2014; Aarikka-Stenroos & Sandberg 2012.) The contribution of this study is twofold. First, this study contributes to the literature on the commercialization of innovation by extending the contributions levels presented in the previous literature. According to Aarikka-Stenroos et al. (2014) the actors contribute to the commercialization at three levels; creating markets, facilitating and accelerating further adaption as well as performing practical commercialization tasks. This study contributes by extending these three levels to eight context specific levels. Second, this study contributes to the network literature on commercialization and innovations. This study fills the gap in the
previous research and describes the commercialization network, in other words the actors, their roles and activities, in a specific context. The practical relevance of my research is that it shows what kinds of actors are required to structure the change towards personalized medicine and use of genome data in Finland.
As the personalized medicine is an emerging innovation, it does not have a specific form yet.
It can be said that at this point it is a multi-stage process whereby ideas are transformed into new or improved products, service or processes (Baregheh et al. 2009). The aim is to commercialize this new innovation and here the networks are essential. In this research, the conceptual approach is focusing on commercialization networks. The networks in the commercialization process refer to the divergent actors who contribute to the commercialization of innovation by sharing resources and performing different tasks to support the commercialization (Aarikka-Stenroos et al. 2014).
1.2 The Purpose of the Study
The purpose of this research is to increase understanding about how the commercialization of medical innovation takes place in a network of actors. The aim is to present an analysis of the actors and relations involved in the commercialization of innovation. The purpose in depicting the network of commercialization is to increase our understanding about the ways by which an emerging innovation takes shape in the activities of networked actors involved.
The research question that I aim to answer is:
What are the network actors involved and how do they contribute to the commercialization of medical innovation?
There are also three sub-questions:
What are the roles of the actors?
What activities do they perform?
How are they linked to each other and for what purpose?
To answer these research questions, I used the qualitative content analysis method. First, I read the data for my thesis carefully to get a clear image what it is about (Forman &
Damschroder 2008, 47; Bengtsson 2016). Second, I started to search for the actors, their roles
and activities from the data. I formed a Word document by using Microsoft Office to keep the data organized. Third step was to organize the actors under different categories which referred to the activities that the actors performed. In this way, it was also possible to see how the actors were linked to each other and what the purpose of the co-operation was. Finally, I drew a network picture and wrote the results and conclusions.
By answering the research questions, this study seeks to contribute to the literature on the commercialization of innovation and personalized medicine. The study will increase our understanding about the network of the commercialization in a specific industry (Aarikka- Stenroos et al. 2014) and the information can be useful when developing the concept and use of personalized medicine in Finland.
1.3 Key Concepts of the Study
The key concepts of this study are personalized medicine, innovation, commercialization and network. These are the most central concepts as the purpose of the study is to gain deeper understanding about the network involved in the commercialization of an emerging medical innovation called personalized medicine.
Personalized medicine
Personalized medicine is a new, comprehensive line of health research that is expected to change and even revolutionize the healthcare around the world. The concept includes several new aspects to understand, categorize, diagnose, prevent and treat diseases and endorse health. (Collins 2010; Academy of Finland 2014a.) Personalized medicine also helps to identify individual´s lifestyle and environmental factors that can be used to improve nutrition and physical activity for example. (Academy of Finland 2014a.) The health information from the citizens is gathered from multiple sources. It can be gathered through different types of commercial genetic tests, i.e. through genome data which refers to the whole human genetic makeup (Sitra 2013, 4; Ministry of Social Affairs and Health 2015, 3), as well as from the public healthcare system and through data gathered and stored by the individual him/herself (Academy of Finland 2014b). The extensive use of genome data will provide several advantages, for example increased well-being, cost-effective healthcare, knowledge, environment for new innovations as well as totally new opportunities and perspectives for research especially in the social sciences (Liu & Guo 2016; Ministry of Social Affairs and
Health 2015, 10). Some of the healthcare leaders assume that genomics and the personalized medicine will be one of the top innovations in medicine in the next hundred years (Hartung 2017). This makes it an interesting and fascinating area of research also from the business point of view.
The path towards personalized medicine requires multiple changes in the healthcare sector and in the whole society. It requires better devices, IT-based systems and products and especially training of healthcare personnel. Besides that, it requires individuals´ and organizations´ active participation. This means that the citizens, companies and other institutes participate in the development of the concept and most importantly in the implementation of it. This type of innovation cannot be adapted to the Finnish healthcare system without collaboration. The development of personalized medicine induces many questions for example concerning ethical and moral issues, regulation as well as understanding and interpreting the genetic information. This is why more research and discussion are needed. (Hamburg & Collins 2010; Academy of Finland 2014a.)
Innovation
Innovation is a wide concept and it is commonly associated to change. There is not one clear definition to this concept as it can be viewed from multiple perspectives. From the perspective of my research questions, innovation can be defined as “a multi-stage process whereby organizations transform ideas into new or improved products, service or processes, in order to advance, compete and differentiate themselves successfully in their marketplace”.
