Innovation and Creativity in SMEs [1st edition] 9781786303172

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Innovation and Creativity in SMEs

Smart Innovation Set coordinated by Dimitri Uzunidis

Volume 21

Innovation and Creativity in SMEs Challenges, Evolutions and Prospects

Claudine Gay Bérangère L. Szostak

First published 2019 in Great Britain and the United States by ISTE Ltd and John Wiley & Sons, Inc.

Apart from any fair dealing for the purposes of research or private study, or criticism or review, as permitted under the Copyright, Designs and Patents Act 1988, this publication may only be reproduced, stored or transmitted, in any form or by any means, with the prior permission in writing of the publishers, or in the case of reprographic reproduction in accordance with the terms and licenses issued by the CLA. Enquiries concerning reproduction outside these terms should be sent to the publishers at the undermentioned address: ISTE Ltd 27-37 St George’s Road London SW19 4EU UK

John Wiley & Sons, Inc. 111 River Street Hoboken, NJ 07030 USA

www.iste.co.uk

www.wiley.com

© ISTE Ltd 2019 The rights of Claudine Gay and Bérangère L. Szostak to be identified as the authors of this work have been asserted by them in accordance with the Copyright, Designs and Patents Act 1988. Library of Congress Control Number: 2019938869 British Library Cataloguing-in-Publication Data A CIP record for this book is available from the British Library ISBN 978-1-78630-317-2

Contents

Foreword by Wim Vanhaverbeke . . . . . . . . . . . . . . . . . . . . . . . .

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Foreword by Gaëtan de Sainte Marie . . . . . . . . . . . . . . . . . . . . . .

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Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Chapter 1. External Environment of an SME: From Determinism to Strategic Innovation . . . . . . . . . . . . . . . . . 1.1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2. The classic approach of the firm’s environment: a deterministic relationship (also) affecting the SME . . . . . . . . 1.2.1. Adapting to the environment . . . . . . . . . . . . . . . . 1.2.2. Giving meaning to environmental scanning . . . . . . . 1.3. From strategic intent to RBV: what level of emancipation is there from environmental constraint for SMEs? . . . . . . . . 1.3.1. Conceptual framework . . . . . . . . . . . . . . . . . . . . 1.3.2. The emancipation of SMEs from the environment . . . 1.4. The SME in a hypercompetitive environment: from emancipation to environmental transformation. What role is there for strategic innovation? . . . . . . . . . . . . . 1.4.1. A conceptual evolution to think about in the transformation of the environment. . . . . . . . . . . . . . . . . 1.4.2. Methods for developing strategic innovation. . . . . . . 1.4.3. Strategic innovation: what about SMEs? . . . . . . . . . 1.5. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.6. Appendix: from the French province of Drôme to London, becoming an entrepreneur by using cultural resources . . . . . .

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Chapter 2. Stimulating the Innovative Capabilities of SMEs in an Ever-Changing World . . . . . . . . . . . . . . . . . . . . . . 2.1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2. An understanding of current mutations . . . . . . . . . . . . . . . . 2.2.1. Understanding the emergence of the economy of platform . . 2.2.2. Meeting of the platform economy and social aspirations: which collaborative economy? . . . . . . . . . . . . . . . . . . . . . . . 2.3. Evolving in a changing world: how can we boost the innovative capacities of SMEs? . . . . . . . . . . . . . . . 2.3.1. The barriers and drivers of SME innovation . . . . . . . . . . . 2.3.2. Boosting the innovation capacity of SMEs in times of change 2.4. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5. Appendices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5.1. Digital transformation and servitization: disruptive innovations for SMEs? . . . . . . . . . . . . . . . . . . . . . . 2.5.2. New approaches needed for the digital revolution and innovation . . . . . . . . . . . . . . . . . . . . .

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Chapter 3. Innovation and Creative Slack in SMEs . . . . . . . . . . . .

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3.1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2. An SME’s internal components as a source of new ideas . . . . 3.2.1. Leadership and creative slack . . . . . . . . . . . . . . . . . . 3.2.2. Employees and creative slack . . . . . . . . . . . . . . . . . . 3.3. The SME environment as a source of new ideas . . . . . . . . . 3.3.1. The territory: a cognitive space for the emergence of ideas 3.3.2. Inter-organizational relationships in SMEs: a source of new ideas . . . . . . . . . . . . . . . . . . . . 3.4. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5. Appendices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5.1. Family businesses and innovation: the same DNA or expression of a paradox? . . . . . . . . . . . . . 3.5.2. The territory of French Polynesia: a space of constraints, opportunities and resources for small businesses .

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Chapter 4. Innovation and Social Construction of a New Idea in SMEs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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4.1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2. The social construction of a new idea in SMEs through rhetoric 4.2.1. The legitimacy of the idea promoter as an SME . . . . . . . . 4.2.2. Discourses to convince people of the usefulness of the idea . 4.3. “Making” the social construction of a new idea in SMEs . . . . .

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Contents

4.3.1. The exploitation of design thinking in SMEs . . . . . . . . . . . . 4.3.2. The role of intellectual property in SMEs . . . . . . . . . . . . . . 4.4. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.5. Appendices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.5.1. Securitization for SMEs: an innovative and alternative financing instrument . . . . . . . . . . . . . . . . . . . . . 4.5.2. Five components favorable to the integration of design in SMEs.

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Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Foreword by Wim Vanhaverbeke Developing the Innovation Potential of SMEs through Collaborations Involving Proximity and Trust

Innovations are generally considered to be technological innovations, which have their roots in research in universities and research laboratories. They find their way into the market through large companies or start-ups financed by angel investors and venture capitalists. Most publications on innovation management provide this simplified picture and, as a result, small- and medium-sized enterprises (SMEs), which represent the majority of European firms, are rarely mentioned as a major source of innovation. This book by Claudine Gay, professor at the Université Lumière Lyon 2, and Bérangère L. Szostak, a university professor at the Université de Lorraine, takes the reader on an interesting journey to explain why SMEs can excel in innovation and surprise customers, competitors and value chain partners. Academics and policy makers have paid little attention to the innovative potential of SMEs. It is only recently that SMEs have been recognized for their high innovation potential and the European Commission is currently implementing specific innovation policies for SMEs. There are several reasons why SMEs have not been in the spotlight for very long: for example, most SMEs work in B2B markets, which are usually hidden from most of us. However, SMEs do not only focus on product innovations: they also gain a competitive advantage by intelligently applying process innovations, organizational innovations, product commercialization innovations and

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strategic and business model innovations. This book provides an interesting overview of how SMEs innovate, challenging the traditional and narrow vision of innovation and innovation management that has been developed based on observations from universities and large companies. One of the most challenging aspects of this book is that Professors Gay and Szostak integrate different perspectives and methodological approaches to examine the innovative potential of SMEs. They focus on the role of the entrepreneur, organizational culture and business model innovation in understanding this potential. Second, they focus on employee selfmanagement as a source of innovation and the role of design thinking in managing creativity in small businesses. Last but not least, the role of open innovation for SMEs is highlighted in Chapter 3, which summarizes an interesting and refreshing approach to unlocking the innovation potential of SMEs. I published two books on open innovation in SMEs in 2017 and 2018 respectively. This book by Professors Gay and Szostak builds on my previous reflections and integrates the search for external knowledge by the management of innovative SMEs. What are the typical advantages and challenges for innovative SMEs? First of all, the good news for small businesses is that because of their small size, they have the ability to be faster and more adaptable than large companies. Experimentation is the key to innovation, and collaboration with partners helps companies with limited resources to carry out the discovery process on a larger scale. By tapping into open innovation networks, SMEs can change their business models without having the necessary technology in-house. However, while open innovation networks have the potential to make SMEs more profitable, they only work effectively when the value created jointly is significantly higher than the value produced by the companies when they work on their own. And the true value of open innovation lies in the ongoing experimentation process, which produces new and unexpected opportunities for partners. SME managers must therefore develop and maintain such networks of innovation partners in order to improve their own business success. In addition, personal connections and trust are essential for open innovation partnerships between SMEs, and the entrepreneur who launched the network generally leads the network. The advantage highlighted here is

Foreword by Wim Vanhaverbeke

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that an SME can activate this network and therefore innovate faster than anyone else in the industry because it knows the capabilities of each partner and can activate these external skills, which leads to faster innovation. The reason? Relationships are based on trust, and trust relationships lead to open and rich collaborations, accelerating innovation in SMEs. The strength and survival of an innovation network also depends on how SMEs manage mutual aid and conflict: SMEs in the network must support partners in difficulty, as they are the weakest link in the chain. Similarly, conflicts between partners undermine cooperation: managers must address them quickly. However, it must be recognized that this type of collective collaboration is not a natural reflex for many SMEs. Small businesses do not like to involve others in their decisions. The recent acceleration of new collaborative innovation models by large firms can help stimulate new thinking among small companies. As multinationals seek to accelerate their innovation pipeline, opportunities for SMEs to partner in open innovation platforms are increasing. In this sense, two steps seem important for me to highlight. Because trust is so important, the first step for a small business looking to forge open innovation partnerships is to think about its best customers and suppliers – those with whom it has worked the longest and those in whom it has the most confidence. By discussing ongoing projects with these value chain partners, savvy entrepreneurs can propose solutions to innovation challenges in the medium term, creating a new dimension to the partnership. The second step is to establish relationships with local research institutes or universities, which can help provide the expertise needed to bring new ideas to market. Small businesses should look for such partners. Face-to-face contact with a partner is necessary and this implies an essential proximity. For example, a local university with a good track record of partnering with companies can help SMEs adapt new products, change business models and introduce new technologies. Innovations do not have to be radical. SMEs can stimulate sales and profits by importing ideas already used in another industry or by innovating the business model. In the solar energy sector, for example, First Solar has boosted sales to consumers by offering them an innovative financing package that requires no cash payment to install a solar panel system on their roof. Instead, the buyers rent the solar panels in combination with a 15-year

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contract to purchase the electricity produced by the panels. SMEs are very innovative in the development of new business models, so we should not focus simply on technical or product innovations. To conclude, I would like to remind you that SMEs are the backbone of the European economy, but most of them are not yet innovating or are not fully using their innovation potential. I hope that this book will help SME managers to start their innovation journey. Once the decision is made to choose a new product or business model, SMEs will automatically open up and innovate with partnering organizations because they do not have the necessary internal resources and skills. Managing the partner network is new for SME managers and is the most difficult challenge in their transition to an innovative company. With this in mind, this book is a must read for anyone interested in how to successfully manage the transition to an innovative SME. Wim VANHAVERBEKE1 NEOMA Business School ESADE Business School

1 See the website: www.wimvanhaverbeke.be/.

Foreword by Gaëtan de Sainte Marie Innovating in SMEs or How to Make Your Company Collaborative and Desirable

One day, Pierre Bellon, founder of Sodexo, who made the company he created a world champion, answered the following question: “What explains Sodexo’s success?” His answer was wonderful in my opinion: “The sum of our successes is slightly greater than the sum of our failures.” An SME manager knows that failure is part of the road to success, and that it is a source of continuous improvement. Before creating PME Centrale in 2001, I had created my first company in Sydney, which was a kind of first cousin, so to speak. It met the same objective: to pool SME resources to make them stronger and more together. This Australian company did not work. Among the mistakes I made, the most significant was probably the following: I prepared my offer with my partners on the basis of the intuition I had, and once the offer was packaged, after many months, I went to meet prospects. It was a failure... The idea was perceived as excellent, but the SME owners I met were not ready to change: I was thinking too far in advance; the step was too significant to take, etc. So, by creating PME Centrale in France, two years later in 2003, and Qantis in 2018, I proceeded completely differently: I kept my intuition (which was the same!), and I co-constructed the offer with the first members. It was not easy, but it eventually worked, because we adapted the offer to their needs and, little by little, are broadening our scope of proposals. Since then, all Qantis subsidiaries and brands have been created according to the same process. Our customers are at the heart of the innovation process and the

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creation of new projects. We have also included it in the baseline of the Qantis collaborative platform: “Co-create, Connect, Commit.” In my opinion, the collaborative phenomenon can become an asset to put up your entrepreneurial sleeve, and a source of permanent innovation for SMEs. In the book Ensemble on va plus loin, which I co-wrote with Antoine Pivot, we describe how to implement this collaborative economy and how it allows managers to develop their companies in collaboration with their stakeholders (customers, suppliers, employees, etc.). Here are three simple principles, taken from the book, to integrate the collaborative economy into an SME. First principle: put the customer back at the center! It is difficult to create a company, convince its first customers and then recruit its first employees, train them and achieve a certain balance in which profits feed the progressive development of the structure. It is so difficult to reach this moment when everything seems to be working, when customers are satisfied and employees are invested, that the simple idea of rethinking everything to get the machine running again can frighten many people. The problem is that, unconsciously, each company is gradually moving away from the full satisfaction of its customers. Soon, efforts become more limited, innovation is less voluntary, desire less present, etc. In fact, the customer leaves their natural place at the heart of the company to leave it to habits and formulas such as “we’ve always done it this way”. The collaborative economy challenges these behaviors, because this model consists of building its service with a community of customers. In other words, it is the community that decides, and the company responds to its needs. The interest here is that customers are very often on both sides: they participate in the creation of the service and they consume it. They therefore know how to continuously improve the offer since they play the role of both suppliers and customers. For the company, it is “only necessary to” analyze their behavior and listen to their needs in order to constantly innovate. Second principle: create a community of trust. The great success of the collaborative economy is that it has won the battle of trust. Its purpose is to enable clients gathered in a community to also provide services to each other, for example carpoolers for BlaBlaCar, companies for PME Centrale and Qantis. In short, “Together we are stronger and we go further”. These

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communities often existed before these companies, but there was no tool to make it easy and intuitive to connect them. And, of course, offering a simple digital platform is not enough. Moreover, at PME Centrale, we started without a platform. The most important thing was to create the conditions for trust between community members, and between the community and the company. BlaBlaCar, for example, surveyed its users and found that those they trusted most were their friends and family, then just after that, other BlaBlaCar users with a good rating on the platform, and much further away, their own neighbors! In other words, they trust strangers in the same community more than people they encounter every day. How is that possible? These platforms have endeavored to create a system that values quality and compliance with the commitment made. Almost always via notes that users give each other, and also through video training of new members, charters, etc. At Qantis, it is the team that plays this role by being in permanent contact, in the field, with our stakeholders to verify the quality of our framework agreements and the implementation of our commitment. Third principle: give meaning and return to common sense. The other success of the collaborative economy is to give or restore meaning. And what better way to promote team management than a shared sense! After all, in the end, customers and employees pursue the same objective: to ensure the permanence of the community with which they identify. The functioning of some cannot be contrary to the functioning of others. If employees and customers identify themselves to the community, it is because their membership in this particular group is meaningful. Let’s mention Airbnb and its dream: “a world where all of us can belong anywhere”... a world where we are at home everywhere. With friends, family, at home... in France as in Tanzania. And that’s the welcome message on the platform: “Welcome home!” Concerning this third principle, it seems to me that collaborative economy companies have understood it better than others. Their customers know why they consume here and their employees know why they get up every morning. Defining the “why” and not just the “for what” of your company is the way to attract new talent, who particularly need this sense to mobilize, and ultimately to make your business desirable.

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On the basis of these three principles, it now seems even more true to me to think of SME innovation in this context of a collaborative economy, because, in my opinion, innovation no longer has quite the same forms and characteristics. Even if the subject of innovation seems to have been largely explored, it seems necessary to return to an issue that is constantly being reinvented in companies, and mainly in our contemporary SMEs. Gaëtan de SAINTE MARIE Founding Manager of Qantis and PME Centrale

Acknowledgements

If you have grown up with an SME, if you have experienced, and sometimes suffered from, the daily life of being a business leader, experienced managerial and financial difficulties, strategic challenges of differentiation in highly competitive sectors, the joys of seeing projects succeed, of winning contracts, of creating jobs for troubled people, or of succeeding in developing their business, writing a book about SMEs is of great personal significance. This meaning is amplified when this in-depth understanding of an SME is enriched by decades of discussions, observations and research with these companies, their managers and employees. With this knowledge and experience, it was truly satisfying to link them to other scientific expertise: innovation and creativity. And we owe this opportunity to several actors. We would like to thank, first of all, ISTE Ltd and Dimitri Uzunidis for their confidence in the writing of this scientific project. We also wish to thank the Research Network on Innovation (RNI), a network which has fed our thinking, through its important publication activities and the organization of scientific events. Through seminars and large-scale projects, we also think of our current and past research laboratories. They have made it possible to explore some of the ideas in the book, namely (in alphabetical order): BETA (UMR 7522), Coactis (EA 4161) and Triangle (UMR 5206). In addition, we would not have been able to develop the ideas of the book without the material support of our two universities (in alphabetical order): the University of Lorraine and the University of Lyon − University Lumière Lyon 2.

