Climbing the value chain

Abstract

PurposeIncreasing productivity gaps and declining manufacturing bases create complex challenges for mature small to medium enterprises (SMEs). One solution advocated by academia is to reposition along the value chain – moving to a position of greater value. The purpose of this paper is to examine strategies used by firms to reposition through creating a new product development (NPD) capability. In doing so, the paper seeks to resolve gaps in extant literature on NPD in mature SMEs.Design/methodology/approachAn exploratory approach is taken, analysing in‐depth case studies of three mature UK manufacturing SMEs.FindingsFour strategic approaches to enable the creation of a NPD capability (strategic alliances, licensing key technologies and ideas, outsourcing and deploying an internal development process) are found. Each may facilitate an SME to reposition but the findings highlight that these strategies are not mutually exclusive as different combinations were employed to accelerate and leverage change.Research limitations/implicationsLimited number of case studies constrains wider understanding despite providing richness. The findings highlight four different strategies for repositioning but there may be other routes.Practical implicationsDeeper understanding of how to climb the value chain, providing valuable lessons for mature SMEs facing a need to reposition to generate new growth opportunities.Originality/valueThe paper provides an understanding of how mature manufacturers utilise different strategies to overcome resource constraints and generate a NPD capability to assist in repositioning. This resolves weaknesses in current literature that so far have not adequately examined the process of shaping a NPD capability and the strategies used to reposition.

Making sense of high value manufacturing: relating policy and theory

“…However, others play down this form of rivalry, recognizing that in most situations competitive advantage is not easily secured with firm-specific core capabilities, and suggest that firms should cooperate to promote the supply network and the value created within it above their own attempts to capture a larger share of the value that exists within the network (Kim and Mauborgne 1997;Lamming 2000;Lamming et al 2000). This means that firm-level strategy is still about positioning a firm, but the emphasis has changed from positioning within an industry to positioning within a supply network (Noke and Hughes 2010;Peppard and Rylander 2006). So firms are increasingly attempting to upgrade their capability in order to appropriate more value from the network (Edwards, Battisti, and Neely 2004;Noke and Hughes 2010).…”

“…This means that firm-level strategy is still about positioning a firm, but the emphasis has changed from positioning within an industry to positioning within a supply network (Noke and Hughes 2010;Peppard and Rylander 2006). So firms are increasingly attempting to upgrade their capability in order to appropriate more value from the network (Edwards, Battisti, and Neely 2004;Noke and Hughes 2010).…”

Becoming a Sustainable Organization: Focusing on Process, Administrative Innovation and Human Resource Practices

“…In the field of operations and supply chain management, as business organizations continue to make efforts to develop new products, with a low success rate, most of the product development literature has focused on the overall process of product development or key success factors affecting product outcomes (e.g., [12,[21][22][23][24][25][26][27][28]). The suggestion that project-specific factors affect the outcomes of new product development activities has been widely analyzed [10,11,29,30]. Also, a firm's performance in terms of new product development is believed to be positively related to third-party suppliers [31][32][33][34], or collaboration with customers [35][36][37][38][39].…”

“…However, it is easier for managers to understand the importance of technological innovation on product development, as technology capabilities have been suggested as a core competency of organizations. That is one of the reasons why prior literature also has been mostly focusing on technological innovation [10,11]. To attempt organizational innovation, organizations should expect tangible results, but merely having a goal of developing a new product may not be sufficient enough to convince.…”

“…Technology drives innovation, in general, and the performance of innovation is often interpreted as the performance of new product development. In the academic field, technology is also recognized as an important factor in the development of new products because it enables the creation of new products [10,11]. While it is clear that technical ability is important in new product development, not all companies with such advanced technology develop new products successfully.…”