(Baregheh et al. 2009.) This definition addresses the central aspects of innovation related to my thesis. It shows that the innovation process has several stages and the aim is to gain advantage as well as be competitive in the global market. It also addresses that the innovation can be a product, service or process or even combination of these.
Commercialization and network
Two other key concepts of this study are commercialization and network. There is not a clear definition for the term “commercialization” in the academic literature and it can mean different things depending on the context (Simula 2012, 74–75). In this thesis, the term refers to Aarikka-Stenroos´s et al. (2014) definition; commercialization means innovator company´s ability to increase income from new products, services, concepts or technology.
Commercialization occurs through the whole innovation development process and it includes
multiple activities, for example strategic and tactical planning, marketing, launch and collaborative actions with potential clients and other relevant parties (ibid 2014; Mattila &
Lehtimäki 2016). In other words, it can be said that the commercialization is a process of gaining new ideas, adding knowledge in them, developing and manufacturing saleable goods and selling them in the market (Mitchell & Singh 1996). Launching a new innovation to the market also requires collaboration with other organizations as the commercialization process demands lots of different resources and it is rare that a single company has all the resources (Aarikka-Stenroos & Sandberg 2012). In this research, networks in the commercialization process refer to the divergent actors who contribute to the commercialization of innovation by sharing resources and performing different tasks to support the commercialization (Aarikka- Stenroos et al. 2014). These networks evolve and combine several actors aiming to get benefit from the innovation (Mattila & Lehtimäki 2016). This network and the actors in it also help to develop and expand the innovation as well as to make it visible and efficient.
1.4 Structure of the Thesis
The thesis is structured as follows. Chapter 2 discusses the theoretical background of the study and it is divided into two major parts; commercialization and networking. The chapter 2.1. focuses on the literature of the commercialization process and successful commercialization. This chapter discusses the complexity in commercialization. The chapter 2.2. discusses the network aspects. First, I explain the innovation network as it is the basis of the commercialization network. I address the actors, roles and resources required in the innovation development. Then the discussion move forward to the commercialization network. This sub-chapter is focused on the advantages of networking in the commercialization process. In this chapter, I also present an illustrative example of the network. Finally, the discussion concentrates on the network management issues.
Chapter 3 presents the methodological approach of this study. The chapter shortly discusses the qualitative research approach and more detailed about the empirical data and the analysis method; the qualitative content analysis. Finally, I evaluate the methodological choices.
Chapter 4 is the result section. In this chapter, I present and discuss the results of the qualitative content analysis. The chapter concentrates describing the commercialization network. First, I handle the actors and their tasks separately. Second, I discuss the actors´
contributions to the commercialization and also address the actors in the network picture.
Finally, I summarize the key findings.
Chapter 5 concludes the study. In this chapter, I summarize the study and discuss the key contributions in relation to the earlier studies. I also present the managerial implications, the limitations of the study and proposals for future research.
2 THEORETICALBACKGROUND
In this chapter, I discuss the theoretical background of my thesis. The earlier academic literature on commercialization of emerging innovation is rather narrow but the researchers have adopted multiple perspectives to study the commercialization in general. There are researches conducted from the perspective of technological innovation (e.g. Frattini et al.
2012), product development (e.g. Dale et al. 2004) and from the business model perspective (e.g. Eriksson et al. 2015). As the focus of my research is on the networks, the theoretical background concentrates on the network perspective of the commercialization.
The chapter is divided in two parts namely commercialization and networking. First, I discuss the commercialization process as it is essential to understand the complexity of the process.
The commercialization is stated to be the most critical and challenging phase of the whole innovation process (Chiesa & Frattini 2011) and that is why it is beneficial to review the success factors. The second part of this chapter is focusing on networks. The networks are vital for successful commercialization and because the commercialization network is an expansion of the innovation network, the discussion continues to present the innovation network first. (Aarikka-Stenroos & Sandberg 2012.) Then, I discuss the advantages of networking in the commercialization process and present an illustrative example of the commercialization network to increase understanding from the practical point of view. Then the discussion continues to the network management issues. It is said that the main disadvantage of networks is the coordination problems (Aarikka-Stenroos & Sandberg 2012).
Managing the network takes effort and the organization needs to have capability to handle the network and the relationships (Möller & Halinen 1999). Coordinating the network is essential part of the collaboration and that is why these aspects are also discussed. Finally, I present the theoretical framework of this study.
2.1 Commercialization
Commercialization refers to an innovator company´s ability to increase income from new products, services, concepts or technology. (Aarikka-Stenroos et al. 2014). According to Chiesa and Frattini (2011) the commercialization is known to be the most critical part of the whole innovation process. To get better understanding about how multistage and challenging the commercialization actually is, the process is discussed more detailed next.