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In addition, we would like to thank the many scientific and professional experts who have agreed to communicate to us their views on the subject of SMEs and innovation. We would also like to express our sincere gratitude to the various companies that shared with us their questions about innovation: these discussions and debates allowed us to review our results and thus discuss them further. The quality of these discussions has led us to focus on the relevance of conceptual developments from the point of view of the people involved, who support SMEs. Through this work, we sincerely hope to honor them, for the courage, endurance and humility they deserve in the face of obstacles, and, for most of them, for the humanism they display towards the many employees who work in SMEs. Finally, we are grateful to our students who inspire and motivate us to work on such projects. Our final thanks go to our close colleagues, friends and family for their support in our “small business”. Claudine GAY & Bérangère L. SZOSTAK

Introduction

Small- and medium-sized enterprises (or SMEs) have always been part of the economy in various forms (rural, family, craft, small production units, etc.). They have even historically been the spearhead of many countries’ economies: Italy, Japan, Portugal, Argentina, France, etc. (Marché et organisations 2017). Today, they represent between 95% and 98% of companies in the world1 (Marchesnay 2015). Although their influence should be put into perspective in view of the very large number of microenterprises within them, their overall socio-economic contribution should be highlighted. Indeed, it is an organizational form that can be considered decisive, particularly for growth, territorial development, sustainable development or the strive against unemployment (Boutillier and Uzunidis 2015). However, with few exceptions, it has long been neglected in the scientific literature, to the benefit of large companies. Schumacher’s (1974) book, Small is beautiful, marks a first turning point. Then, it was the crisis of the 1980s that played a major role in the recognition of SMEs (Lescure 2001; Marchesnay 2015; Judet 2017). It was also necessary to rely on the influence of a few militant authors like Michel Marchesnay and, later, Olivier Torrès in France, as well Pierre-André Julien in Quebec. In the 1990s, we even witnessed a certain enthusiasm. In 1993, for example, French-speaking researchers (Quebec and France) published an overview of knowledge specific to SMEs2, which appeared “useless or superfluous” almost 40 years ago (Julien in St-Pierre and Labelle 2017, 1 According to INSEE, SMEs represent 99.8% of companies in France, including microenterprises. 2 This inventory was updated in 2017 (St-Pierre and Labelle 2017).

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p. 10). During this same period, associations, scientific conferences and scholarly journals emerged. Training modules for students and seminars for socio-economic actors were developed. At that time, the emergence of a new research field dedicated to entrepreneurship3 (Gartner 1990) also contributed to the academic recognition of SMEs4. As a result, SMEs gradually gained recognition from researchers. But the success was limited. The SME, one that has been in existence for many years, in reality, is still a little stuck between, on the one hand, the big company that is crushing it with all its weight and, on the other hand, the start-up that seduces the political and media world with its novelty, its promises of rapid growth and its media leaders. In addition, the recognition of the major role of intermediate-sized companies in the competitiveness of countries, particularly Germany, has led to a new obsession: growing SMEs to become ETIs. Despite the recognition now acquired by SMEs, larger companies are still often the norm for optimal organizational functioning. According to transaction cost theory (Williamson 1975), any organization tends to grow if internalized costs are lower than market transaction costs. Yet, as Marshall showed at the end of the 19th Century, the economy can also be built on externalities that can flourish, for example, between small businesses in the same district. It is also likely that the explanation for this tropism towards large companies can be found elsewhere. As Torrès (2017) suggests, there is a representation bias5 that leads to assimilating the SME to a large company “in reduction”. Thus, SMEs are still too often appreciated in comparison to large companies, and in a negative way (Levratto 2009). For all these reasons, it is not so easy to recognize two points. First, SMEs play a specific economic role. Second, they are also characterized by a unique organizational dynamic. This is particularly problematic with regard to innovation. Since innovation is knowledge-intensive, large companies are viewed as more conducive to it. The main reason is that innovation involves the creation, sharing and dissemination of a large 3 Defined as “the academic analysis of how opportunities to bring new goods and services to market are discovered, created and exploited, by whom and with what consequences” (Shane and Venkataraman 2000, p. 218). 4 In English language literature, Entrepreneurship and Small Business is a specific field of research. 5 Inspired by the “Gulliver” effect described by Gomez (2010).

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amount of knowledge between the actors involved (Nelson and Winter 1982; Dosi 1988). The tacit nature of knowledge therefore makes transactions complex (and therefore costly) or even impossible. As a result, it seems less costly and less risky to internalize innovation in a large company than to limit it to a smaller company. Beyond this explanation, there are other reasons why large companies may appear more adapted, a priori, to innovation than SMEs. For example, the lack of internal resources and difficulties in accessing external finance are a major funding barrier to innovation in SMEs. Demand uncertainty and the cost of intellectual property play a role as well (see, among others, St-Pierre et al. 2017). However, analyses dedicated to innovation carried out by different institutions show that SMEs are particularly innovative. In France, BpiFrance revealed that in 2015, SMEs invested 5.1 billion euros in R&D6. That represents an R&D intensity of 8.1%, while large companies invested on average 2.5% of their turnover in R&D (Schweitzer 2017). The Community Innovation Survey (CIS) conducted by the Member States of the European Union also confirms the commitment of SMEs to innovation. Experts agree on the same approach for SMEs in countries and regions such as China, Argentina, Polynesia, Africa7, etc. In addition, we know of many examples of SMEs that have become leaders or challengers in their sector because of their innovation and creativity. This is the case for Raidlight-Vertical, in the trail-running sector8, Haemmerlin, manufacturer of Made in France wheelbarrows. There are also former SMEs that have become intermediatesized companies thanks to their dynamic innovation, such as Babolat, manufacturer of tennis racket equipment, or Prismaflex, leader in the production of large-format display and printing panels. Some characteristics should be obstacles for SMEs achieving innovation. Why then are they so innovative and creative? The purpose of this book is to propose some answers to this question. However, we would like to come back in detail, first, on the specificities of SMEs compared to other companies, and second, on their innovative nature. We explain, thirdly, the positioning adopted in the book. It does not aim to be exhaustive. We highlight factors conducive to innovation and creativity that are

6 R&D or research and development. 7 These experts were invited to express themselves in the book through interviews. 8 Raidlight-Vertical was independent until 2016, when it was bought by Rossignol.

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insufficiently recognized and yet essential, particularly in the face of changes in our economy. The specific features of the SME The notion of specificity refers to a condition that has an original and exclusive characteristic. In the scope of this book, the SME is specific because it differs from other organizational forms9. We refer here to nonprofit organizations (associations, trade unions, non-governmental organizations), or public organizations (public administrations, local authorities). On the other hand, it should be recalled that the concept of SMEs’ results arise, above all, from the need to classify companies into categories. The reasons for this ranking are twofold. First, they are very operational: they make it possible to apply accounting standards and define tax levels. Second, they are analytical: the ranking reflects the companies’ situations. This allows international comparisons to be made and differences to be explained. In France, Decree 2008-135410 specifies the current criteria for defining categories of companies. It applies the law of August 4, 2008 on the modernization of the economy and in line with the recommendations of the European Commission. This decree includes the category of intermediatesized companies. In this context, three classification criteria are used to define SMEs: – the number of employees is less than 250, in accordance with European Commission criteria11; – the annual turnover is less than 50 million euros; – the balance sheet total may not exceed 43 million euros.

9 The purpose of this book is not to show that SMEs are specific; we rely on the work carried out over the past 30 years on the subject. 10 See Decree No. 2008-1354 of December 18, 2008 concerning the criteria for determining the category of membership of an enterprise for the purposes of statistical and economic analysis. 11 It should be noted that in the United States and Canada, the number of employees must be less than 500. In addition, in the European Commission’s criteria, there is a sub-category: microenterprises, which have fewer than 10 employees.

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In France, the SME category includes microenterprises that employ fewer than 10 people and have an annual turnover not exceeding 2 million euros. However, they represent 96% of SMEs, and some of them are not active. Thus they are often analyzed separately. In addition, it must be recognized that the classification of companies by size is very useful for reflecting the economic structure of a country or territory. For example, the French economic structure is characterized by a small number of large companies, a large number of SMEs, a very large number of very small companies (or MICs for microenterprises), and a shortage of EIT companies12. In Germany, intermediate-sized companies (or Mittelstand) are twice as large as those in France. However, this typology does not really allow us to understand the originality of SMEs. By way of illustration, let us take the criterion of the number of employees, which is mainly used to characterize the SME. We have to admit that it does not reflect reality. Indeed, some people are not included in the total workforce (trainees, apprenticeship contracts, the SME manager’s family members, and spouses). In addition, SMEs are increasingly outsourcing some of their tasks. Thus, since the 1990s, scientific research has highlighted several other variables of a more qualitative nature that are specific to SMEs (Julien 1993; Marchesnay 2015). They mainly underline: – the centralization of the manager’s decision-making; – a low organizational structure (see the simple structure in Henry Mintzberg’s typology of organizations); – a high dependence on access to resources (human, financial, material and immaterial, etc.); – limited resources. In addition, Olivier Torrès (2015) develops a stimulating approach to the specific nature of SMEs. They can easily develop close relationships at several levels: in terms of space (spatial proximity), hierarchy (hierarchical proximity); work organization with the division of tasks (functional proximity) and coordination (coordination proximity). They can also control 12 In France, there were exactly 3,820,122 companies in 2015, that is 3,674,141 MIC, 139,941 SMEs excluding MIC, 5,753 intermediate-sized companies, 287 large companies (source: INSEE).

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the way information is shared (proximity information systems) or the decisions to be taken (temporal proximity). However, SMEs are not static. They have evolved a lot. Some of these specific features should therefore now be revisited, as encouraged by Marchesnay (2015)13. First, the leader is not as lonely as one might imagine. Family, partners, such as accountants, bankers, suppliers, customers, but also employees, are important actors in the decision-making process. Leaders are increasingly trained. Some of them choose to join business leaders’ associations, such as the Centre des jeunes dirigeants14 in France. These groups can influence decision-making through advice, sharing of experiences, specific training and even mutualization of activities. Second, the SME is increasingly well structured and several factors explain this. We note a greater diffusion of management tools; digital technology contributes to this phenomenon (for example, remotely accessible and shared planning). Employees are themselves increasingly better trained and informed and are pushing for more structuring of the organization. Finally, partners (customers, suppliers, bankers) lead to more structuring and organization taking place. This is particularly the case when SMEs are in subcontracting relationships. Third, the issue of access to resources remains, of course, a major challenge, but it is much easier. However, difficulty is no longer specific to SMEs: non-profit organizations and large companies face relatively similar situations. But economic, social and technological changes offer them new access to resources, inter alia through the development of a digital and collaborative economy15. Fourth, resources remain limited, but they can be increased by exploiting the opportunities offered by the sector, the territory, inter-organizational relations, but also (and still) digital means (see crowdfunding). On the basis of these conclusions, and respecting the quantitative variables retained in the institutional documents, we propose, as specific features of SMEs, to focus essentially on the qualitative variables. We formulate them, however, taking into account the above conclusions:

13 If Marchesnay (2015) addresses small business, reading her article shows how much this can also affect medium-sized businesses. 14 See the website: www.cjd.net/. 15 On this point, the foreword by SME manager Gaëtan de Sainte Marie is enlightening.

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– decision-making by the leader, but under the influence of the closest stakeholders; – a simplified (and not “simple”) organizational structure; – a dependence (and not “high dependence”) on access to resources; – limited resources, but easily mobilized, in particular thanks to the multiple local relationships fostered by SMEs. All these variables were in our minds when writing this book, and, to begin with, when understanding its ability to innovate. The ability of SMEs to innovate There is no consensus on the contribution of SMEs to the economy. For some, they constitute a potential source for growth and employment (Hausman 2005; UEAPME 2015). Other researchers believe that it is actually a myth (Boccara 1998). We are convinced that, whatever their contributions, it is important to stimulate innovation within them and give them the means to succeed. Indeed, not all SMEs innovate16 and those that innovate do not systematically succeed. To approach this reality, we refer here to the concept of innovativeness17, that is the propensity of an organization to achieve innovations (Hadjimanolis 2000; Wang and Ahmed 2004; Kmieciak et al. 2012). It is the ability of an organization to implement any new feature within it, whether or not it exists elsewhere. However, this capacity is not easy to measure. Quantitative measures (such as R&D investments or patent filings), or surveys of SMEs’ innovation habits can be used. But understanding what enables SMEs to create, maintain and develop such capacity is essential to stimulate innovation. Research has also been carried out on the main brakes and drivers of innovation in SMEs (MadridGuijarro et al. 2009; St-Pierre et al. 2017; Seville and Szostak 2018a). One of these obstacles is that the appropriation of the value of innovation remains a key issue that is insufficiently considered in the specific context of SMEs (Le Bas and Szostak 2016; Corbel and Reboud 2018) (see Chapter 4).

16 According to Bpifrance, 52% of SMEs innovated between 2010 and 2012, which means that 48% of SMEs did not. 17 This concept also appears as “tendency to innovate” or “capacity to innovate”. We retain this last expression.

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This propensity to innovate concerns innovation defined in the broad sense. This is the process that leads to the creation of something new in the economy. It is common to characterize innovative activity by types of innovation. For a long time, technological innovation (product or process innovation) was at the top of the list. However, since the 2005 edition, the Oslo Manual18 has incorporated non-technological innovation through marketing innovation and organizational innovation. In sum, product innovation refers to the functionalities and/or characteristics of the product as a whole (techniques, packaging, product formula). Process innovation refers to the production or distribution method that is new or improved, involving concrete changes in techniques, hardware and/or software. Organizational innovation concerns the way in which the offer is designed and implemented in a company (practices, workplace organization and external relations). Marketing innovation involves implementing a new method of designing, packaging, placing, promoting and pricing the company’s offer. To these traditional categories of innovations, we can add several others, typical of recent developments: market innovation, strategic innovation, business model innovation, managerial innovation, social innovation and responsible innovation. Marketing innovation involves creating a new market (new use of an existing product, new type of customers). The Blue Ocean Strategy illustrates this category of innovation (Kim and Mauborgne 2005). For example, the French SME “Les Trois Bras” offers a restaurant space on the motorway area of the Millau Viaduct. It is connected to two other markets: the promotion of regional know-how and tourism. Instead of being a technical and quick pit stop, the space is an opportunity to take time and enjoy, breaking with the traditional key success factors of the sector. Strategic innovation involves changing the way the organization’s activity is carried out and can be achieved through business model innovation. The latter is understood as the creation of a new configuration of value for the sector, that is a new way of creating and capturing value (Eyquem 2017). For example, small video game studios have successfully differentiated themselves from large publishers by developing a multifaceted platform on the Internet by bringing together complementary and/or

18 The OECD Oslo Manual is the first international source for collecting and using information on innovative activities. Its purpose is to define guiding principles for this collection with a view to evaluating the promotion of innovation.

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interdependent user groups (Parmentier and Gandia 2016). This type of innovation is currently central for SMEs (Chapter 2 explores this issue further). Managerial innovation is a change of traditional managerial principles, processes and practices, or a change of regular organizational forms (Hamel 2006, p. 4). This change must be considered in relation to the company and/or the market (Mol and Birkinshaw 2009). These may include the Delphi method, Total Quality Management standards, Corporate Social Responsibility (CSR) strategy, lifecycle analysis, etc. Based on a qualitative study, Dangereux et al. (2017) then show that managerial innovation in SMEs can be used to legitimize actions undertaken with financiers, reassure clients, win new contracts and drive growth while remaining viable. This example thus underlines the importance of the social construction of a new idea for the legitimacy of the SME and its innovation capacity. Social innovation is defined as a new response to needs expressed by a specific social group, not satisfied by markets and by public institutions (André et al. 2009; Moulaert 2009). This may involve, for example, areas in difficult situations, proposing solutions for people facing unemployment, old age, illness or disability. The emblematic organizations involved in this type of innovation belong to the Social Economy. These include associations19 that are similar to SMEs (see Janssen et al. 2012). For example, Dutertre et al. (2013) study the case of the Solidarauto solidarity garage network: the objective is to cover the mobility needs of the most vulnerable households. Research shows that such organizations have a significant capacity to exploit untapped resources (i.e. donations of broken down cars), to create a network of actors with little initial connection, and thus to break out of the established framework, resulting in socially successful innovation. Responsible innovation is a more recent category. It is founded in particular within the framework of the European Responsible Research and Innovation project. It questions the potentially harmful consequences that innovation can have on society. This concept is still vague and evolving (Gay et al. 2018). However, the authors point out that this type of innovation promotes a capacity for innovation that is, in its process, more anticipatory, more reflective, more deliberate and reactive.

