Abstract:
It is widely recognized that Radical innovation drives growth in Small and Medium-sized firms
(SMEs). However, relatively few SMEs develop highly innovative new products and services.
An underlying cause of this could be SMEs’ failure to identify customers’ latent —
unarticulated — needs. Such Deep Customer Insight (DCI) is a prerequisite to radical
innovation and should emerge during the innovation process. DCI requires firms to acquire and
absorb new knowledge from customers, something that is known to be challenging for many
SMEs.
The relevant theoretical perspectives underlying DCI are found in the Market-Based
Learning, Customer Involvement, Innovation Management, Design and Entrepreneurial
Marketing literatures. However, the extant knowledge was found to be fragmented and
incomplete. For example, it is unclear whether formal learning processes and market research
methods are applicable to SMEs and the roles of managers and employees in DCI have not
been clarified. In addition, extant research has not delineated a clear relationship between the
type of insights generated (either current needs or latent needs) and the processes and resources
by which they were created. As a consequence, it is unclear how SMEs, with their limited
resources, can generate DCI effectively.
Using systematic case research, with multiple sources of data, radical innovation
projects at six companies were studied. This investigated: 1) SMEs’ DCI practices; 2) The level
of insights generated; 3) Managers’ perceptions of the process. The results show that some
SMEs generate high-quality insights, while others do not; demonstrating that a company’s
research skills are a key prerequisite for successful customer interactions and tap customer
knowledge. This shows that managers need to prioritize ‘skills’ when allocating resources to
radical innovation projects and contributes to Entrepreneurial Marketing theory. The study also
provides a precise understanding of two new concepts, the quality of insights and customer
involvement, opening up interesting avenues for future research on SMEs.