2.1.1 Commercialization Process
In a process view of innovation, commercialization is considered as the final stage of the process. The process starts with idea generation and ends in a product launch and it has several stages where choices are made and activities are engaged in. (Datta et al. 2015; Chiesa
& Frattini 2011.) Through their literature review Datta et al. (2015) have identified six steps to understand the multilateral and complex process of commercialization from the perspective of technical innovation (figure 1). It is typically believed that the commercialization process is formed from discovery, development and deployment but there are several phases under these steps. The discovery phase includes the innovation source and type. The source of an invention can be inside or outside the organization. This type of sources can be organizational creativity, R&D or it can also emerge through different types of collaboration and alliances, innovation engines such as universities and government or through clusters and spillovers. It is also important to identify what type the innovation is, in other words is it a process or product, radical or incremental etc. because it affects the chosen commercialization approach and strategy as well as the creation of networks (Partanen et al. 2014; Frattini et al. 2012).
(Datta et al. 2015.)
The next phase is the development which includes decisions on market entry and protection.
The best market entry can be assessed through analyses of different kind. The entry time, first-mover advantage and competence are important aspects to consider. The protection of innovation is also a vital aspect of development. The innovation needs to be protected effectively from the competitors for example through a trademark, patent or copyright. The company can also consider the diffusion instead of protection. This means that the innovation is diffused to the markets without protection and it usually accelerates the development as other companies promote and distribute the innovation. This may be the case when the innovative company does not have enough resources to develop, produce, distribute or market the innovation but it is also a good strategy when there is a competitor in the market who will most likely develop its own and better version of the innovation or when the innovative company wants to ensure the dominant market place for the innovation. In the diffusion, the innovation can be controlled for example through licensing. (ibid. 2015.)
The final phase is the deployment which refers to the selling and distributing the innovation.
This step includes the aspects of designing and manufacturing, the process of further
development and the launch format decisions. The innovative company needs to make a decision about the collaboration, for example whether to manufacture and design the innovation in-house or outsource it. There are also several other collaboration forms such as strategic alliances and licensing. The advantages of collaboration are that it reduces risks and costs, allows resource and competence sharing as well as knowledge transfer. On the other hand, if there are too many companies involved, the collaboration can also lengthen the time from conceptualization to commercialization. The deployment phase also includes the further development process. The successful development process also requires knowledge on customer requirements, making the entry time as short as possible and minimizing the development costs. The company needs to decide the launch form as well which can be for example subsidiary or a joint venture. Finally, the deployment step includes critical decisions on launch time and the price as well as about licensing, marketing plans and distribution channels. (ibid. 2015.)
Figure 1. Steps to commercialize technical innovation (Datta et al. 2015).
As shown, the commercialization is a wide and challenging process which includes several critical decisions. In an actual innovation process, it is difficult to separate the phases from each other as the commercialization process is overlapping and parallel with the innovation
development process (Simula 2012, 250–251). As the commercialization is a critical and demanding phase, next it is beneficial to review the factors that endorse the success of commercialization.
2.1.2 Successful Commercialization
There are multiple barriers in the successful commercialization of innovation; the process is very risky, costly and the organizations usually have poor strategies or no strategies at all.
Also the nature of the markets is uncertain and the degree of customer uncertainty is high especially in high-tech markets. Even though the commercialization is the most critical step in the innovation process it is also the least well-managed which causes troubles as well.
(Frattini et al. 2012.) The complexity of the commercialization can be seen from statistics. It is said that the failure rate of new products is 40-50 % (Chiesa & Frattini 2011). What are the factors that make the commercialization successful then?
In his dissertation, Simula (2012, 236–237) proposes that successful commercialization requires mapping the commercialization process. In other words, the company needs to have a commercialization plan or strategy for managing the commercialization activities. There are multiple aspects that the company needs to take into consideration when mapping the process.
It includes aspects all the way from the name to the packing and from customer testimonials to the launch plan (review Simula 2012, 304–305). Frattini et al. (2012) have identified the most critical dimensions and choices of successful commercialization; these are presented in the table 1. Chiesa and Frattini (2011) suggest that there are strategic and tactical dimensions in the decision making. Strategic choices are taken before the actual launch and those are timing, targeting and positioning and the inter-firm relationship (i.e. partnerships and alliances). The strategic choices are related to the decisions about when is the right time to launch the innovation, who are the customers and what is the position of the innovation in a relation to the competitors´ similar offerings. The strategic choices also include the decision about the partners i.e. what kind of relationships are requires for example to distribute or manufacture the innovation. Tactical choices are linked to marketing mix and they are related to the operational side of the innovation launch. These dimensions are the product configuration, distribution, advertising and promotion (i.e. communication) as well as pricing.
The tactical decisions are related to the set of complementary offerings and what are the channels to deliver the innovation to the customers. The company needs to also decide how to
market the innovation to the customers and what kind of message it wants to give. Most importantly, the company needs to make the decision about the pricing, for example is there some specific pricing tactics that could be used and what could be the price of the whole product configuration. (ibid. 2011.)