19 Associations are not-for-profit companies like a private structure.

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In addition to these categories of innovation, the question of the intensity of the innovation, the origin and nature of the innovative process is generally raised. Traditionally, a distinction is made between incremental innovation, which consists of improving what already exists, and radical innovation, which generally results in the creation of a new product. While the first form is gradual with a risk considered low, the second implies a significant change in the conditions of use by consumers, or in the production methods or technologies used and considered more risky. Innovation can also be distinguished according to the origin of its process. Either it is driven by technology (or technology push, resulting in particular from R&D) and offers consumers an unexpected product/service, or it is driven by the market (market pull), following the expression of consumer needs, in a perspective that we now call user-oriented. In order to clarify the innovation process, innovation can also be approached through the prism of organizational learning. Following on from March’s work (1991), we can then distinguish between so-called exploration and exploitation innovation (Chanal and Mothe 2005; Li et al. 2008). Exploration innovation is part of a long-term vision. It is a question of highlighting the organization’s ability to discover, renew and even create new resources and skills, enabling it to adapt to the reality of its competitive environment. Exploitation innovation is more in the short and medium term. It is a matter of focusing on the operational efficiency of existing resources and skills. The former would lead more to radical innovations, while the latter would lead to incremental innovations (Chanal and Mothe 2005). It should be noted that an organization can engage in either or both. And this is also the case for SMEs. This is reflected, for example, in exploration innovation, in the experimentation of radically new ideas, in the developed ideation of the SME’s employees. In exploitation innovation, this is displayed by the company’s success in mastering and improving existing technologies (Szostak 2017). Beyond the type and intensity of innovation in SMEs, it is especially important to remember that many SMEs have a clear capacity to innovate, whatever the form of innovation. This translates, particularly in France, into significant R&D staff: nearly a quarter of employees dedicated to innovation are employed in SMEs (23%), and this figure increased between 2014 and

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2015. Several factors explain this capacity in the case of SMEs. We will focus here on three main ones: – the role of the manager and employees; – the nature of the organization; – the type of environment. Concerning the first, we consider that it is the company manager (Van de Ven 1986; Hadjimanolis 2000) who should play the role of developing a corporate culture that values innovation, original ideas, experimentation and employee proactivity (Lumpkin and Dess 1996; Rosenbusch et al. 2011). The manager must engage in innovative and creative approaches, such as design thinking (Seville and Szostak 2018a), and allow their employees to do the same. Employee empowerment effectively offers SMEs the opportunity to benefit from their ideas (Carrier 1998); this managerial practice has a positive impact on the propensity to innovate (Farace and Mazzotta 2015). Concerning the second factor explaining the innovation capacity of SMEs, we refer to its ability to combine internal and external knowledge (De Oliveira Paula and Ferreira Da Silva 2017), with reference to the open innovation paradigm (Chesbrough et al. 2006; Spithoven et al. 2013; Vanhaverbeke 2017). This concerns the emergence of ideas, but also the marketing of the product for example (Lee et al. 2010; Henttonen and Lehtimäki 2017). An open and agile organization, which is the case for SMEs (Barzi 2011), is conducive to the development of the propensity to innovate. The simple structure and its proximity to customers and partners allow it to adapt quickly to market demand (Hausman and Fontenot 1999; Hausman 2005). Finally, and in addition to these factors, Mazzarol and Reboud (2009) show the importance of taking into account the formalization of SME strategy that depends on the degree of organization complexity and the level of uncertainty and risk in the environment. This is the third and final factor we want to take into consideration: the nature of the environment, its evolution and changes. The perception of this environment will differ from one SME to another depending on the degree of integration within it, via, for example, the sector, the nature of partner relations established with other environmental actors, etc. In the end, we note that SMEs are characterized by a major challenge. On the one hand, they have strong capacities to innovate (Hausman and

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Fontenot 1999; Hadjimanolis 2000; Hausman 2005). On the other hand, innovation represents risks that SMEs cannot always keep up (St-Pierre et al. 2017; Seville and Szostak 2018a). The purpose of this book is thus to propose a framework of thought dedicated to SME actors and researchers concerned, in order to meet this challenge. Positioning of the structure On the basis of the reminders discussed here, we propose in this book to investigate innovation in SMEs more precisely. We consider that SMEs are not the reduced version of large companies (Torrès 2017). We are convinced that, despite certain inherent difficulties, an SME is an organization that is favorable to the development of creative ideas (Carrier and Szostak 2014). The SME is seen as a unique organizational unit. The innovation activities that give substance to its propensity to innovate are, as such, specific. In this book, we therefore propose to address arguments that seem to us to be enlightening in order to understand why SMEs have the propensity to be innovative and creative, and to implement innovations, when certain characteristics should prevent them from doing so a priori. Before that, we must talk about our working method and the structure of the book. Concerning our methodology, our purpose is based on several data sources. First, we exploit the academic reference works on the subject (articles, books and scientific conferences). Second, we draw on the expertise of researchers and professionals with whom we have discussed (and continue to discuss) specific topics for the writing of this book. Third, we call on our own expertise because of our regular work with many SME managers. This can be our research and pedagogical work, especially during collaborations with our students (study projects, internships). This is why, in addition to the traditional academic references in a scientific book, we provide boxes and appendices to give a voice to these experts in SMEs, creativity and innovation. These contributions are intended to link points of view on these topics. Concerning the trail of thought, the book is divided into four chapters. Chapter 1 develops the relationship between SMEs and their environment, and the consequences on the nature of innovation. This report can be guided by three main approaches. The first reflects a deterministic view of the environment. The second considers the environment as a resource for SMEs

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and, therefore, develops an emancipatory framework for business strategy. The third suggests that it is also possible to transform the environment, particularly in the case of strategic innovation. In Chapter 2, we consider that SMEs are proving to be an organizational form that is conducive to innovation in the face of current economic change. Thus, it seems essential to us, first of all, to set out this changing context in which these SMEs are currently challenged. Three changes are described and illustrated in the case of the platform economy: economic, technological and social. This reflection leads us to highlight lessons to be learned by SME managers. In Chapter 3, we highlight the importance for SMEs to identify who and how to feed the creative slack or pool of new ideas (Cohendet and Simon 2015) in order to further develop innovation in response to change (Liu et al. 2017). We emphasize the role of the SME, seen as an organization that supports the development of innovation, and the environment, which is approached more as a resource than a constraint. In particular, we are discussing the role of leadership and employees further on the one hand, and the role of the territory and inter-organizational relations on the other, in response to the open innovation strategy (Chesbrough et al. 2006; Vanhaverbeke 2017). In Chapter 4, we examine the ability of SMEs to legitimize new ideas of creative slack. Indeed, it is not enough to have ideas to develop innovation. It is necessary to make these ideas desirable and adapted to SMEs. We then discuss how the SME manages to socially construct the legitimacy of the idea, and to demonstrate its usefulness. Two avenues are explored. The first concerns tools for creativity and innovation, such as design thinking, and the second concerns the question of capturing value. It could be through traditional intellectual property rights or through new organizational forms based on the benefits provided by Cloud Computing and Creative Commons. To conclude, we propose avenues for reflection both conceptually and managerially on the innovative capacity of SMEs. This is also an opportunity for us to offer advice to our young students, still at school and university, who want to specialize in creativity and innovation, in order to enter the professional world, which is, it should be recalled, mainly composed of SMEs. In addition, we are aware of the importance of the impact of national culture on the development of SME innovation. However, we do not directly discuss a subject in the next few pages. That is why we

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offer expert views from developing countries or countries undergoing restructuring due to crises (Argentina, China and African countries); they are intended as a call for studies on SME innovation in these countries. We hope that the academic and professional reader will find stimulating ideas to meet the challenge of innovation and creativity in SMEs.

1 External Environment of an SME: From Determinism to Strategic Innovation

1.1. Introduction Regardless of their size, companies are constantly confronted with changes in their external environment. These changes concern their macro environment, on which they have no direct influence and at multiple levels (political, technological, economic, social, societal, ecological, etc.). They also concern their direct environment, mainly industry actors, which constitutes the reference framework for analyzing the company’s business and participating in defining its competitive space. In principle, these changes are a source of opportunities as well as threats, and can put existing companies at risk. By changing the rules of the competitive game, the sources of profitability in a sector, changing market size, customer expectations, or even encouraging the creation of alternative offers, these changes can then lead to a crisis. They also allow new entrants into a market and radically change the rules of the game. The digital revolution, for example, has proved to have immense potential for many start-ups to enter into a multitude of markets at a fast pace. This then leads to players that were previously firmly established becoming destabilized. Faced with changes in their environment, particularly those that closely affect their sector of activity, companies are expected to react. These can be operational adjustments, or even a race to achieve operational efficiency, through management methods such as total quality or lean management. But this usually requires real strategic changes (Porter 1996). However, these

Innovation and Creativity in SMEs: Challenges, Evolutions and Prospects, First Edition. Claudine Gay and Bérangère L. Szostak. © ISTE Ltd 2019. Published by ISTE Ltd and John Wiley & Sons, Inc.

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developments are sometimes of such magnitude that companies find it difficult to react. Lack of resources, growing uncertainty, radical changes in the rules of the competitive game… there are many reasons to prefer the status quo to change. Indeed, when the pace of change accelerates, creating splits and discontinuities (Dumoulin and Simon 2005), or when the intensity of change increases, to the point of creating a sectoral crisis, business decisions can be inhibited, caught between “dangerous action which produces understanding” and “safe inaction which produces confusion” (Weick 1988, p. 305). Whether they are simply evolving from a temporary crisis or a profound change, SMEs in particular are questioning their resilience and scope for action. It must be noted that, in literature, the relationship between SMEs and their environment is above all marked by a certain level of ignorance (Guilhon 1998). While the relationship attracted some interest in the 1980s and 1990s, marked by major structural changes, it is still subject to a certain contradiction that is still insufficiently explored (Gueguen 2004). Indeed, the relationship of SMEs with their environment is characterized at an academic level, both by a certain level of fragility (Julien and Marchesnay 1988; Marchesnay 1992; Silvestre and Goujet 1996; Torrès 1999) and a certain level of flexibility, if not agility (Torrès 1999; Marchesnay 2001; Barzi 2011). The analysis of company practice confirms this contradiction highlighted by researchers. For example, Duquesnois et al. (2010) studied the French wine sector in Languedoc-Roussillon. A sector in crisis since the 2000s, it has suffered a decline in consumption in some countries, seen the development of international competition and the absence of global supply regulation. In this context, SMEs are mostly affected, particularly in terms of competitive pressure. However, they note that it is ultimately the smallest companies that have been the least affected compared to medium- and largesized ones. The authors explain this result in particular by the ability of these companies to focus on seeking a limited number of competitive advantages. Some SMEs therefore seem less fragile than others. Although characterized by specific features (Torrès 2015), the SME’s relationship with its environment therefore seems to be in line with traditional opposition in research in strategic management. For example, between the deterministic approach, which overvalues the role of the environment, and the voluntarist approach, which reduces its importance in favor of strategic intention and choices (Astley and Van de Ven 1983; Hrebiniak and Joyce 1985; Gueguen 2001; Saïas and Métais 2001; Roy 2004). However, various studies developed since the early 2000s suggest a

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middle path, capable of taking into account both the effects of a rapidly changing environment and the complexity of the dynamics linked to strategic choices. Whether it is a question of new approaches to competition (Roy 2004) or business design theory (Slywostzky 1996; Slywostzky et al. 2002), also referred to as strategic configuration (Saïas and Métais 2001), these studies consider companies’ strategic actions, capable of shaping their environment by redefining the rules of the game. This can also transform their competitive space. These works provide a better understanding of why disruptive or breakthrough strategies are currently being developed. From this perspective, strategic innovation (Markides 1997) appears to be the most important form of innovation and the business model (see section 1.4.2) is the main issue. This first chapter wishes to question the current capacity of SMEs to operate in a rapidly changing environment. It does so by presenting the evolution of the conceptual framework of the company’s relationship with its environment. The objective is to have a relevant framework to enable the SME to react as effectively as possible. To do this, we distinguish three major approaches to this relationship. For the first, we return to the origins of the strategy. In other words, we discuss “what and how” the role of the environment in business performance can be a central issue in business strategy research, even if company size is not taken into account. While in these traditional approaches the environment is deterministic, its perception evolved in the 1990s, notably under the influence of the Resource Based View (RBV), to attribute companies’ more proactive strategic behavior; this is the second approach to the SME’s relationship with its environment. Faced with this traditional opposition between determinism and voluntarism, a third approach has emerged; it consists of taking into account the complexity of competitive dynamics. This makes it possible to analyze the development of strategic breakthrough innovations, which are increasingly common in hypercompetitive environments. In each of these three approaches, the specific nature of the relationship between SMEs and their environment will be considered. 1.2. The classic approach of the firm’s environment: a deterministic relationship (also) affecting the SME From the very first models of business strategy analysis, the relationship between the company and its environment has been based on a deterministic perspective.

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Whether they are the very first models of strategic formulation (Learned et al. 1965), strategic planning school (Ansoff 1987; 1989) or the positioning school (Porter 1981), the company’s performance comes from its ability to understand and adapt to its environment. Strategy is defined from the outset as “the logic which guides the process by which an organization adapts to its external environment” (Ansoff 1987, p. 501). This approach to strategy involves adapting to the environment (section 1.2.1) and implementing business intelligence (section 1.2.2). 1.2.1. Adapting to the environment It is the large enterprise that is mainly targeted by traditional approaches to strategy, the SME being only a special case, a miniature one, on which to apply the vision and tools of strategic management. In these studies, the environment is understood as an exogenous factor that is imposed on the company. The company has no choice but to try to predict and adapt to the future (Aurégan et al. 2008). To do this, the company uses analytical tools that allow it to take clear strategic directions. Also, the company’s strategy is affected by an environmental determinism (Gueguen 2001): it adapts to the environment, seeking to obtain the “fit”, in other words the best balance of the strategy with the environment. The SWOT model is an emblematic tool of this approach. It positions the company in its environment in terms of balance. However, taking into account the changes in the organization’s strengths and weaknesses has made it possible to (re)think this adequacy over time with the use of scenarios (Saïas et Métais 2001). Michael Porter’s Five (+1) Forces Model and the Boston Consulting Group’s Advantage Matrix are also emblematic: they enable us to understand the environment’s influence on business using an analysis of a sector’s competitive structure. Through this prism, the SME is generally not perceived as having a specific relationship with its environment; at best the constraint is considered amplified (Guilhon 1998). Thus, at the SME level, the environmental determinism of the classical approach borders on “environmental fatalism” (Gueguen 2001, p. 10). The phenomenon worsens in a hostile environment; in this case, SMEs appear to be even more dependent on their environment than large enterprises, due to “their limited resource bases and relative inabilities to survive the consequences of poor managemerial decisions” (Covin and

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Slevin 1989, p. 75). In doing so, the classic paradigm of strategy has reinforced the idea that SMEs are the equivalent of large enterprises with weaknesses and shortcomings that aggravate their fragility in their environment. Despite the reductive nature of companies’ relationships with their environment in traditional approaches, these approaches stress that one of the conditions for their sustainability is the development of increased vigilance, which has been based, since the 1990s, on the development of monitoring tools. Going beyond the mere collection and management of information, monitoring is de facto a real “continuous and largely iterative activity aimed at actively monitoring the technological, commercial and environment, etc. in order to anticipate future change” (AFNOR 1998)1. In particular, strategic intelligence aims to collect and analyze relevant information about the company’s environment and enables it to make appropriate strategic decisions. It does not only concern large enterprises: the SME manager must also be attentive to their environment (Lafaye 2018). When it comes to listening to the environment, the champions seem to be start-ups. Creating a company with high potential requires strong innovation to legitimize the arrival of a new player in an often saturated competitive environment. Also, at the beginning of start-up creation, “listening” to the environment tends to take place. This is done by the manager who is generally considered a visionary. This listening sheds light on business opportunity, with a “good” idea leading to satisfying a need that has not (or badly) been satisfied so far, or to solving a problem that has not (or badly) been solved before. However, this good idea is far from being enough to make a good start-up entrepreneur, any more than an SME. The challenge then remains to move from the business project to the company project, seen as a production unit combining, on the one hand, resources and skills to make the offer a reality, and, on the other hand, a human group to be managed and a decision-making center to be sustainable. When this small business grows, the challenge is to maintain this entrepreneurial spirit and listen to the environment, while regularly developing the business project. Prismaflex (Box 1.1) illustrates the importance of listening to the environment throughout the company’s life, from its creation to its development.

