value insights

Knowledge Leveraging and Product Innovation- Valutrics

In contexts where product innovation is a crucial competitive weapon, dynamics
related to knowledge are of utmost importance. New knowledge may turn into new
products, making possible a strategy of permanent innovation. At the same time,
knowledge generation is a precondition for knowledge accumulation, a source of sus-
tainable competitive advantage. In the motorcycle industry, advances at the product
level have ranged from significant innovations to stylistic features introduced at little
cost by combining modified components from old models. Ducati’s Desmodromic
valve management system and L-Twin engine, or BMW’s anti-lock braking system
are examples of the former type of innovation. Improvements such as paint, trim,
chrome, and exhaust pipe shaping have also been necessary to appeal to modern
bikers. Nevertheless, deference to the company’s styling tradition often causes inno-
vation to occur incrementally. Starting in the mid-1970s, the most important trend in
the industry has been the introduction of electronic components. More recently,
companies introduced composites, such as carbonium, titanium, and magnesium to
make their bikes lighter and more reliable.

Technological improvements in motorcycles have stemmed from different sources.
Over the years manufacturers have concentrated on optimizing engine performance,
reducing noise, decreasing motorcycle weight, and improving aerodynamics to lower
fuel consumption and toxic emissions. Moreover, they have further promoted R&D
and marketing collaboration. For example, a large number of technical improvements
or innovations have come from market surveys or customer feedback. Yet, manufactur-
ers have also pushed suppliers to improve quality and technology on such components
as anti-dive systems in the air-assisted forks, mono-shock rear suspensions, and front
and rear disc brakes. Since the early 1980s, some companies such as Honda, Kawasaki,
Yamaha, and Ducati have also used racing competitions to develop and test new mate-
rials and mechanics, where many have been transferred into mass production.

Inter-firm networks in the motorcycle industry demonstrated their usefulness in
terms of fast learning and flexibility; they permitted a more focused development of
internal expertise while maintaining collaboration with external sources of know-
ledge. As a consequence, the network approach has emerged as the most supportive
to the lead manufacturers’ strategy of rapid and reliable product innovation. Similar to
the biotechnology industry , where learning mainly occurs through networks, in the motorcycle
industry firms are willing to pursue a strategy of networking to benefit from unexpected
discoveries stemming from tacit knowledge and technical interdependencies. To highlight the
importance of suppliers as knowledge generators in the motorcycle industry, we compared
two inter-firm networks, comprised each of a lead manufacturer of scooters and ten
component suppliers. The two networks have a different performance measured by
the number of new model of scooters. To capture the potential of suppliers as knowledge
generators,  three parameters are of interet: patenting, incidence of employees related
to knowledge-based activities, and experience as dominant designers.
In the motorcycle industry, both manufacturers and suppliers are active in patent-
ing. The latter are providing an extension of the lead manufacturer’s design capabili-
ties. Preliminary data  highlighted the alignment of the innovative potential of the
different partners in the network. For example, the most prominent supplier of frames
to the industry holds 6 patents; the leaders in forks and brakes registered 39 and 34
patents respectively. The oldest companies supplying carburetors and engines recorded
45 and 38 respectively. Sometimes, the supplier patenting activity is more pronounced
than the one observed at the lead manufacturer side.

A second measure of the potential for knowledge generation is the “knowledge
worker index,” or a ratio of the number of employees in knowledge activities to the
number of total employees. Core activities such as R&D and engineering are increas-
ingly organized around a network of external specialized suppliers. For example, lead
manufacturers and their partners are employing computer aided design (CAD) and
computer numerical control (CNC) technologies. Furthermore styling, product and
process feasibility, surfacing, prototyping, structural analysis, and prototype engineer-
ing are now shared in the network.
Knowledge generation potential is not only related to patenting and knowledge
workers but also to a history of developing dominant designs. The motorcycle indus-
try has witnessed quite interesting dynamics; data from the scooter segment reveal
that both lead manufacturers and component suppliers are responsible for significant
innovations in the industry. In particular, such dominant designs as
wheels, suspensions, engine lubrication, and innovative ignition systems are examples
of component supplier contributions. Indeed, dominant designs can be found in the
network as a whole. However, it was not always this way. During the industry’s
earlier history, lead manufacturers emerged as the developers of dominant designs.
Pioneering firms introduced products developed inhouse.
A growing market began to take shape around that product; competitors
either expanded the market further, or developed their own product version. Over
time, lead manufacturers started to outsource the production of many of the domi-
nant designs to specialized suppliers. These specialized suppliers through experiment-
ing then created new dominant design components. The involvement of external
suppliers in the innovative process has been critical. Thanks to their ability to improve
existing components, no manufacturing firm has had a lock on the market. In sum,
the ecology of competition has changed: from many firms and many unique designs,
to fewer competitors with similar component designs. As suppliers generated new
knowledge they became involved at different stages of product development: some-
times in planning but more often in implementation and execution.

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