Table 1. Dimensions of successful commercialization (Chiesa&Frattini 2011).
According to Simula (2012, 237–243), convincing customers is a vital part of successful commercialization. This can include activities such as pilot projects and free trials. It is also important to collaborate with the customers to have references and testimonials but also to get some profit to continue the innovation process and to forecast changes in the market and future customer needs (Mattila & Lehtimäki 2016). The collaboration also includes the communication with competitors. It is noticed that contact with competitors can increase the success rate as it enables the exploitation of knowledge and allows companies to be at the forefront of new market development (van Hemert et al. 2011). At the organizational level, successful commercialization requires strong and competent manager and team. Simula (2012, 244) proposes that in a large company context, the internal product launch and communication had a positive effect on successful commercialization. This means that all the key personnel are involved in the development and they communicate the information to other employees. In this way, all are on the same page. It is also noticed that concurrent commercialization thinking has a positive impact on success. This means that the
commercialization should be present in all phases, also in the development phase (Simula 2012, 249–250). It can be concluded that both internal and external networking and relationships are essential factors for the successful commercialization of innovation. When discussing the successful commercialization from the process point of view, the collaboration with customers, partners and competitors as well as communication inside the organization is important. Additionally, it is important to notice that not all the commercialization processes are alike and there are several different innovations which all require different kinds of relationships for commercial success.
When examining successful commercialization more closely from the perspective of different innovation types, it can be seen that networking becomes more crucial and that the networks include more actors along with customers, partners and competitors. According to Partanen et al. (2014) innovations can be divided into four types which all require specific kind of network. These types are radical-autonomous innovations, radical-systemic innovations, incremental-autonomous innovations and incremental-systemic innovations. The innovations which are both radical and autonomous refer to the innovations which have revolutionary features but are compatible with current infrastructure (technical, social, political or legal). As these innovations are revolutionary but easy to adapt, the successful commercialization requires a strong relationship with customers who provide revenue, valuable knowledge for R&D as well as the reputation. The successful commercialization of radical-autonomous innovations requires strong ties also with distributors who offer access to the customers and complementary offerings as well as with research institutes who provide credibility and contribute to the R&D. Also the radical-systemic innovations, i.e. the innovations which have revolutionary features but the implementation requires changes in the supportive infrastructure, need a relationship with customers as well as with the agents that find the customers. It is argued that this type of innovations do not require a relationship with distributors or research institutes because radical-systemic innovations needs to be implemented into customer processes and this is why the partners need to be close to the customers to understand the process. (ibid. 2014.)
The third type of innovation is incremental-autonomous innovations referring to the innovations that are improved or developed versions of existing ones and they can be delivered with current infrastructure. As the nature of the incremental-autonomous innovation is not revolutionary and they are easy to adapt, they require strong ties with universities and
research institutes to develop the innovation further and with distributor partners to access to customers. The fourth type of innovation is incremental-systemic innovation i.e. the innovation is a developed version of existing one but the implementation requires changes in the supportive infrastructure. The successful commercialization of this type of innovation requires a relationship with distributors who offer access to customer and complementary services. To get market knowledge and to develop the innovation further, the company also needs a relationship with agents and with universities and research institutes. (ibid. 2014.) Commercial success is a multidimensional concept which includes various aspects and choices. All the aspects mentioned above are important but the final determinants of commercial success are the measurements of customer acceptance and financial performance.
This means that the innovation needs to be accepted among the users to get sales and financial profit at the end. (Frattini et al. 2012; ref. Griffin & Page 1993.) In a conclusion, it can be said that successful commercialization requires strategic plans, strong and competent organizational actors, communication, and concurrent commercialization thinking as well as co-operation and networking. Next, the network aspect is discussed more closely.
2.2 Networking
As the previous chapter shows, networking is one of the key success factors in the commercialization process. Nowadays, the whole innovation process is dependent on communication and interaction with diverse actors outside the organization (van Hemert et.al.
2013). Developing, managing and commercializing innovation includes multiple challenges, requires different resources and competence as well as work division and it is rare that a single company has all these capabilities but the networks and collaboration is needed (Story et al. 2009; Perks & Moxey 2011). Next, the discussion continues to handle two types of networks; innovation network and commercialization network.
2.2.1 Innovation Network
The innovation development process is interaction of several actors with different roles and tasks and this co-operation can be called the innovation network. The innovation network includes collaboration between people, ideas and innovative organizations such as
universities, research institutes, government, small-and-medium sized enterprises (SMEs) and investors. (Ahrweiler & Keane 2013.)