1 Translation by the authors.

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At its origins in the early 1990s, Prismaflex was a company specializing in two activities: the manufacture of billboard hardware and wide format printing. Hardware, which historically represented half of its turnover, was sold for outdoor advertising displays or to large specialized retailers for point of sales. The second activity, printing, was also dedicated to displays and mass distribution, to integrate the billboards sold by the company or competitive panels, which ensured recurring revenue streams. Today, in a digital context, the two activities are less related, but the company continues to be both an industrial manufacturer of billboards and a wide format digital printer. It continues to diversify, becoming a specialist in communication both indoor and outdoor. To gain this competitive position, Prismaflex has had to withstand a particularly turbulent environment for at least three reasons. The first is of an economic nature. Although it does not derive any direct income from the operation of the billboards, the company is highly dependent on the advertising sector, which has experienced many crises over the past 20 years. The economic crises of 2001 and 2008 resulted in a sharp decrease in advertising spending, destabilizing advertisers’ suppliers. In addition, the development of Internet advertising has challenged traditional advertising, despite its continuing high impact today. This second reason is also linked to changes in regulations that limit the development of outdoor advertising (limited advertising, switching off illuminated advertising at night, framing of maximum permitted surfaces, etc.). As for the third reason, it is sustainable development coupled with digital communication: they represent both a threat and an opportunity for the sector. These three reasons require effective technological developments. What has enabled Prismaflex to survive and grow in this turbulent environment is first and foremost its innovation strategy. The company has chosen to position itself from the outset on a wide range of technological products, constantly investing in R&D, focusing on product design and image quality. In addition, its attentiveness to its environment has enabled it to constantly develop new products, new markets and several diversifications of activities, such as interior design products or urban property. From the beginning, the company was one of the only companies in the sector to supply both display billboards and printed posters. Its position on both activities was favored by the specific nature of the invention that led to the creation of the company in 1988: a fixing process between a flexible element and a rigid structure designed to fix canvases to a frame. Initially, this patented process was invented for the transport sector. It was by observing the uncovering of trucks by a carrier that Pierre-Henry Bassouls, a recent graduate of INSA, came up with the idea of using his engineering skills to replace the traditional and restrictive elastic cord system. However, it is not in the transport market that the process has found an economically viable outlet, but in the outdoor communication market with distributors and then with display panels. This rapid shift of the offer has been

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fundamental in the company’s history. And so the company has become one of the leaders in the construction of wide-format billboards and poster printing. At the time of the crises of 2001 and 2008, listening to the environment was even more evident. It enabled the manager to react very early and well in advance during crisis periods. This resulted in a reduction in the rotation of advertisers’ campaigns and a freeze on advertisers’ investments. It was thanks to its international presence, at the industrial and commercial level, and its choice of growth methods (internal, but also organic), that the manager was able to identify weak signals and react accordingly. In particular in 2001, its presence in the North American market enabled it to implement a rapid restructuring plan to avoid the worst possible scenario. Since then, Prismaflex has taken advantage of both digital and sustainable development opportunities. Although this deprived the company of the recurring revenue that the displays allowed, it made the switch to digital at the right time. It began with the development of LED panels, initially through a distribution agreement with a partner, and then it designed its own panels. In addition to billboards, it is developing its offer with urban property solutions, which provide various services, beyond advertising. On an environmental level, it has developed less polluting products and is seeking to reduce the energy consumption of digital panels. Attentive to its environment, the company is therefore pursuing its diversification by also expanding upstream and downstream of its historical activities. Box 1.1. Listening to the environment, a vital issue for Prismaflex International, a medium-sized company (Gay and Lanoux 2014)

This example shows us that SMEs can succeed in reacting to changes in their environment, provided they are attentive to signals, sometimes weak, heralding crises, new regulation or the emergence of new expectations. The main issue then concerns the ability to give meaning to these signals. 1.2.2. Giving meaning to environmental scanning There is a plethora of work on the collection and analysis of information, the perception of weak signals and prospective analysis (Baumard 1991; Lesca 1994; Mevel and Abgrall 2009). But information scanning is not simply a case of listening carefully and analyzing the environment, it is also a case of drawing strategic meaning from this information (Lafaye and Berger-Douce 2012; Lafaye 2018). In the case of SMEs, it is true that their inclusion in their immediate environment, reinforced by the close

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relationships that the manager easily forges (Torrès 1999), constitutes a favorable ground for listening to the environment (Julien and Marchesnay 1988). However, this presents a risk of short-term and overly reactive decision-making (Gueguen 2004). Beyond the difficult collection of information, one of the difficulties for SMEs remains the transformation of monitoring into relevant strategic decisions. This difficulty raises the question of the ability of SMEs to create strategic meaning from this information, especially since this meaning is not a given, but remains to be constructed. In this perspective, Lafaye and Berger-Douce (2012) show that, despite its complexity, collective listening at an inter-organizational level is an interesting solution in the case of SMEs. These enterprises may be limited in this capacity and in the resources to be entirely devoted to it. However, if the traditional approaches to the strategy have the advantage of raising awareness about listening to the environment, several criticisms have been made of them for two main reasons. The first reason is methodological: the restrictive vision of the environment, conceived as data, is not appropriate. The second reason is more pragmatic: the multiplication of breakthrough strategies questions the idea that companies’ performance is based on a single adaptation to their environment. Child (1972) was one of the first to criticize environmental constraint by showing that the company has the ability to manipulate environmental characteristics. Beyond determinism, what Bourgeois (1984) also criticizes is the reductionist view of classical approaches that “tend to focus on one independent variable (e.g. degree of turbulence), as it causes managers to manipulate one dependent variable (e.g. structure)”. Thus, the deterministic vision relegates management to a “reactive-adaptive prison”, at best it “becomes a computational exercise” (Bourgeois 1984, p. 586). In response to these criticisms, a second approach to the company’s relationship with the environment has developed. We refer here to the framework for interpreting the success of Japanese companies in the 1980s proposed by Hamel and Prahalad (1989), coupled with the development of the resource-based view (or RBV), largely inspired by the two authors2. The challenge of breaking away from the traditional approach is fundamental, particularly for SMEs, because it makes it possible to develop a real theory

2 Despite the various criticisms of the scientific scope of Hamel and Prahalad’s work (Métais and Saïas 2007).

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of strategic behavior that opens up a degree of freedom for companies, particularly SMEs. 1.3. From strategic intent to RBV: what level of emancipation is there from environmental constraint for SMEs? The alternative paradigm to environmental determinism was introduced in the 1990s. The voluntarism it defends is opposed to the approach of adaptation to the environment. While the way forward is paved by the pioneering article on strategic intent by Hamel and Prahalad (1989), and their subsequent work (Hamel and Prahalad 1991; 1993), it is mainly structured within the general framework of the RBV approach (section 1.3.1). This approach therefore provides a better understanding of how the SME’s relationship with its environment can be considered emancipatory (section 1.3.2.). 1.3.1. Conceptual framework In their seminal article, Hamel and Prahalad (1989) used strategic intent to help explain the conquest of previously dominated companies, in this case, Japanese companies. Unlike strategic planning, strategic intent is an attitude, sometimes very combative, that allows people to free themselves from environmental constraints by setting original and ambitious long-term objectives. This intention requires, in particular, imagination to consider markets that do not yet exist (Hamel and Prahalad 1991). By having strategic intent with ambitions that a priori exceed capacities, the company risks finding itself with a lack of resources. Of course, strategic intent leads the manager to choose an appropriate portfolio of resources and skills. However, this is not necessarily enough. The originality of Hamel and Prahalad’s work is that it argues that it is precisely “the gap between a company’s resources and its managers’ goals” that constitutes the sources of competitiveness (Hamel and Prahalad 1993, p. 75). As a result, the company is in a situation where it can learn and succeed, particularly thanks to the leverage and tension caused by this gap. In the original approach to strategic intent, therefore, willingness is more important than environmental constraints. In other words, more than the company’s specific resources, it is imagination that counts, competition being “product versus product”, and also “mindset versus mindset” (Hamel and Prahalad 1993, p. 77).

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In terms of strategic intent, the company is not necessarily constrained by the environment: it can act, but it can also seek to transform it, leaving the traditional aspects of its sectoral environment. What enables us to consider this possibility is the Resource Based View (RBV) approach, which is the integration of Hamel and Prahalad’s work into the academic field: it allows the company’s resources and skills to be placed at the forefront. In this approach, the company’s performance is based on the combination of its specific resources and skills. With regard to SMEs, the strategic intent and RBV approaches therefore provide an opportunity to overcome the environmental fatalism that affects them, for several reasons developed in section 1.3.2. 1.3.2. The emancipation of SMEs from the environment We retain two main reasons why strategic intent and RBV approaches allow us to consider that SMEs are able to free themselves from the framework imposed by the environment. The first is that these approaches make it possible to consider the SME, above all, by the potential represented by the strength of the manager’s strategic intention. A manager’s centrality is highlighted in the literature on SMEs. Indeed, in SMEs, it is essentially the manager who imagines, develops, realizes, and also shares their vision (Filion 1991; Filion and Lima 2011). The manager’s position is such that, in the particular case of the VSB, the company “becomes a very small world in which the center is the ownermanager” (Torrès 2015, p. 341)3. The second reason is that these approaches make it possible to provide a framework that is particularly adapted to the specific nature of SMEs, as analyzed by Olivier Torrès, for example. In order to define the SME less by its size than by its nature, the latter shows that proximity is the main basis and range of decisions taken in the SME (Torrès and Gueguen 2008; Torrès 2015). Indeed, whatever the type of decision, “an SME manager’s field of action is most often limited to the nearest environment” (Torrès and Gueguen 2008, p. 104), proximity being understood in a broad sense (spatial, hierarchical, functional, temporal, or involving coordination and

3 Translation by the authors.

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information). While this result defines the (limited) scope of an environment relevant to SMEs, it also highlights how SMEs mobilize their resources. To demonstrate the central role of proximity, Olivier Torrès’ work is inspired by psychological research, in particular Moles and Rohmer’s law of proxemics (1978). The latter shows how, in a subjective approach to space, what is “close” is more important than what is distant to individuals. For Olivier Torrès, this law corresponds to SME reality: the degree of importance of their analysis and actions is organized according to criteria of proximity. This explains de facto why the management of SMEs is so personalized. In line with the RBV, this law of proxemics describes, in short, the specific way in which SMEs mobilize their resources. It is verified in a number of cases detailed by Olivier Torrès and Gaël Gueguen (2008). This is the case, for example, for exports. The authors show that SMEs choose places according to, first and foremost, cultural proximity, legislation, business practices, level of education, language, etc. This allows them to limit international risks (Dominguez and Mayrhofer 2018). This is also the case in the choice of successor: the manager who sells their business, first turns to their family, employees, then to customers, suppliers and, ultimately, to third parties. This is also noticeable in the choice of growth methods: first within the same sector, the same activity and among the same customers. Torrès and Gueguen (2008) show that this is also true for recruitment choices and financial management (self-financing, then bank financing before considering opening up capital). This proximity principle also plays an important role in the external development of SMEs, particularly as part of their network strategy. Finally, we note that the very content of strategic choices is influenced by this law: SMEs tend to follow development trajectories based on specialization. We can find an interesting explanation for this proxemic mobilization of resources, characteristic of SMEs: it is the product of limited rationality that prevails particularly in small businesses (Torrès and Gueguen 2008). By reducing uncertainty, proximity makes it possible, firstly, to make decisions, to strengthen trust and bonds, and to decipher the implicit: “When we are closer, we understand each other better” (Torrès and Gueguen 2008, p. 104)4. Secondly, proximity makes it possible to strengthen control. This second explanation echoes the RBV framework, where the challenge for the 4 Translation by the authors.

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company is not always to own VRIN resources5; it is also to control specific resources that do not belong to it. Thus, proximity, which is the main criterion for SME decision-making and management, supports the strategic intent and RBV approach to understanding the SME’s relationship to its environment. It provides it with the capacity to effectively mobilize resources. It can, however, make this approach more complex in regards to the following two points: – by its tendency to encourage a manager to plan in the short term, whereas strategic intention requires a long-term perspective; – by the tacit aspect of its implementation, while strategic intent, such as RBV, requires making the decision implicit. In any case, this proactive approach enables the SME to envisage emancipation from environmental constraints or even a transformation of this environment, even with limited resources. Because “where Porter looks at the dominant figures, their strengths, the structure of the industry and competitive forces, Hamel and Prahalad study the dominated, the areas of uncertainty, the weak points, the asymmetries and the weak signals” (Métais and Saïas 2007, p.322)6. Since this approach considers that competitive play can be disrupted by a company’s resources and skills, it therefore questions, in particular, the SME’s ability to modify dominating relationships in an industry. In this perspective, the case of the Caudalie brand (Box 1.2) illustrates how an SME can succeed with a resource-based approach in a dynamic and competitive sector such as the cosmetics industry. Created in 1995 by Mathilde and Bertrand Thomas, Caudalie is today an original French cosmetics company specializing in vinotherapy, and has now diversified in spas. Before being the successful mid-sized company we know today, Caudalie is above all the product of developing grape polyphenol and the family vineyard of Château Smith Haut Lafitte. The idea of wine therapy came about at the time of harvest, during a meeting with Professor Vercauteren, a researcher at the Faculty of Pharmacy in Bordeaux. In regards to the antioxidant power of grape seed polyphenol, he said,

5 VRIS for valuable, rare, inimitable and non-substitutable. 6 Translation by the authors.

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“Do you know you’re throwing away treasure?” According to Mathilde Thomas, “this sentence changed my life”. The company introduced itself on the French market with an elementary range, based on a few products sold in pharmacies, and quickly established itself as a serious competitor to brands such as Avène, Vichy and La Roche-Posay. Then it went on to conquer the United States, and then China. Remaining independent, the SME has experienced insolent growth on the international market, thanks to a permanent research and innovation strategy. While this is typical of the cosmetics sector, the SME has implemented a marketing strategy based on the tradition and expertise of the wine sector. For example, the brand name, Caudalie, refers to the unit of measurement for the duration the wine’s aromas remain in the mouth after tasting. As the couple states on the brand’s website:7 “It all began in Bordeaux, in the heart of the vines at Château Smith Haut Lafitte. This natural environment of rare beauty inspires us every day. Vines and grapes hold exceptional powers for the skin. Powers that just wanted to be cultivated.” In the case of Caudalie, the resource developed in the products is not only a raw material with magical antioxidant powers (the grape, which is collected free of charge in the parent vines) it is also an ability to develop the French expertise that has made it possible, from a wine sector in crisis, to penetrating a cosmetics market that is nevertheless very competitive. The development of this resource-based strategy has been facilitated by two factors. The first concerns the ability of the managing couple to make quick decisions. The second success factor is the ability of the SME to mobilize resources and skills in its immediate environment. Box 1.2. From vines to wine therapy, the resource approach at the 8 origin of an SME that has become large scale: the Caudalie case

Despite its contributions, the RBV approach, applied here to SMEs, has not escaped criticism. First, as Métais (1999) points out, the identification of VRIN resources is not very effective, while their analysis ultimately closely resembles Porter’s value chain. Second, it does not make it possible to understand how to radically transform the environment (or react to) and conduct (or defend against) a breakthrough strategy. To do this, it required theoretical extensions that we propose to study in the following section. 7 Translation by the authors. 8 Sources: fr.caudalie.com/; businessofeminin.com/feature/mathilde-thomas-fondatrice-decaudalie/; www.vitisphere.com/actualite-86175-Pour-les-grands-crus-Caudalie-ne-passe-pascreme.htm.

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1.4. The SME in a hypercompetitive environment: from emancipation to environmental transformation. What role is there for strategic innovation? With the development of an increasingly competitive environment and the increase of breakthrough strategies (Lehmann-Ortega and Roy 2009), the idea that the strategy could consist of voluntarily transforming the environment has gradually developed. This transformation consists, for a company, in breaking with the Critical Success Factors (CSFs) of its sector and transforming them to its advantage. This type of strategy, described as a breakthrough, involves the creation of new sources of value and new competitive areas (Kim and Mauborgne 2005). It is based in particular on the identification of unexplored needs or new customers, but also on new ways of building and delivering this new value proposition. The term strategic innovation embodies this new approach to strategy, of which the business model is one of the main bases. This last part of the section details how the conceptual framework for studying the relationship between the company and its environment moves towards a new approach (section 1.4.1), then presents methods for achieving this objective (section 1.4.2) and questions the ability of SMEs to do so (section 1.4.3). 1.4.1. A conceptual evolution transformation of the environment

to

think

about

in

the

This new competitive landscape and these new strategic practices require a conceptual framework that allows us to understand: – the hypercompetition context and its impact on competitive relationships; – strategic processes that allow breakthrough strategies to develop in this environment. Various works, generally in addition to and/or as an extension of the RBV approach, make it possible to do this. However, the role of SMEs remains limited. For D’Aveni (1994; 1995), what specifies the new competitive landscape in recent decades is the notion of hypercompetition, characterized by, among

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other things, market turbulence, increased demand and a decline in entry barriers. In this environment, companies’ competitive positions are fundamentally unstable (D’Aveni et al. 2010). Consequently, the most successful companies are not those seeking a sustainable competitive advantage, but those that rely on a succession of temporary advantages, at the cost of permanently challenging their own position. The potential reasons for this volatility of competitive advantages are numerous. D’Aveni et al. (2010) provide a long list: “technological change, globalization, industry convergence, aggressive competitive behavior, deregulation, the privatization movement stimulated by governments or hedge funds, government subsidies, the rise of China, India, and other emerging countries, the increase in availability of patient venture capital money, terrorism, global political instability, the pressure of short-term incentives for senior executives to produce results, etc.” (D’Aveni et al. 2010, p. 1372) However, the end result is that no factor is truly and clearly identified. While the origins of this unstable environment are difficult to establish, it is possible to clearly understand its implications: a permanent renewal of competitive advantages that can be characterized by strategies that are sometimes described as aggressive (Ferrier 2000), or even as self-destructive competition. The Apple brand is emblematic of this type of permanent innovation strategy, which extends to the cannibalization of its own products. Rather than a traditional strategic analysis in terms of static position (with reference to generic strategies and resources and skills), this situation of hypercompetition implies, indeed, a strategy of permanent movement. This is defined by continuous innovation and creativity, organizational flexibility and strategic agility. To explain these mechanisms, various studies first try to better understand the foundations of new forms of competitive dynamics (Smith et al. 2001a and 2001b; Roy 2004; Roy 2010). These approaches are based on an interactionist approach to competition: they give a central role to strategic action, which is created following action-reaction sequences. They provide a framework that allows us to establish that an industry does not have a spontaneous structure, and that results from a succession of competitive strategies.

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More precisely, in hypercompetition, companies compete for profit zones that they constantly develop. This means that, in strategic terms, it is no longer appropriate to pursue a competitive advantage, but to change it permanently. This change has resulted in the development of the term “strategic innovation”. For Hamel (2000), this form of innovation, or metainnovation, is based on a company’s ability to continually reinvent its strategy, organization and even its sector of activity9. In this context, what is important is no longer dominating a sector, but being creative about how to implement key competences and develop new business models; nor is it to follow sectoral rules of games, but to collectively shape the sector in the future (Hamel and Prahalad 1994). For Markides (1997), this strategic innovation leads to a redefinition of what business is. To complement the understanding of strategic innovation, Kim and Mauborgne’s (2005) work emphasizes the ability of companies to emerge from the “red oceans” of competition, to create “blue oceans”, untapped market spaces, without ultimately seeking to replace existing markets. If it is appropriate to break with the rules of the sectoral game, the question that remains is: how do we do it? Section 1.4.2 proposes methods to achieve this. 1.4.2. Methods for developing strategic innovation In his pioneering article, Markides (1997) proposes four potential sources of strategic innovation consisting in redefining: – its business; – customers (with the objective of discovering a niche that will eventually become larger than the traditional market); – offers; – processes (in particular by extending core competences). From this perspective, it is not so much technological innovation that is the lever for strategic change, as innovation in the way in which one defines, conducts and derives income from one’s business. It is therefore necessary to adopt a much more global vision of innovation that leads to organizational, commercial and managerial innovations, among others. 9 Researchers approach this reality from the perspective of organizational creativity (Amabile 1988; Ford 1996; Drazin et al. 1999). Chapters 3 and 4 will further develop this work.

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To designate this complex set of strategic decisions that the company defines (and regularly redefines) and that can disrupt the environment, some authors have used the notion of business design (Slywotzky 1997), or even “strategic configuration” (Saïas and Métais 2001). These are decisions about how to target customers, differentiate the offer, define the company’s activities (and those it outsources), configure its resources and skills, position itself in the market, in order to make a profit. More frequently, it is the notion of a business model (Box 1.3) that is now being used. This concept is more complete, as it incorporates the notion of value architecture (Lehmann-Ortega 2008). The business model concept, popularized in the 1990s, is currently generating real enthusiasm, both practically and theoretically. It is a description of how a company creates value, how and with whom it produces it, how it delivers it to customers and how it captures the value created through a remuneration model. As a model, it is is polysemic: it is both an abstraction, or a simplified representation of reality, and also a tool, which acts, allows manipulation and experimentation, and has a performative role (Doganova and Eyquem 2009). Beyond the differences in form, the various works converge towards the description of three elements that constitute the business model (Eyquem 2017): – value proposition: the value proposed to the customer, which motivates them to buy a product; – value architecture: represents all the activities and resources dedicated to the production and delivery of value to the customer; – profit equation: describes the cash flows required to create value and the revenue models adopted by the company. Beyond the description of these three components, it is the relationships between these three sets (i.e. the configuration of the model) that explain the profitability of the model. In this sense, the business model canvas10 developed by Alexander Osterwalder and Yves Pigneur is a tool that allows both to design the new company’s business model and to develop (or “pivot”) an established company’s business model. Indeed, the tools used to “design” a business model11 are widely

10 See Osterwalder and Pigneur (2011) or the website: https://strategyzer.com/. 11 Except for A. Osterwalder and Y. Pigneur’s business model, there are several of them, including the one developed by T. Verstraete and E. Jouison-Laffitte (2009).

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used when creating a company, both to make essential choices and to persuade stakeholders of a business project’s relevance. On this particular point, it must be noted that incubators and other places of support for entrepreneurship are very fond of them. In addition, these tools also make it possible to analyze and develop the business and strategy of existing companies. Box 1.3. The business model: a concept and tool

Thus, the main lever for strategic innovation is the introduction of a new business model, the evolution of an existing one or part of an existing one (Lehmann-Ortega 2008). For business model innovation to be disruptive, it must lead the company to break with the CSFs in its sector. But breaking with the sectoral rules of the game is not a matter of course. This requires a certain method specified by Kim and Mauborgne (1999). In particular, they show how much the substitute products approach creates value. Based on the case of Home Depot, they show that this company has developed a breakthrough strategy by understanding both why some people recruit professionals to do work (because of their expertise), but also why they can do without them, and why some people go to the hardware store. It is the combination of these analyses that has allowed the company to make a new value proposition: to provide professional entrepreneurial expertise at prices lower than the hardware store. The authors show, however, that adding CSFs is not enough to create a competitive sphere, it is also necessary to eliminate and reduce traditional CSFs. In his article on value migration, Slywotzky (1996) provides further insight. He shows that, in a hypercompetitive context, it is necessary to know how to migrate from superficial needs to a deeper understanding of customers’ needs. To this end, more than the need expressed by the customer, what counts is “the interpretation of this need by the company, to access the customer’s complex system of priorities12” (Saïas and Métais 2001, p. 206). Listening (and listening again) to the environment then becomes fundamental to understanding the customer. After asking the question of “how” to break with the rules of the game, the question remains: “who” is best able to develop a breakthrough strategy? Overall, it appears that it is mainly initiated by start-ups, which have a strong

12 Translation by the authors.

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interest in destabilizing the historical players. These are often digital companies that have developed a platform business model (see Chapter 2 for more details), such as Uber, Airbnb, etc. Indeed, there is a certain advantage for new entrants in the ability to carry out such strategies. The entrepreneurial qualities and ambidextrous nature of breakthrough strategies, on the other hand, raise questions about the ability of established companies to carry out these breakthroughs. This leads to numerous changes for market players. First, they involve changes for consumers themselves, who do not always assess the benefits of a new product or service resulting from this strategy. The latter must break with their consumption habits and this represents transfer costs. In addition, they involve changes for existing companies, and their network of historical partners, in terms of activity, resources, structure, etc. Beyond these difficulties for external stakeholders, there are internal barriers. These are due to the company’s cultural inertia, its fear of cannibalizing its offer, or destroying previously developed skills (Le Roy and Yami 2007; Moingeon and Lehmann-Ortega 2009). Also, according to Markides (2009), large existing enterprises cannot and should not want to break with the rules of the game and in particular develop radically new markets themselves, for three reasons. First, the innovation process that the breakthrough implies is very difficult to develop in existing companies. Second, these strategies destroy their historical skills and require significant investment. And third, they do not have the entrepreneurial skills to do so. For these three reasons, it would seem logical for large enterprises to leave this to early entrants, who sometimes end up disappearing. Indeed, the most important thing is not necessarily to initiate this strategy, but to be a “consolidator” that contributes to the development of innovation on the mass market: “Thus, even if pioneers are chronologically the first to enter a market, consolidators are the true first entrants. They are the first on the market that really matter: the mass market.” (Markides 2009, p. 181)

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Based on Markides’ (2009) comments, we understand that it would be better to let existing companies focus on exploitation rather than exploration13. However, the breakthrough can also come from existing companies or socalled mature firms (Baden-Fuller and Stopford 1994), even if the literature insists on the breakthrough strategies of challengers and pursuers (Roy 2005). In this case, it is based on the ability of companies to regenerate themselves, as illustrated by the case of Hotpoint in the household appliance sector or Cook in the steel industry (Baden-Fuller and Stopford 1994). In addition, this ability can be expressed when these mature companies are in a crisis situation. For example, Nintendo, a pioneer in its sector, decided in 2005, with the launch of the Wii game console, to break with the rules of the video game sector, in response to the strong development of its competitors Sony and Microsoft (Aurégan and Tellier 2009). Indeed, in a sector characterized by CSFs linked to the existence of a universe, and technological and graphic performance, Wii offers a new gameplay based on high interactivity (the Wii controller) at the expense of lower technological and graphic performance. While this value proposition does not satisfy the traditional user, the hardcore gamer, it allows Nintendo to enter an untapped strategic space (all members of the family) with enormous growth potential. Finally, it also happens that the breakthrough strategy is led by a leader in the sector. This is the case with Pathé’s multiplex cinema development strategy, which broke with the rules of the game in the sector and helped to change consumer behavior (Roy 2005). Faced with these findings, the question now arises: what about existing, mature or even leading SMEs in their sector? Section 1.4.3 provides some answers. 1.4.3. Strategic innovation: what about SMEs? Through this research, we understand that it is difficult for an existing large enterprise to break with the sectoral rules of the game. And SMEs are no better equipped a priori to disrupt the established order. Indeed, in their case, “in the face of peril or an unforeseen situation, the spontaneous reaction consists of ‘clinging onto something’ and sticking to what they know best and know how to do” (Torrès and Gueguen 2008, p. 104) 14. As a 13 Suire (2018) reached a similar conclusion in his study of MIT-labelled FabLabs. 14 Translation by the authors.

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result, there is a high risk, according to the law of proxemics, that the SME manager will avoid changing strategy. This may even discourage them from innovating in general (St-Pierre and El Fadil 2017). What are the main obstacles? How would it be difficult for an SME to transform its environment? There is little academic work explicitly devoted to the study of breakthrough strategies in SMEs. Thus, before detailing the specific obstacles to SMEs, it is important to understand what can explain the failure of a breakthrough strategy. Unlike the majority of cases studied, Detchenique and Joffre (2012) study a case of a failed breakthrough strategy, which highlights proven obstacles. Based on the case of Val de Vire, a French company in the cider sector, their analysis highlights the various obstacles to the strategic regeneration of a company and, in doing so, to the regeneration of a sector in crisis. For the authors, the obstacles to achieving breakthrough come first and foremost from the company itself: – cognitive barriers: linked to the difficulty of challenging beliefs that are firmly anchored in the company’s paradigm; – organizational barriers: linked to the difficulty of challenging established practices, habits, expertise, in short, the company’s routines. This may include, for example, the resistance of salespeople with strong habits. However, the obstacles can also come from the outside: the strategic group to which the company studied belongs to shares a common vision with which it is difficult to break away from. Detchenique and Joffre (2012) underline in this case, the company’s difficulty in distancing itself from regional traditions. These obstacles to regeneration are crucial when it comes to SMEs. Indeed, from a cognitive point of view, it seems more difficult to question beliefs, especially if the beliefs have been formed on past experiences and successes, especially those of the company manager. At organizational level, it is the questioning of the way of doing things, which is part of routine that can impede change. In the specific context of SMEs, the manager’s leadership is essential to overcoming these obstacles (see section 3.2.1). At external level, the specific issue for SMEs is their ability to impose a new vision on the company’s entire value chain or on all the players in its ecosystem.

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In contrast to the approach presented so far, Dumoulin and Simon (2005) take the opposite view by immediately considering how SMEs constitute a context conducive to the breakthrough strategy. This is despite the reproducibility of this type of strategy being ultimately limited. These researchers build on the four main strengths considered by Le Roy and Yami (2004). The first asset of SMEs with regard to breakthrough strategies is the presence of a manager who creates the permanent link between strategy and operations. This would make it possible to overcome the organizational obstacles observed by Detchenique and Joffre (2012). The second advantage is the low formalization of the structure, which avoids the rigidities and inertia that characterize large companies. The third asset is the ability to react quickly to the SME’s environment and the fourth is SME’s good knowledge of its own resources and skills. SMEs, often specialized, have a high level of expertise. Based on their study of a company that has led a breakthrough strategy, largely based on intuition, Dumoulin and Simon (2005) suggest another possible asset: reputation, which has played an important role in the strategy’s success. To summarize this section, we wish to note that, if the breakthrough strategies are a priori more favorable to start-ups, SMEs nevertheless benefit from significant advantages on the condition that they are exploited and that they do not allow themselves to be dominated by the actors in their environment. 1.5. Conclusion This chapter returns to the fact that the relationship between SMEs and their environment is a classic strategic issue. It highlights the fact that in order to define its strategic positioning, SMEs must strike a particular balance. This balance can be between, on the one hand, listening to the rules of the game in their environment, traditionally perceived at sectoral level, and, on the other hand, relying on their own strategic resources and capacities. We also pointed out that strategic literature has evolved in the conception of this balance. While traditional approaches tend to over-determine the role of the environment, leading companies to follow sectoral rules of the game, RBV approaches allow for an emancipation of the environment. They offer the key elements to a positioning based on the company’s resources, skills and intention. We have also seen that this duality must be challenged in a context of hypercompetition and, more broadly, of major upheavals. In our opinion, the approach that makes

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it possible to better understand this dual constraint, that is to take the environment into account and emancipate oneself from it, leads to placing innovation at the heart of the strategy. It is not only technological innovation, which accompanies the acquisition of a sustainable competitive advantage through the differentiation of the offer, but also business model innovation, which accompanies the acquisition of a succession of temporary competitive advantages. The review of the relationship between SMEs and their environment through these three approaches to strategy allows us to identify some recommendations for SMEs. Through traditional approaches, we retain that SMEs must listen carefully to their environment. This requires environmental scanning and attentive listening to weak signals. However, this is not enough: analyzing the environment requires a form of imagination and creativity in order to make strategic sense of it. Due to an SME’s limited resources, this strategic meaning can be removed from a collective analysis. However, the strategic sense is not enough: listening to the environment may require rapid reactions in times of crisis, difficult management decisions, without derogating from its strategy. Chapter 2 will return to these questions in light of economic change. From the second reading grid, strategic intent and RBV, we argue that SMEs can emancipate themselves from their environment if they rely mainly on their distinctive resources and skills. Indeed, thanks to the proxemic management of its resources, SMEs are able to mobilize them effectively, whether internal or external15. Finally, from the third grid, which highlights the role of strategic innovation as a way of emancipating oneself from the environment in a hypercompetitive context, we stress that, a priori, this context and analysis framework seem less favorable to existing SMEs and give greater value to the company being created. Finally, we were able to consider many advantages, if only because the SME is intending to develop a breakthrough strategy. In short, if one of the approaches to be retained is that if “the key to victory is the adjustment of performance” (Slywotzky 1996), even more than a change in strategy, it is therefore a change in behavior that the SME must consider, especially in times of change.

15 To illustrate the importance of mobilizing external resources, we suggest that readers refer to the appendix to Chapter 1 (section 1.6): the interview with Emmanuel Exbrayat, CEO of Perlimpinpin Designers Limited.