Gottfridsson (2014) has identified seven actor types involving the service innovation development process. First actor type is the prime-movers which refer to the actors who are responsible for starting the development process and make it happen. These prime-movers can be for example managers or other parties enthusiastic about the invention. The second actor type is the management team i.e. strategy creators and deciding actors referring to the group of actors which develop the strategies for the process as well as decide what innovations are developed. In a small company context, there actors are typically the owners or entrepreneurs but in a wider scale the government could also be this actor. The third group is the service performers or other employees and this means the group that actually delivers the service to the users. These actors are important in the development process as they have firsthand knowledge of customer´s needs and expectations. The fourth actor type is the inspirers or supporting actors. As the name reveals, they support the development process directly or indirectly. These actors can be people who help the process by discussing ideas and solutions with managers. This role can be played by consultants for example. The fifth type is the competing actors and it refers to the actors who compete for the same resources (for example for the customers´ purchasing power) but they are beneficial as they can also offer new insight and ideas for the innovative company. Typically, the competitors are these actors. The sixth actor type is the suppliers or partners and it refers to the actors who offer more formal resources that do not exist inside the innovative company e.g. distribution or marketing channels. The final type is the customers or users meaning the end users and buyers of the service. (Gottfridsson 2014.)
These innovative actors contribute to the innovation development by offering resources. In the development phase, the resources are needed to put a new invention into a physical or psychological form (Aarikka-Stenroos & Sandberg 2012). Resources required can be tangible or intangible. Tangible resources are for example equipments or technology and intangible for example things such as employee experience or reputation. It is somewhat difficult to identify the resources because they are often used together with other resources. (Perks & Moxey 2011.) However, previous studies have identified several types of resources; financial, physical, legal, human, organizational, informational and relational assets. For example, in the service innovation process especially physical and informational resources are required.
Physical resources mean different machines, devices or software. Informational resources can be general (e.g. industry information), confidential (e.g. new ideas and future plans) or tacit information (e.g. know-how and expertise). (Rusanen et al. 2014.) Another advantage of the innovation network is that it allows task-sharing. This refers to a situation where tasks are shared to the members of the network including the organization and other members outside the organization. This type of task-sharing can be for example outsourcing the manufacturing or designing of the product. The aim of the activity is to be more effective and efficient.
(Perks & Moxey 2011; ref. Van Hippel 1990.)
The actors inside the innovation network have different roles. According to Story et al. (2011) the innovation development roles can be divided into two types; task-oriented and network- oriented roles. Task-oriented roles are articulating, funding, developing, prototyping and producing the good. These tasks are highly related to product innovation. Articulating means the process of developing an idea into a full concept. Funding refers to giving funds for example for innovation further development or research. Developing refers to the role of making the concept into an actual product and prototyping means the production of early models to test the product. Producing means the production of an actual product or service.
(ibid. 2011.) According to Heikkinen et al. (2007), the actors who perform task-oriented roles can be also called producer, planner, an entrant and auxiliary. A producer contributes to the innovation development process by concretely working for its execution. A planner contributes by giving resources but purposefully trying to affect on the outcome of the process. This type of planner could be for example the manufacturer. Entrants are the actors who intervene the process, for example media. An auxiliary is an actor who is quite unseen and others may not even know that the actor has a role in the process but usually this role evolve over time and can become apparent. This type of actor could be for example research institute. (Heikkinen et al. 2007.)
Network-oriented roles are connecting, integrating and endorsing. The boundaries of the roles are not very clear as one actor can perform several roles. Connecting refers to connecting diverse actors with the innovation process to ensure the development of innovation.
Integrating includes management responsibilities while endorsing refers to ability to create markets. (ibid. 2011.) Heikkinen et al. (2007) divide the actors at network level into a facilitator, compromiser, aspirant and accessory provider. A facilitator provides possibilities for the development actions for example by offering venues but it stays outside the process.
Research organizations can be this type of facilitator. A compromiser is the actor who balances the actions and relationships in the network, for example municipality. An aspirant is the actor who wants to be part of the process but other members do not perceive their contribution relevant and they stay as outsiders. The accessory provider is an actor who wants to promote its own products, services or expertise in the development process. (Heikkinen et al. 2007.)
The actors, resources and roles are case dependent. Every innovation development process requires different actors and resources and also the roles of the actors can vary during the process (Heikkinen et al. 2007). The task-oriented and network-oriented roles are important in the innovation development but when moving from research and development (R&D) to commercialization, the network is evolving and usually expanding. While R&D network aims to combine different resources such as technology and knowledge to create the actual product or service, the commercialization network aims to commercialize the product or create markets for it. (Gottfridsson 2014; Aarikka-Stenroos & Sandberg 2012). Next, we take a closer look at the commercialization network and advantages of it.
2.2.2 Commercialization Network
The commercialization network can be considered the extension of the innovation network. In the commercialization network, the actors are somewhat the same as in the innovation network but the resource requirements change. (Aarikka-Stenroos & Sandberg 2012.) What advantaged the network of actors can offer to the commercialization of innovation?
According to Aarikka-Stenroos & Sandberg (2012) commercialization requires multiple resources likewise the innovation development. The resources required are such as technical competence, experience of the industry, customer and market knowledge, the ability to identify the optimal functionality of the product, communication, distribution and close relationships with key actors. The innovative organization needs these resources and networks to perform the main commercialization activities; create trust, establish credibility, build awareness, educate customers, organize distribution and trial opportunities and provide complementary offerings. (ibid. 2012.) Moreover, the reason why resource sharing is a vital part of the commercialization is that resources allow the organization efficiently and
effectively to produce valuable offerings for markets (Rusanen et al. 2014; ref. Hunt and Morgan 1995, 6).
Through networks, organizations also create value to themselves as well as to the other actors in the network e.g. for the customers. There are several outcomes that create value. These can be for example cost and time savings, better information processing across the network or better decision making. (Pinho et al. 2014.) One of the key advantages is that through relationships companies can achieve learning about the customers, markets or the processes (Möller & Halinen 1999). Organizations can also achieve negotiation power, growth and profit by collaborating with other companies and organizations. Through networks it is easier for companies to access to new markets and improve their reputation as well as gain new ideas. (Aarikka-Stenroos & Sandberg 2012.) Organizations can also develop and achieve sustainable competitive advantage through networks (Hammerschmidt et al. 2012).
As shown above, the actors in the network offer multiple resources and other assets to enhance the commercialization of innovation but who are these actors and what they do in practice? To understand the formation of the commercialization network better, an illustrative example is presented next. The example shows the actors, their roles and contribution based on the systematic literature review by Aarikka-Stenroos et al. (2014).
An Illustrative Example
According to Aarikka-Stenroos et al. (2014) the commercialization network is comprised by individuals (e.g. users and managers), groups (e.g. peer communities and sub networks) and organizations (e.g. companies and universities). The authors have identified different actors and their individual contributions in the commercialization process which are presented in the figure 2. In this example, there are ten actors involved which are universities, suppliers and manufacturers, policy makers, distributors, users, media, complementaries, public organizations, expert organizations and investors. Each of these actors has their own tasks and roles. The task of the expert organizations is to increase learning about commercialization, the universities add scientific knowledge and trust while media build awareness. The users make the use visible and the distributors make the innovation available for the users. The suppliers increase the use and the complementaries offer complement offering as well as knowledge.
The task of the investors is to offer funding. The policy makers set the standards and the public organizations provide information and prompt collaboration.
Figure 2. The network actors and their main contributions to commercialization (Aarikka- Stenroos et al. 2014).
In a wider scale, there are three main contribution levels in which these actors support the commercialization. The suppliers, manufacturers, media, investors, complementaries, policy makers and public organizations contribute to the commercialization through creating markets for innovation and supporting the birth of new businesses. Universities, users, media, distributors and suppliers as well as complementaries on the other hand contribute by facilitating and accelerating further adaption. Distributors, users, media, complementaries, investors and expert organizations contribute by performing practical commercialization tasks, e.g. by offering funding, marketing and delivery channels. (ibid. 2014.) Even though this example illustrates the formation of the commercialization network, the final form is always dependent on the context as well as the innovation to be commercialized.
2.2.3 Managing the Network
As shown above, networking is advantageous in many cases but the main problem is the coordination of the network (Aarikka-Stenroos & Sandberg 2012). Building and managing a network is not always easy. It requires the investments of management time, financial resources as well as time to develop the relationship (Möller & Halinen 1999). In their research, Aarikka-Stenroos & Sandberg (2012) noticed that it is necessary to keep in mind that the partners need motivation to do collaboration and share their resources and that is why it is important that they benefit from the resource sharing. Also trust between business partners is vital and that is why the boundaries and expectations need to be in line so that trust can occur. The authors noticed that the challenges raised when the partners had different goals, they were uncertain about the resource trade-offs and there was lack of trust and the fear that the partnership will turn in to competition. Also the differences in strategic relevance and disagreements about the organizing systems were identified as challenges. (ibid. 2012.) What kind of capabilities and tools there are to overcome these challenges and manage the network?
Möller and Halinen (1999) distinguish four domains of network management capability. It is said that the company needs to have skills to create the valid views of networks as well as how those networks might evolve in the future. This domain is called network visioning capability and it is essential to realize the value opportunities in the network. Network visioning capability is highly related to the organizational learning and it refers to the company´s ability to generate and evaluate the information about the network. The second domain is the net management capability referring to the company´s ability to mobilize and combine other actors´ resources and activities. This capability is vital for example when creating and managing the supplier, customer and R&D nets. The third domain is the portfolio management capability which refers to the company´s skills to manage customer and supplier portfolios for example. This means that the company needs to have competence to create and use analytical databases, evaluate the partners as wells as to develop organizational solutions to handle the relationships. The portfolio management capability is important as it affects the profitability and optimizing the resources. The fourth domain is the relationship management capability referring to the management of an individual relationship. This capability is linked to the company´s ability to assess the value of a single relationship i.e. how to create, manage and conclude the relationship. (ibid. 1999.)