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1.6. Appendix: from the French province of Drôme to London, becoming an entrepreneur by using cultural resources Interview with Emmanuel Exbrayat, CEO of Perlimpinpin Designers Limited. Serial entrepreneur since his teenage years, first working in nightlife (dancing, live shows), then working in the trade of musical products, but also in corporate communication, Emmanuel Exbrayat, self-taught and passionate about music, created his latest company in London in 2013. Perlimpinpin Limited uses technologies from the video game, entertainment and amusement park industries to create immersive experiences in real, permanent or ephemeral spaces. The company is creative in three ways. First, it thinks about the new interactions made possible with technology (touch surfaces, contactless technology, augmented reality, etc.). Second, it creates educational content on a wide variety of themes (museum visits, selective sorting) in order to promote learning by visitors, children, etc. And third, it creates the music that supports events. Since 2012, the founder has been developing a major parallel event, The Five Tribes Experience. It is an immersive show where the spectator is the privileged witness of a futuristic and creative adventure combining theater, music, writing, games and new technologies. This adventure addresses topics characteristic of some of the changes facing our economy: “How can we (re)think about living together? How can we give a more central role to individual values and education? And how can we use the arts as a source of increased awareness?” explains Emmanuel Exbrayat on the website dedicated to the show. This company, which is part of the cultural and creative industries, is developing in London, while the founder comes from a small town in a French province, and “no one in my family has ever gone beyond the borders of France”. Why then did you go to the other side of the Atlantic to create it? Emmanuel Exbrayat – The Perlimpinpin Designers project and the show The Five Tribes Experience in London are the result of my training as an entrepreneur, but also of how I am as a creative and artistic person. Let me explain. When I opened my first music store in the 1990s, I quickly realized that the place was important – something I learned on my own without a

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university education. Although the store was quite successful, the city was far too small for this type of activity. So, when I opened my second store, I moved to Montélimar, a more dynamic small French city with more development potential. I also created a communication agency focused on the development of educational tools based on video game technology. With my employees, we then developed real high level technological expertise. However, we did not know how to “share” our “know-how” with prospects. We would have had to go to a larger city to attract new customers through the network. At the time, Lyon was the city that scared me a little. It was the representation of what “The City” was, in capital letters for a person like me, who came from a small town. Then, the 2008 crisis gradually overcame our activity; I went bankrupt in 2010 following a suspension of payments by a major customer. I lost a lot. It was my former employees who came back to find me to develop a new activity and, there, I settled in Lyon. A friend of mine then invited me to work with him on an important project with BNP Paribas and Roland Garros; and it worked. Then Citroën called us up right away, followed by others and so on. In six months, everything worked out impressively. My first experiences in the performing arts help me to develop cutting-edge technological products dedicated to events. That said, the professional hit I had taken as an entrepreneur of the communications agency had left a particular impression on me; and I wanted and, I would even say, needed to create by and for myself. Indeed, I realized that surrounding myself with artists to develop a project for one of my clients did not make me an artist, but an entrepreneur. I needed recognition, not because of an economic success with a good turnover or employee satisfaction, but because of my imagination and my ability to implement them. So I started creating The Five Tribes Experience show. And one morning, I woke up and said to myself: “It’s not in Lyon that we should create it, it’s too innovative, it’s too big, I have to go to London.” I didn’t really know the city, and then I regretted not having been able to meet people of a certain social status, to go abroad, not to have learned languages. London was obvious to me. I wanted to learn, to become someone else. I then created a new business in London: Perlimpinpin Designers. It consisted of creating immersive learning paths based on new technologies, with an underlying message linked to my values (education, culture, etc.), which I had missed in short. Given my background, my clients were still organizations in France, but I was thinking about the projects from London.

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At that time, I was a course designer, with a team of technicians, illustrators and curriculum developers from all over the world, based in London and France. And, surprisingly, I realized that, for my clients, I had become a “star” against my will, but also an artist, simply because I was now based in London. Goodbye to the status of a small provincial technician! Indeed, at the time of my last activity in Lyon, my clients were event and communication agencies in Paris. These agencies called companies in the province to respond to requests from their own clients. However, when I went to London for the Paris working meetings, my status changed. In itself, I was the same, but I had become “the London business that came especially for them”. So I understood that there was an aura around the city of London. It also allowed me to appreciate that, to develop business with France in the event industry, knowing that everything is happening in Paris, it was better to be either in New York or London, to play on the image. On the other hand, the other side of the coin was new tensions with some clients, who were no longer the “stars” during the meetings, and this was not beneficial to our collaboration. The Five Tribes Experience is a Perlimpinpin Designers project, but on your own account. What did France and London bring to the show? France and London, in fact, are complementary. I have devised a strategy for my company. I work with French clients on creative learning path projects. I am learning a lot of useful things for my show. Then, in London, I create the show; I am an artist and no longer an entrepreneur. Beyond that, I must point out that the aura of the city of London mentioned above is not just about the name when I am in meetings with my clients. I see that there is a certain energy. I live in East London, where many artists live. Everywhere, there are people who create. Creation is their daily life. You go to buy your loaf of bread, and you meet a writer, a musician, a professional dancer, etc. In my performance, I feel like I’m in Charles Aznavour’s song La Bohème. East London is my Parisian Montmartre. All cafés are used as coworking areas. Also, any freelancer can arrive with their computer, connect to wifi, work and create. I didn’t find that anywhere else. The other spaces I know are rather cold, and, despite everything, very business-oriented. France is very square, things are very organized, the spaces are clearly delimited.

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Here, I feel of a different mind. As a result, this creative energy is present in my team. Before, I was the driving force behind the project; but I paddled alone in an ocean where people didn’t understand what I was doing. Today, I am in the middle of an ocean with a real competition between boats. And some are very far away, I can barely see them, but they pull me out. So there is more competition here in London, but there is a significant market, with customers who have experience in shows and very creative projects. In short, it helped me to sharpen the project. This has been very useful, because the product does not exist. It is totally new: it combines a show, an immersive experience for the viewer, as well as a book, a game and a community on social networks. What interests me in London is that all our ideas, even the craziest ones, can be proposed. There are people working on converging topics (shows, experiences, etc.). We see a lot of things emerging everywhere. There is a real excitement that can be found here. London is 70% foreigners, multiculturalism is a real strength. Rent is expensive, however. So there is a selection in short in relation to that. You have to want to stay here to set up projects. In conclusion, do you consider the city, London, to be a strategic asset for your project? Yes, for several reasons and first of all, because there is an energy. Then you can find all the skills you need. Finally, there are many projects being created in all fields; there is emulation. I have the impression that, in these big cities, the engine runs faster, so people are attracted by the same pace, and that suits me well.

2 Stimulating the Innovative Capabilities of SMEs in an Ever-Changing World

2.1. Introduction In Chapter 1, we saw how changes in the SME environment can weaken them and how difficult it is for them to make proactive decisions in a context of strong change. Yet, when change intensifies to the point of leading to a real mutation in the environment, action is a matter of survival, and innovation is often the cornerstone. The role of innovation in company competitiveness and the growth of countries is no longer disputed (Baumol 2002), but innovating in a changing world is an increased challenge for SMEs. By the term mutation, we mean the existence of successive transformations in the environment, involving those of a profound and enduring level. These are generally complex developments at different levels: technological, economic and social. They are characterized by an evolution in economic and social regulation. They sometimes even involve a crisis. The impact of these changes was already questioned in the 1980s, at the time of the Ford crisis and the birth of post-Fordism (Piore and Sabel 1984; Leborgne and Lipietz 1988; Coriat 1990). It was then a question of considering the consequences of the shift from one triptych (mass production – mass consumption – standardized products), to another (flexible production – individualized consumption – differentiated products). However, the very use of the term “post-Fordism” underlines how difficult it is to characterize a mutation that is in progress and how difficult it is to avoid referring to what existed before. At the time, this reflection reflected

Innovation and Creativity in SMEs: Challenges, Evolutions and Prospects, First Edition. Claudine Gay and Bérangère L. Szostak. © ISTE Ltd 2019. Published by ISTE Ltd and John Wiley & Sons, Inc.

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the desire to understand the transformations of capitalism and their impacts (Benko and Lipietz 1992). It has continued in the work that envisages the emergence of new forms of capitalism (Granstrand 1999; Paulré 2000; Vercellone 2003). This study also responds to the need to study its impact at company level: the transformations of the sources of competitiveness, production organization structures and work organization. The mutations of the time also had an impact on innovation. For example, during Fordism, innovation was characterized by a long exploitation of the results of sequentially conducted R&D. During post-Fordism it was characterized by permanent R&D with increasingly shorter applications. The search for competitive advantages based on the differentiation and permanent activation of the market/product pair then results in a race for innovation, with the result that product and technology lifecycles are shortened. Sometimes it may imply planned obsolescence here. In this context, the dynamic of innovation has a completely different face (Gay 2012). However, the flexible production paradigm has highlighted another phenomenon, namely the increasingly important role played by SMEs, particularly in the framework of districts and other territorial innovation systems (Piore and Sabel 1984)1. Since the mid-2000s, the economic situation has again undergone significant changes, at a pace not seen since the end of the last century (Aubert 2014). Technological, economic and social changes can also be witnessed, which act in an interdependent way. They transform companies’ sources of competitiveness and their relationship with the environment. They also translate into new ways of producing and working – to the point that some people are once again considering a transformation of capitalism (Rifkin 2014) – as well as new forms of innovation (see Introduction, “The capacity of SMEs to innovate”) and new ways of innovating. While it is impossible to say whether the current mutations are characterized by a radical paradigm shift, it is certain that, for SMEs, these changes in the environment have a strong influence on their innovativeness/capacity for innovation. Therefore, without being exhaustive, we present, first, a framework for understanding these major changes, with 1 Finally, it must be acknowledged, a posteriori, that post-Fordism has not hindered the role of large companies in favor of SMEs.

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an emphasis on digital transformation, and, second, we develop proposals for SMEs to boost their capacity for innovation in this context. 2.2. An understanding of current mutations As in all major periods of mutation, the technological dimension takes center stage. It must be said that it raises many questions, due to the different evolutions of digital technology (see the current development of artificial intelligence and its integration into the industry). Beyond technological and material developments, the questions mainly concern work, employment, as well as social relations, education and even humanity2. Without entering into debates between futurists and “futurologists” about the emerging world, we want to return here to the changes that SMEs are facing. To refer to the work of philosopher Gaston Berger, we consider that the future cannot be predicted, it is being prepared. SMEs therefore have a strong interest in better understanding these changes. We will therefore discuss here recent developments related to the development of digital technology in order to consider the current consequences for SMEs. We will discuss the issue of “platformization” (section 2.2.1) and its impact on the development of a qualified collaborative economy (section 2.2.2). 2.2.1. Understanding the emergence of the economy of platform As Michel Serres (2013) points out, the advent of digital technology implies phenomenal economic and social changes, although they are not new. It is, in fact, the third transformation of the support/message pair in the history of humanity, after the invention of writing and printing. According to the philosopher, during the previous transformations of the support/message pair, gigantic mutations took place: legal, political, economic and even religious changes. This is also the case in this third revolution. Today, the spectrum of changes is enormous: it goes so far as to transform the relationship with time, with a requirement for immediacy and the

2 The emergence of the increased figure of man, and the resulting theme of transhumanism, is probably the most anxious form of this question. Nevertheless, the impact of technological change on the evolution of professions, work and employment also raises questions about everyone’s contribution in today’s society. In his interview (see the appendix to section 2.5.2), Loïc Moura explicitly raises the question of the reconstruction of the social contract.

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relationship with space, slipping from a space of concentration to a space of distribution. SMEs are not spared and must therefore be aware of what this means for them, especially in terms of innovation. To do this, in this section we develop an economic analysis of the development of the platform economy. So, first, we describe the advent of digital technology that led to this economy, and second, we discuss the mechanisms of this economy in more depth. 2.2.1.1. From the new economy to society at zero marginal cost Technological advances in the digital field are based on multiple advances, which are not addressed here. They are based on scientific and technical developments over the past 60 years, ranging from the application of mathematical theories to communication, the development of new languages for structuring data on the Web, the massive development of ICT (Information and Communication Technologies) and today’s NBIC (Nanotechnologies, Biotechnologies, Informatics and Cognitive Science). The economic impact of these advances was not immediate: they were first characterized by a false start, that of the “new economy”. An expression disseminated and popularized by the media and politicians, before being a concept used and questioned by economists (Brender and Pisani 1999; Gordon 1999; Bomsel and Leblanc 2000; Gadrey 2000), the “new economy” refers to an increase in growth in the mid-1990s in the United States, without inflation and with full employment. In fact this growth was attributed to the development of new ICTs. This “new economy” was then conceived as the basis for a new period of growth similar to the Trente Glorieuses3. It has led to a sense of euphoria in financial markets, particularly the NASDAQ4, and to the emergence of business model thinking (see section 1.4.2). This bubbling feeling came in particular from hopes of productivity gains resulting from better information management. However, since the profit forecasts that created the increase in share prices did not materialize, the bubble eventually burst in 2000. From that point on, the “novelty” of this

3 A period of 30 years after the Second World War in France. 4 To give an example: Netscape’s initial public offering (IPO) increased its share price from $28 to $75 in one day. At the end of its first trading day, the company reached 2 billion dollars of market capitalization.

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economy, its spillover effects and its real impact on productivity were debated to the point of making the term less used. While not really new5, this economy foreshadowed what is now known as the “zero marginal cost” society (Rifkin 2014). At first, the “new economy” did not have the expected effects on productivity gains. This is called Robert Solow’s “productivity paradox”. In statistical work on the impact of information technology on productivity, he concluded in 1987: “You can see the computer age everywhere but in the productivity statistics” (Solow 1987). But, while the impact of ICT on growth is difficult to measure at macroeconomic level, various studies have shown a real impact of ICT use on business productivity (Greenan and L’Horty 2002). It is gradually, as ICTs are adopted, that digital technology has led to an improvement in productivity in some companies, rather than serving as a massive lever for macroeconomic growth. Beyond the adoption of ICT in companies, it was the vast digitization movement that followed that had the greatest impact on the economy as a whole. By transforming more and more private goods (rivalrous and excludable) into public goods (non-rivalrous and difficult to exclude), digital technology has first helped to reduce production and access to information costs, before producing lower transaction costs and access to new markets. The development of digital technology has also created, since the 2000s, the conditions for a major crisis in the content sectors (photography, music, publishing, press, audiovisual). The reproducibility at zero marginal cost of the goods produced by these sectors has called into question their traditional economic model, essentially based on the sale of products (Bomsel 2006; Fiscal et al. 2006; Le Blanc 2006; Bourreau et al. 2007; Sonnac 2009). For example, this is the case for the music industry, which has seen its worldwide turnover fall since 1999, for 15 consecutive years. It has only recently recovered, supported by the development of streaming, without however returning to previous levels6. The recorded music industry being a bilateral oligopoly with competitive fringe, it is mainly very large companies that seem to have absorbed this crisis. Yet, among the many independent 5 In the sense that the surge in market capitalizations in a context of uncertainty about the sources of value inevitably ends up exploding in a bubble. 6 Global recorded music sales were $17.3 billion in 2017, according to the Global Music Report (2018), or about 68% of the 1999 level.