According to Ritten and Gemünde (2003), there are different practical tasks to manage a single relationship and to manage the whole network. Relationship-specific tasks are initiation, exchange and coordination. Initiation refers to the beginning of the relationship. A potential business partner can be found by visiting trade shows, monitoring journals, company visits or through existing partners. Exchange means the trade-offs that the companies share, for example products, services, money, information, personnel or know-how. Coordination refers to activity synchronizing in a way that the activities are in tune. This includes the establishment of formal roles and procedures as well as mechanisms to solve conflicts. (Ritten
& Gemünde 2003.)
When managing the whole network, there are four different practical tasks. These are planning, organizing, staffing and controlling. Planning means that the company needs to analyze its internal resource situation in the network as well as understand the contributions of other parties. This type of planning includes internal analysis (e.g. resources, strengths and weaknesses), network analysis (e.g. the quality of partners and strategic fit within the network) and environments analysis (e.g. competitors and market). Organizing means that each member of the network has its own assigned task and it invests in the process to achieve the goals. It is important also to allocate resources, clarify communication procedures between people as well as individual partner´s needs. Staffing refers to the allocation of personnel according to the need. Managers need to coordinate and guide the employees. The final task is controlling. This means that the relationships are controlled both internally and externally (e.g. the quality and quantity of communication activities or performance of the network). Through the feedback and monitoring, controlling is also the first task of network management cycle. (ibid. 2003.)
In sum, it can be said that the networks are very beneficial in the commercialization process as the actors inside the network offer resources, learning opportunities and many other advantages. As the example above shows, the network includes several actors who have their own tasks through which they contribute to the commercialization of innovation. This collaboration is essential but the key issue is the management of these relationships and the whole network. Creating and managing business relationships requires time, competence and practical tools. That is why it is important that the company is aware of these issues. Next, the theoretical framework of this study is presented.
2.3 Theoretical Framework in This Study
The theoretical framework in this study is illustrated in the figure 3. As the aim of the research is to explore how the network of actors contributes to the commercialization of medical innovation, the theoretical approach is focused on network perspective. The theoretical approach in this study is leaning on the view that the commercialization network is forming based on the innovation network and is an expansion of it. The actors in this network are interrelated and all have their own changing roles and resources which they share to contribute to the commercialization. This study also emphasizes the theoretical view that the commercialization process is not a last phase of the innovation process but it should occur in every step, starting from the development of innovation.
Figure 3. Theoretical framework.
As the theory shows, the commercialization is wide and challenging process and for commercial success concurrent commercialization thinking and networks is vital and it should
occur through the whole innovation process. (Simula 2012.) The innovation development as well as the commercialization requires lots of resources, strategic decision making and tactical choices. It is rare that a single company has all the capabilities and that is why networks are needed in all phases of the innovation process. (Aarikka-Stenroos & Sandberg 2012; Frattini et al. 2012; Simula 2012.)
The innovation process begins with the idea generation originated inside or outside of the innovative company (Gottfridsson 2014). When the idea or invention is further developed, the process will include various actors who have different roles and who share different assets as well as perform distinct tasks to contribute to the innovation development (Gottfridsson 2014;
Story et al. 2011; Heikkinen et al. 2007). This network of actors can be called the innovation network (Ahrweiler & Keane 2013). When the innovation development tasks are changing to the commercialization activities, the roles and requirements of the resources change. Also the formation of the network change. The commercialization network is usually an expansion of the innovation networks but it is also possible that some of the actors do not participate in the commercialization activities. (Aarikka-Stenroos & Sandberg 2012.)
This study contributes to the existing literature by showing what kind of actors are involved in the commercialization of medical innovation called personalized medicine in the Finnish context. The study presents individual actors, their resources and the activities they perform to contribute to the commercialization. This study contributes to the existing literature also by showing how the network of actors is constructed, how the actors are interrelated and what the purpose of the collaboration is in the specific context.
3 METHODOLOGY
In this chapter, I discuss the methodological choices of my thesis. I explain how I conducted the empirical research including information about why the qualitative research approach was chosen, how the data was formed and how the data was analyzed by using the qualitative content analysis method. Finally, I evaluate the trustworthiness of the method and results in this study.
3.1 Qualitative Research Approach
I chose the qualitative research approach for my thesis. As the purpose of my thesis is to understand how the commercialization of medical innovation takes place in a network of actors and how the field of actors is constructed in the medical context, the qualitative research approach was a good choice as it aims to understand human conditions (Bengtsson 2016) and various phenomenon in different and defined contexts (Eriksson & Kovalainen 2015, 119). I chose the qualitative research approach because it gives an opportunity to research the phenomenon in its context but it also aims to understand why things work in a certain way in real-life business environment. Qualitative research is interested in understanding socially construed reality which is produced and interpreted through cultural meanings and that is why the qualitative research approach includes interpretation and understanding rather than explaining or testing. (Eriksson & Kovalainen 2008, 2–4.) These elements also supported my choice.
3.2 Data Collection
The analysis method for my thesis was the qualitative content analysis. Qualitative content analysis can be done with any written or audiovisual material (Eriksson & Kovalainen 2015, 120). The range of appropriate data is wide; the data can be for example newspaper articles, emails, pictures, movies, websites, contracts, diaries and minutes of meetings or other written documents (Schreier 2012, 3; Eriksson & Kovalainen 2015, 122). The data can already exist but the researcher can also collect the data for example through interviews, focus groups or other discussions and then transcript those into written form (Bengtsson 2016; Schreier 2012, 3). In my thesis, the data was assigned by my supervisor Professor Hanna Lehtimäki and it was already existing and available in Internet.
As table 2. presents, the data for my thesis was formed from the strategy text document called
“Innovating together. Health Sector Growth Strategy for Research and Innovation Activities.
Roadmap for 2016–2018”. The document was 30 pages long and it was published by Ministry of Employment and the Economy in June 2016. The growth strategy was prepared in collaboration with Ministry of Employment and the Economy, Ministry of Social Affairs and Health, Ministry of Education and Culture, funders such as Tekes and Academy of Finland as well as with health sector actors. The purpose is to improve citizens’ health and well-being and promote Finland as a forerunner in health sector research and innovation, investment and new business internationally. The roadmap aims also to give detailed focus points and steps to accelerate the implementation of the strategy. (Ministry of Employment and the Economy 2016.)
Table 2. Empirical data.
Name Innovating together. Health Sector Growth Strategy for Research and Innovation Activities. Roadmap for 2016–2018.
Publisher Ministry of Employment and the Economy Publish date 14.6.2016
Number of pages 30
Method of data collection Free access via Internet
Access date 17.11 2016
The permanent address http://urn.fi/URN:ISBN:978-952-327-143-2
There were several documents available that I could have used in my thesis but this strategy document was chosen especially because it was clear, wide enough and it was easy to understand and follow. It addressed the actors and their activities explicitly but it also leaved enough room for my own analysis and interpretation. As the document is a grow strategy for the heath research and innovation, it describes the phenomenon comprehensively from the perspective of Finnish society and healthcare but it also allowed conducting research from the business viewpoint. Most importantly, the document was chosen because it was suitable and adequate to answer my research questions.
3.3 Data Analysis
The empirical analysis was conducted by using the qualitative content analysis method. The word “content analysis” is often associated to the quantitative content analysis and that is why
it is first useful to distinguish these two approaches from each other. It is known that categorization and coding are key features of the content analysis (Eriksson & Kovalainen 2015). Even though both of the approaches are based on logical coding of the content, they have nothing else in common. The main difference between qualitative and quantitative content analysis is the coding procedures and the use of the count. Qualitative content analysis usually uses the data itself to form the codes when quantitative content analysis uses search algorithms that form the codes automatically. This means that qualitative content analysis includes broader and more careful reading of the text. The other difference is the use of the count. This means that quantitative content analysis uses the counts of the codes to summarize the data and present the results in a numeric form. In qualitative content analysis this type of counting leads to interpretation and deeper understanding about the patterns and context i.e. it aims to answer the questions why and how instead of what and how many.
(Morgan 1995.) In other words, quantitative content analysis is interested in the frequencies and counts of words in texts and it uses statistical techniques. Instead, qualitative content analysis is interested in the meanings of the phenomenon not frequencies and it uses qualitative research logic; the cyclical research process where the data analysis and gathering are interacting with each other. (Seitamaa-Hakkarainen 2014.)
I chose to use qualitative content analysis in my thesis because it enables to understand the social reality in a subjective but scientific way. By using qualitative content analysis, it was possible to explore meanings, themes and patterns in the text. (Zhang & Wildemuth 2005.) The reason why qualitative content analysis was an appropriate analysis method for my thesis was that I aimed to describe the phenomenon in a summative and generalized form (Tuomi &
Sarajärvi 2009, 103). In other words, I aimed to give comprehensive, factual and rich description about the phenomenon, precisely offer the “big picture”, and develop detailed and nuanced interpretations about it (Eriksson & Kovalainen 2015, 120; Zhang & Wildemuth 2005).
There are three main approaches in qualitative content analysis, namely deductive, abductive and inductive approach (Tuomi & Sarajärvi 2009, 95–97). The deductive approach means that the research, including categories and coding, are theory driven, meaning that previous studies or theories are used to conduct the research (Zhang & Wildemuth 2005). The aim of the deductive approach is to strengthen or extend the theory or theoretical framework and to help define research questions (Hsieh & Shannon 2005). The deductive approach is also used