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producers, SMEs that provide 80% of music titles but account for only about 25% of sales, many have closed down. Others have managed to survive thanks to lower production costs (Vulser 2008). Like a domino effect, performing arts SMEs in France saw their concert and festival sales fall by 25% in 2010 (Supertino 2011). Thus, the reproducibility of digital goods at zero marginal cost has called into question many economic models, to the point of legitimizing the free nature of these goods. This was prophesied by Chris Anderson in 2008, then editor-in-chief of Wired magazine: “the ever-decreasing cost of production in the digital economy would drive most companies to donate their products for free” (Anderson 2008). It is on the basis of this constant decrease in the cost of production of the digital economy that Rifkin (2014) bases his analysis of the end of capitalism. However, the development of digital technology in content sectors is only one phase in its development. A second one has followed, based on the development of platforms in all sectors. It poses many challenges, particularly for SMEs. 2.2.1.2. Development of digital platforms: a challenge for SMEs In the wake of Web 2.0, that of social media, the development of mobile Internet has encouraged, since 2010, the expansion of a new organizational form: the platform. The latter has contributed to the “platformization” of the economy or development of a platform economy (Choudary et al. 2016; Lambrecht 2016). In this second phase of the digital transformation, all sectors of activity are affected – and not only those providing content. From a website and/or a mobile application, the digital platform, combined with practices such as geolocation, algorithms, user evaluation and crowd mobilization (see below), enables the development of new services. In these platforms, it is a question of putting in direct contact, in an almost instantaneous way, actors who exchange goods, services and content thanks to the platform. There are different types of platforms: – marketplaces are platforms on which an operator connects sellers and buyers. Amazon, Alibaba or eBay are the best known examples. Some are pure market places, meaning they only play a role in connecting people. Most are also trading platforms that sell their own offers. This is the case for distribution companies, such as Fnac or Darty, which find a way to extend the offer to customers at a lower cost;

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– platforms for exchanging and sharing assets make it possible to pool, or even enhance the value of assets already depreciated, or even access, if we take the example of the BlaBlaCar platform; – networking platforms, such as online booking platforms such as the pioneering example of the Booking.com platform, promote a significant reduction in transaction costs; – content platforms allow people, who are in turn providers and requesters, to share content, as in the case of YouTube; – jobbing platforms bring together labor demand and supply. The consequence is a return to work on task and self-employment; – innovation platforms connect people with ideas/solutions and companies looking for them. All these platforms therefore bring individuals closer to other individuals, individuals with companies, companies with companies. While it is common to talk about disintermediation for these platforms, it is more accurate to talk about disintermediation/reintermediation. Because within the platform, there is not a market, but a focal company that sets its own rules of the game. The role of the focal company is multiple: – to create and provide tools for the development and networking of contributors; – to host, filter, qualify, organize and manage content; – and above all, to play the role of trusted third party by securing payment, sharing opinions and user ratings, or even by geolocating the offer. Sometimes, their role is also to certify this offer (such as Airbnb, BlaBlaCar, Booking.com, eBay, Uber). At the heart of the platform, these focal companies operate numerous economic procedures (Box 2.1). The economic mechanisms that lead the development of platforms are numerous. They explain how the platform’s focal companies create value (Evans and Schmalensee 2017), particularly in many side markets (Rochet and Tirole 2003). We can detail the main ones: – reducing transaction costs: platforms facilitate the search for information, contractualization and even the execution of contracts and their monitoring. It is a procedure that is, for example, at the heart of online booking platforms;

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– cross-side effects: at the heart of two-sided markets, these indirect network effects are distinguished from direct network effects (where the value of the network is proportional to the number of its participants), by the fact that a consumer’s satisfaction with a good sold on one market depends on the size of the demand for another good on a different market, and vice versa; – disintermediation/reintermediation: the platform’s focal companies replace traditional intermediaries, such as traders, between production and the market; – the “prosumer” and the mobilization of the crowd: this concerns the massive integration of the user into the platform’s value chain, by mobilizing the lever of the contribution or the aspiration to share. It allows costs to be passed on to the latter, by assigning them tasks such as the production of content or the assessment of the service; – algorithms: by exploiting massive data, algorithms are now able to deal with increasingly complex problems that only humans could previously handle. Estimates of algorithm sales are estimated at 40% for Amazon, 60% for Netflix, while 70% of French people say they use algorithm calculations to prepare for their trips (Beckouche 2017); – logic of access: by developing an offer that responds to a demand for a function/access and not to a demand for ownership, the platform develops a servitization7 of offers that were previously provided by the acquisition of goods (for example the streaming platform instead of buying DVDs). It is based on a change in thinking good’s property (Rochfeld 2014); – the trusted third party: in their role as intermediaries and payment organizers, the platform acts as trusted third parties, based in particular on identity verification, the rating system, as well as users’ comments and opinions; – the valuation of depreciated or underutilized assets: the platform, by reducing transaction costs, makes it possible to share, value or even make profitable unused or depreciated purchased assets; – Big Data: in two-sided markets, advertiser financing is increasingly being replaced by data monetization. What is known as the “data deluge” has already taken place: in the digital world, it is said, without this being possible to verify, that every other day we would produce as much information as in the entire history of humanity up to now. Box 2.1. The multiple mechanisms of the platform economy

7 See Appendix to section 2.5.1. The interview with Prof. Martine Seville allows us to detail the service procedures.

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The economic development of platforms is gigantic, contributing to the deployment of major market capitalizations such as Apple and Alphabet/ Google. However, it must be acknowledged that it is essentially start-ups that are developing these digital platforms: they are thus taking advantage of this opportunity to position themselves as intermediaries and penetrate sectors that are sometimes saturated. Indeed, one of the main characteristics of digital platforms is their ability to capture value by having access to a multitude of customers to whom to offer various services while benefiting from increasing returns of scale. These digital platforms, which D. Evans and R. Schmalensee (2017) describe as “matchmakers”, are far from being merely technical tools: they support the development of new business models. One of the main effects of this is the destabilization of historical players8, like Uber that has destabilized taxi activity, but also large and small companies and even microstructures. In this context, it is common to speak of “disruption” to mean the way in which these start-ups are able to compete with established companies, or to capture part of their value, through platform mechanisms. Beyond what constitutes a strategic innovation lever, platforms actually promote organizational innovation, because they allow the companies concerned to be flexible and agile in their more decentralized operations (Benavent 2016). Despite all these observations, we note that the effect of the platform economy on SMEs remains poorly addressed in the literature. It is far from being surrounded. However, the very existence of these platforms, developed by new entrants, represents both an asset and a risk for SME activity. On the one hand, these platforms can be perceived by SMEs as a new service offered to them; they provide them with better market access, lower transaction costs and greater readability. On the other hand, they present a risk for SMEs: that of capturing a significant part of their own value. This question arises in particular in fragmented sectors (artisan, services, DIY, construction, catering, etc.), where SMEs are the most active companies. Indeed, these sectors are a pool for the development of platforms for three reasons: – their lack of legibility; – the scattering, even a fragmentation of the offer; – a significant lack of trust. 8 For an understanding of the procedures of disruption strategies, see Chapter 1.

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In this context, digital technology makes it possible to compare, evaluate, control and therefore partially solve these problems. Thus, new platforms are developing, which are dedicated to the artisan industry. What is the impact on the profitability of SMEs? Research is needed to answer this question. We see another reason why platform development has an ambiguous effect on SMEs. The main strength of SMEs, highlighted at the end of the Fordist crisis, is their agility. However, the latter could appear to be supplanted by the mechanisms of platforms valued in particular for their capacity for adaptability and flexibility. Whether they are an opportunity or a threat, we consider that it is the way to develop new business models for SMEs, without specifying its aims. Thus, to better consider the impact of the economy’s platform on SMEs, it is necessary to describe more precisely the type of economy that this evolution accompanies. 2.2.2. Meeting of the platform economy and social aspirations: which collaborative economy? The platform economy is not only based on technological innovations, but also on a combination of technological and non-technological innovations (organizational, commercial and business model). In addition, it should be stressed that it is nourished by new social, societal and even environmental aspirations. Thus, it is reputed to have accompanied the development of a collaborative economy allowing these aspirations to be expressed, as illustrated by the development of e-health (Gay 2018). However, the widespread use of the term “collaborative economy”, which covers companies with very different motivations and purposes, leads to uncertainty and even ambiguity (Servet 2014; Vallat 2015; Lambrecht 2016). This led Arthur de Grave, co-founder of the OuiShare think tank, to declare: “The collaborative economy is dead simply because, as a concept, it has lost all explanatory power” (De Grave 2016)9. This in turn led some authors to define limits and categorize the different types of collaborative economies (Bauwens et al. 2012; Servet 2014; Lambrecht 2016). However, even when, for example, the collaborative economy is differentiated from the lucrative economy, according to criteria such as the search for profit, there is sometimes “a clever mixture of the two” (Vallat 2015, p. 5)10.

9 Translation by the authors. 10 Translation by the authors.

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Without entering into definitional debates, we propose to use the term collaborative economy in a generic way, like all the various practices related to the development of the platform economy. It is the ability for a company to develop and exploit the networking and collaboration of interdependent user groups. On the other hand, we distinguish two extreme types of them, which are related to two different purposes: – Uber-like platforms: the key challenge is to disintermediate to reintermediate while improving a value proposition and satisfying clients’ expectations of horizontality; – platforms aimed at the sharing economy and social innovation: in particular, they support the development of more solidary or sustainable economic models. In between, the boundaries are blurred, with collaborative consumption platforms detailed below. There are also platforms whose challenges are the development of collaborative projects or mutualization between organizations. This concerns, for example, innovation or crowdfunding platforms or competitions, contributing to the development of open production and innovation (Liotard and Revest 2015). 2.2.2.1. The collaborative economy, between uberization and collaborative consumption The term collaborative economy sometimes refers to uberization. A neologism that comes from the name of the company Uber, the term can be dated back to 2014. It is now so popular that it gave rise to an entry in the Collins dictionary, where it defines the term as: “to subject (an industry) to a business model in which services are offered on demand through direct contact between a customer and a supplier, usually via mobile technology.” It should be noted that Uber is not the first company to have developed this economic model. Rather, it would be the Booking.com site, a hotel reservation site that has replaced the yellow pages by displaying room availability in real time. That said, we are using the example of Uber to better understand how such a platform could disintermediate to reintermediate market players. This platform develops and operates mobile applications to connect users with drivers providing transport services. Its business is therefore not the transport of people; it is a mobility service. As proof, let us look at its value chain: it competes with taxis without owning a single vehicle itself. It exploits

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vehicles beloning to others through a mobile application. If customers find an advantage through a value proposition that guarantees them an efficient and simple offer, the break with the passenger transport sector, particularly taxis, is controversial. Indeed, the latter accuse it of unfair competition, tax optimization and declare the precarious nature of work. Without getting into these debates, we note that at the heart of Uber’s successful business model is a technological innovation, geolocation, which, via a smartphone, tablet or computer, makes it possible to locate the nearest vehicle. If the use of the two-sided market concept is discussed in this case, in view of the link between Uber and its drivers, all the platform procedures described above are present here. Reducing the production steps in the mobility service and reducing transaction costs improves value proposition. The automatic payment made at the end of each journey by direct debit is also a lever for this. The integration of the customer into the value chain through rating options also allows Uber to play two essential roles: as a trusted third party and a regulatory and supervisory authority for drivers’ activities. In this conception of the collaborative economy, coordination is intended to be horizontal: it allows independent drivers to collaborate with the Uber platform and the users of the platform to create value by evaluating the services provided. Beyond the extreme case of Uber, this first type of collaborative economy refers more generally to what Botsman and Rogers (2011) call collaborative consumption. This concerns the organization of exchanges and consumption (group purchases, concierge services, instructions, P2P rentals, resales and donations of objects, bartering, local exchange systems, complementary currencies, etc.), carried out on a rather ad hoc basis. It also concerns different sectors such as housing (shared housing, apartment sharing, housing exchange), mobility (car clubs, carpooling on short or long journeys), energy or food (associations for the maintenance of peasant farming, consumer networks in short circuits, etc.). In this case, the term “collaborative” is first used to highlight the revitalization of social ties within a network or community. Supported by collaborative consumer activists, one of whose leading figures is Rachel Botsman, the central assumption is that this economy is based on trust between people, however unknown it may be (Botsman and Rogers 2011). Thus, Rachel Botsman states:

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Because as its core, it’s about empowerment. It’s about empowering people to make meaningful connections, connections that are enabling us to rediscover a humanness that we’ve lost somewhere along the way, by engaging in marketplaces like Airbnb, like Kickstarter, like Etsy, that are built on personal relationships versus empty transactions. (Botsman 2014) In the case of collaborative consumption, it is therefore an aspiration for horizontality and the revitalization of social cohesion that makes its work, through a sometimes idealized vision of social relationships (Slee 2016). In the context of collaborative consumption, the term “collaborative” is also used because of another social aspiration: to favor use over ownership, because of the limitations of the post-Fordist economic model. Indeed, the collaborative consumption model optimizes the use of goods and services and leads to a reduction in the waste of material resources. For example, a carpooling platform such as BlaBlaCar clearly states the objective of reducing the ecological impact of car use. 2.2.2.2. The collaborative economy, between the sharing economy and social innovation In this second type of collaborative economy platform, social aspirations are more significant and are even at the heart of the development of this economy’s activities. However, this is not a question of drawing a dividing line between actors who would be virtuous and other opportunists. This would not make sense, as the motivations for using collaborative consumption are diverse. Some studies even point out that financial reasons are at the top of the list, just after environmental reasons11. In any case, in this context, the collaborative economy is understood here as a way of consuming more in solidarity, outside commercial and lucrative channels. This type of platform, in which platforms such as CouchSurfing are integrated in the housing sector, or La Ruche qui dit Oui! in the food 11 In 2015, according to the ING survey of Europeans, it is mainly a question of saving money (58%), for the environment (53%), a simple way to earn money (52%), to maintain community links (47%).

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sector, questions, in a more militant way, the economic system. It is generally recognized in the governance movement of the Commons (Coriat 2015). In this case, it is a question of promoting social innovation, an innovation that provides answers to the challenges of today’s society, particularly those related to unemployment, poverty, an aging population, climate change, etc. While platform mechanisms do not shed light, in particular, on the nature of the impact of this economy on SMEs, the collaborative economy can be a source of inspiration for SMEs in terms of two characteristics. The first source of inspiration is the fact that this economy takes into account different social aspirations and developments: – expectations of authenticity, proximity, meetings and participation on the part of the consumer; – the development of alternative collective forms, communities and social networks on the Internet; – aspirations for a change in business model that is more environmentally friendly and reduces waste. The second source of inspiration is the fact that the platform economy is a lever to do better with fewer resources, which is a common problem for SMEs. In order to extend this invitation to take up these changes, we now propose to identify in the case of SMEs how this stimulates their capacity to innovate. 2.3. Evolving in a changing world: how can we boost the innovative capacities of SMEs? This is not the first time that changes have questioned the innovative capacities of SMEs. This is reflected in the title of the article published in 1988 in Revue d’économie industrielle: “Dynamique des PME dans un monde en mutation” (Le Roch 1988). The author lists the various works of the time on the evolution of SMEs in the context of post-Fordism. These show: – the development prospects of SMEs, whose culture was then considered to be conducive to new individual aspirations and management changes;

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– their growing economic weight; – their ability to resist the crisis, in particular through their ability to adapt to change. It is in particular innovation, essentially technological, that makes it possible to overcome “the size complex” (Le Roch 1988, p. 94). The context of current changes, described in the first part, can be perceived as a threat to SMEs, as it is accompanied by sectoral restructuring, with job losses. For example it has a direct impact on companies, and indirectly on the territories and sectors concerned. It therefore presents a risk of the disappearance of a number of SMEs and, in so doing, a dispersion of competences that is harmful to the territories. This is why the public authorities are trying to intervene as closely as possible in companies, mainly within the framework of “hot” public policies, to accompany the crisis, with the aim of maintaining employment12. These may, more rarely, be anticipatory measures aimed at supporting and developing employment with companies and sectors taking into account changes, particularly in the digital age13. These measures are based on a prospective analysis of future developments in sectors, territories and, above all, in the professions in order to adapt company organizations and employee skills as far in advance as possible. 12 For example, through reclassification units, training and employment support for people affected by redundancies, but also through territorial planning. 13 This is the case in France of the AME (Appui aux mutations économiques) scheme developed by the Ministry of Labor, in association with the social partners, company networks and local authorities. This is financial support and support from the State, which can be mobilized at the level of professional branches, territories or companies; it is organized by the Fonds paritaire de sécurisation des parcours professionnels (FPSPPP). This support involves the signing of employment and skills development commitments and the implementation of training. Another example in France is the creation of the Pôle interministériel de prospective et d'anticipation des mutations économiques (PIPAME), which makes it possible, through comparative studies in France, Europe and internationally, to understand the developments in new markets. In 2015, it initiated the study on “Challenges and prospects for collaborative consumption”, setting out prospective scenarios for 2020 and framework recommendations. The MUTECO system, for its part, makes it possible to develop training courses to help construction companies facing economic and/or technological changes, and to support them during the energy transition, digital technology and fiber optic.

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There are only a few examples of successful measures specifically targeted at SMEs (Dietrich 2013). However, beyond these SME support measures, and in view of the risks mentioned above, it is first necessary to detail the specific barriers and drivers of innovation specific to SMEs (section 2.3.1), in order to consider solutions to boost SME innovation in the context of current changes (section 2.3.2). 2.3.1. The barriers and drivers of SME innovation Regardless of the size and stage of the company, innovation is characterized by many barriers. The main barrier is related to the innovative activity’s uncertain nature. Indeed, innovation exposes risks and is characterized by a high failure rate14. Innovation therefore requires breaking with the status quo and creating an innovation culture (Soken and Barnes 2014). This is all the more difficult in times of change, as a withdrawal reflex usually develops. Finally, as evolutionists show, innovation is based on a complex and interactive process (Dosi 1988; Lundvall 1988), based on the accumulation, transformation and production of new knowledge (Nelson and Winter 1982): this de facto reinforces this uncertainty and the difficulties in the implementation of innovation. Many economists have worked on the determinants of innovation (Mairesse and Mohnen 2010). Based on econometric work, they show that these determinants are heterogeneous and numerous, helping to recognize the complexity of innovation. Among the determinants are, indeed, the role of size, as well as the sector of activity. Despite the advantages that SMEs represent in terms of innovation, in particular the agility of their organization and the strength of their motivations, they suffer from barriers to innovation, which should be explained15. 2.3.1.1. Barriers to innovation for SMEs In econometric studies on the determinants of innovation effort, generally approached by R&D spending, the most studied factors are the size and sector of 14 St Pierre et al. (2017) cite a study that puts it at around 70%. 15 We choose to focus on research on obstacles and barriers to innovation in companies in general and in SMEs. There are many of them, but they converge on similar results, which is why we present them sparingly.

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firms. In a highly technological vision of innovation, the positive link between firms’ innovation effort and size is generally explained by fixed R&D costs: these require significant resources and are difficult for small firms, while large firms have the opportunity to diversify R&D opportunities and thus spread risks (Cohen 1995; Cohen and Klepper 1996). However, it is difficult to draw general conclusions from these studies, due to sometimes contradictory results (Rahmouni and Yildizoglu 2011) and due to the differences between industries (Cohen and Klepper 1996) and types of innovation. In research that studies the impact of size on innovation production, that is on R&D16 productivity, the result is indeed mixed. The survey by Pavitt et al. (1987) produced a contrasting result depending on the sector: the ratio of the number of innovations to R&D expenditure tends to decrease with the size of the company, even if it has a “U” shape in some sectors. Faced with mixed results, various studies are developing another approach and examining the barriers to innovation through survey data on firms’ perception of barriers (Mohnen and Rosa 2000; Baldwin and Lin 2002). The advantage of this work is to overcome the barrier that is usually encountered, namely the financial barrier, and to test barriers related to the very organization of the company. For example, in their analysis in Canada, Mohnen and Rosa (2000) tested a variety of barriers to innovation: those related to feasibility and commercialization risks, high costs of the innovative project, financing difficulties, availability of resources to carry out the project, resistance within the company itself, and the regulatory environment. In addition, they showed that the perception of barriers is linked to size, but also to the sector, and to the perception of the competitive environment by companies. Small companies are more sensitive to financial difficulties and the lack of specialized equipment, while large companies are rather hampered by feasibility problems, high costs and generally internal barriers. Among their results, there is one that may seem paradoxical: firms that carry out R&D encounter the major barriers at a higher rate than those that do not. This is consistent with the findings of other studies that show a positive relationship between innovation intensity and perceived barriers to innovation (Baldwin and Lin 2002). One of the explanations for this paradox is that some companies used to innovating have not succeeded in overcoming certain barriers; they therefore speak more easily about it, 16 R&D productivity is understood in this research as the ratio between the number of innovations and R&D expenditures.

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because of their experience. However, companies not very familiar with innovation are not (yet) aware of their existence. Thus, for D’Este et al. (2012), it is necessary to distinguish two types of barriers: – revealed barriers that are related to the direct experience, or experiential learning, of innovative firms; – deterring barriers that effectively reduce commitment to innovation. Based on the CIS4 survey conducted in the United Kingdom, D’Este et al. (2012) also test the influence of a wide range of innovation barriers: they identify 11 factors that could hinder innovation efforts. They group them into four categories: – cost factors; – knowledge factors; – market factors; – others. They show that the dissuasive factors are cost and, above all, market barriers. Companies, on the other hand, are less sensitive to knowledge and regulatory factors. With regard to the effect revealed, linked to the company’s experience, the barriers are more related to costs and knowledge. This reflects the difficulties experienced a posteriori by companies, resulting from their learning about innovation, and therefore being more sensitive to certain factors. In addition, we find that firm size significantly influences the perception of barriers to innovation: large firms perceive them as less relevant than small ones. Furthermore, being a new company increases the likelihood that cost and market barriers will be considered significant. Regarding the impact of innovation intensity, the result is that the four types of barriers to innovation are higher at the extremes: firms that innovate little and those that innovate a lot are more sensitive to them. From this study, we understand how important it is to better analyze the history of SMEs in terms of developing their capacity for innovation, as well as the manager’s perception of the barriers encountered. Another study also sheds light on these barriers in SMEs. Based on their research conducted in France and in three different sectors (manufacturing, service and aerospace), Dos Santos Paulino and Tahri (2014) confirm the importance of financial barriers within the company (for 15.7% of the

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companies in the study), the excessive cost of innovation (for 15.5%), market barriers dominated by established companies are slightly less important (9.5%), as well as the lack of qualified personnel (10.3%). The authors also show that barriers are higher in services than in industry. The originality of this study lies in its demonstration of the greatest importance of nontechnological rather than technological barriers: companies are less constrained by the lack of technological information than by the lack of market information. For the authors, this result is related to the type of innovation strategy pursued in France, largely driven by technology, as well as the innovation culture in France “generally supervised by engineers who leave little room for sales managers” (Dos Santos Paulino and Tahri 2014, p. 78) 17. It is therefore non-technological skills, particularly commercial skills, that the barriers affect most, as they are less well controlled and insufficiently combined. One of the authors’ recommendations is therefore to strengthen commercial skills and, above all, to better combine them with technical skills in terms of human resources. This may involve recruiting more technical sales representatives or setting up an organization more conducive to this combination (regular training of the staff concerned). In all these studies, the most commonly cited barriers are cost, funding difficulties and access to resources. This highlights the major barrier to SME innovation: resources. Moreover, we note that innovation is still perceived as an issue of an essentially technological dimension, while commercial resources are a disadvantage for many companies, particularly in the French context. The development of research on the barriers perceived by companies has made it possible to significantly improve the detailed knowledge of the barriers to innovation compared to traditional econometric and monetary approaches that cover a limited number of variables. They open the door to a more clearly based approach based on the resources and skills specific to innovation in SMEs. 2.3.1.2. Key factors for success in SME innovation Despite the barriers, it must be noted that SMEs are at the origin of many innovations. In contrast, innovations led by SMEs are more often nontechnological and incremental, rather than technological and radical, and as a result, are less visible and recognized. It is often a question of imitating competition or reproducing what the entrepreneur already knows, having “an 17 Translation by the authors.

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original location, a particular involvement or a slightly different form of organization and distribution, a particular approach to customers or a minor addition to the product offered” (Julien and Carrier 2005)18. This underestimation should not lead to the belief that SMEs have a low capacity for innovation, despite the fact that SMEs have many advantages in terms of innovation. Very early on, Scherer (1984) suggested that the strength of innovation in SMEs comes from their structure and organization. Unlike large firms, which can be blocked due to bureaucratic behavior, Scherer (1984) shows that the innovation benefits of SMEs are: decentralization of their decisions, employee participation, systemic behavior, direct and informal relationships with the market to capture ideas. This is also suggested by the evolutionary approach: given the tacit dimension of knowledge, the flexibility and informal organization of SMEs are an asset for innovation. This characteristic is an asset both internally and externally, in the company’s ability to benefit from externalities of knowledge from its environment (Audretsch and Feldman 1996). Indeed, like large companies, SMEs, particularly high-tech SMEs, benefit from cooperation between companies (Mowery 1988). This is confirmed by Lasagni (2012) based on an empirical analysis of 500 SMEs in six European countries. Lasagni found that innovation performance is higher in SMEs that are proactive in strengthening their relationships with suppliers, users, but also customers. However, cooperation is only a guarantee of success in innovation if it is accompanied by the development of absorption capacities (Cohen and Levinthal 1990). In a systemic approach, St Pierre et al. (2013) identify resources and capacities necessary for SMEs to innovate, based on a sample of 123 manufacturing SMEs. This stimulating analysis is based on the in situ observation, over more than 10 years, of SMEs that have experienced strong competitive pressure. It makes it possible to analyze in detail the practices, behaviors and innovation strategies of SMEs. From there, the authors developed a model of global understanding of innovation called “Innostic”. While the barriers to SME innovation are more related to the lack of experience in innovation, the relative unavailability of competent human resources and the difficulty of marketing, which somewhat relativizes the

18 Translation by the authors.

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scope of the financial barriers mentioned above, the research emphasizes the constant role of the manager in innovative SMEs, through having a vision and clearly expressed objectives. This study also shows the importance of collecting and circulating information throughout the organization and updating of staff knowledge. We also note the positive effect of collaborations, while the use of technological tools, particularly ICTs, is a plus. However, what seems to us to be most important concerns the lack of a standard profile for “the” innovative SME. St Pierre et al. (2013) point out that there is no magic formula for successful innovation in SMEs. On the other hand, a common point emerges: the importance of a well-defined strategic direction by the leader. Also, if the barriers to SME innovation are linked to a lack of resources, these various studies show that the main assets of SMEs in innovation are their manager and an organization that allow entrepreneurial dynamics. This conclusion explains why in the following chapters we will focus in particular on leadership. 2.3.2. Boosting the innovation capacity of SMEs in times of change Driving SMEs to innovate is a major concern for public authorities. This has led the European Union to make SMEs one of the major levers of the Lisbon Strategy, ensuring a climate favorable to creation. This policy has been extended as part of the Europe 2020 strategy. Given the work we have just studied on the key factors for innovation in SMEs, it would be illusory to think that improving access to SMEs’ financial resources and promoting cooperation, through clusters and other territorial innovation networks, would be sufficient to strengthen SME innovation. As we have pointed out, innovation in the context of SMEs requires multiple and varied ingredients that have financial and technological, commercial, managerial and above all organizational dimensions. In the face of current changes, we therefore propose ways to boost SME innovation. 2.3.2.1. Coping with the risks of disruption: anticipate it so as not to be surprised In 2014, Maurice Lévy, then Chairman of the Publicis Management Board, told the Financial Times: “Everyone is afraid of being uberized” (Cuny 2014). Beyond the question of the deployment of digital platforms, it is clear there is a concern among many companies of seeing their historical

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activity disappear and being victims of disruptive strategies. The reason why this sentence has had so many repercussions is that it expresses a shared but, in general, hidden concern. Because, faced with the risk of disruption, or more generally of a sectoral crisis, the temptation to deny any problem is great. The first edition of “Baromètre économique des risques des PME” by the Compagnie nationale des commissaires aux comptes (CNCC) confirms this trend: in 2017, only 28% of managers considered that their company would be confronted with a risk related to digital transformation. This is a result that worries the president of the CNCC19. The problem with denial is that it inhibits the ability to innovate, especially in small businesses. This is all the more true because they have been successful (Duquesnois 2011) or because they have specific expertise. The speed of the current disruptions reinforces this danger of the status quo, which is reflected in habitual behaviors and a reference to professional standards. Anticipating the threat of disruption requires, first of all being lucid, as in any crisis situation. This is illustrated by Jean-Christophe Garbino, General Manager of the ready-to-wear company Kiabi between 2014 and 2017: “When I arrived at Kiabi, the weak signals were clearly visible. The company had lost its direction and meaning: it was searching for more, instead of ever better. It had reached the end of a model, but it still worked pretty well, hence the denial of reality. The revealing factor was the cotton crisis, the price of which increased by a factor of 2.5 in 2011. This electroshock facilitated transformation. We have communicated the truth in all transparency by presenting an overview of the company’s situation20.” (Cigref, Enterprise et progrès 2018) His comments also illustrate the fact that listening to the environment is not enough, we must transform this listening according to a strategic meaning, as specified in Chapter 1, and it should be communicated within the company. The latter advice is particularly important for fostering

19 Baromètre launched at the 30th annual conference of the profession on November 21, 2017, conducted by OpinionWay among 500 executives or senior managers of companies from 10 to 249 employees. 20 Translation by the authors.

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innovation in SMEs. Clear communication of the innovation strategy is an asset for innovation. In addition, the digital dimension of current changes makes it more difficult to anticipate for two main reasons. First, it overestimates the technical dimension of the threat, whereas it is more at the level of the business model. And, second, the threat of disruption may come from competitors, but more likely from new entrants who have no connection to the sector. Carrying out this risk analysis exercise therefore requires SMEs to listen to their environment, beyond the boundaries of their sector, and to listen to weak signals. If it is appropriate to anticipate change, it is also because disruption takes time to take place. As a result, companies may have time to find a solution. To illustrate this point, the example of Netflix, the video streaming giant, is emblematic. In the 2000s, many DVD rental stores ignored the disruption caused by Netflix, which began its activity by delivering DVDs by post. On the other hand, Netflix, which took many years to become profitable with a business model characterized by high logistics costs, did not ignore the threat posed by video-on-demand. This lucidity and the research led by the company have allowed it to develop streaming video, in addition to its diversification in content creation. One way to listen to your environment is to monitor the periphery of the market, where needs are not fully met, as the most dangerous disruptions often occur there. This requires listening to the customer, even more than to competitors. The disruption and business model approaches offer tools to improve value proposition. For example, the “empathy map”, proposed by Osterwalder and Pigneur (2011), makes it possible to get to know customers better, particularly through a precise analysis of the customer’s activities, expectations and even “pain”. It is easy to use for an SME that would like to explore scenarios of how its business will evolve. Through the Home Depot case (see section 1.3.2), Kim and Mauborgne (1999) also demonstrate the relevance of also analyzing customers of substitute products. Listening to the environment is a way not to be surprised by a disruption strategy. On this occasion, SMEs can find sources of inspiration to really engage in an innovation project.

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2.3.2.2. Innovation as a means of consolidating existing activity and cultivating independence In times of change, the difficulties in innovating are increasing. The temptation is great not to innovate, to continue doing what you know how to do well or what has been the source of past success (Renard and Soparnot 2012). This is particularly true for SMEs, which are more sensitive to hostile environments (Covin and Slevin 1989; Torrès and Gueguen 2008). This is shown by Duquesnois et al. (2010), or Celhay and Cusin (2011), in the case of SMEs that are both prisoners of their past success and resistant to innovation. The solution for an SME is not necessarily to lead the disruption. The challenge may be to continue innovation, rather than to remain inactive, in order to consolidate its acquired positions. If the disruption caused by potential new entrants is temporary, it ensures a rapid return of customers. The challenge may also be to strengthen its independence, in a context where SMEs are dependent on major clients who are themselves destabilized by current changes. In the plastics sector, a fragmented sector largely made up of SMEs, some have developed an innovation strategy in order to free themselves from a locked-in position vis-à-vis prime contractors (Debrand 2018). These are differentiation strategies, driven by the advanced expertise of these SMEs, but also the integration of digital technology and robots. This strategy allows them to protect themselves from competition through costs, and it helps to rebalance their relationship with purchasers, to the point that “gradually, the dependency relationship can be reversed through innovation” (Debrand 2018, p. 22). To avoid upsetting the company too much, another solution is to support what Alan Lewis and Dan McKone of L.E.K. Consulting call “edge strategy”. The aim is for companies to examine the possibilities of exploiting the edges of their markets. The first tactic is to “squeeze” the product or service to generate more revenue. This is the accessory method widely used by Apple. It is fully accessible by SMEs that recognize their customers’ needs. Another edge to exploit involves linking services with existing products. It is a strategy that can develop into an SME if you think carefully about how to capture the value created by the service. The third edge is what the authors call the “client’s journey”. It is about understanding what problems customers solve by buying a product or service. This can help both to focus on the essentials and to develop important associated services. The authors take as an example ESAB, a manufacturer of welding tools: its

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welding expertise also allows it to sell welding training and engineering consulting. In agriculture, the exploitation of edges is to be taken at first sight: more and more farmers are renting the unusable edges of their fields to renewable energy production companies. Of course, the difficulty of the edge strategy is not to add innovations just to improve the existing value proposition. This strategy must create new sources of value and capture them by finding an appropriate earning model model. In any case, this strategy has the virtue of reducing the current obsession with the search for revolutionary ideas. 2.3.2.3. Diversifying forms of innovation: going beyond technological innovation It is increasingly recognized that innovation develops in different forms, going beyond the myth of technological innovation. While it is always important to develop technological innovations, particularly for specialized or SMEs on niche market, it is first necessary to integrate them into a broader reflection in terms of business models. It is also necessary to conduct a reflection in terms of commercial and organizational innovation. This is a lesson to be learned from the Uber case: what makes the strength of the model is not, in itself, technological innovation, that is the use of geolocation, but its combination with other factors, around a clear value proposition for improving uses. This global approach remains accessible to SMEs, given their proxemic and integrative management, from the moment the manager clarifies this strategy and the entire organization takes it over. Thinking about innovation in a global way also implies referring to the notion of strategic innovation and the business model (see Chapter 1). It also means thinking, rethinking and therefore, constantly reconfiguring the SME’s activity and the outlines of its business. The central axis of this reflection is not necessarily the traditional market/product pair. Instead, the resource-based approach seems to make it possible to have a more original reflection, as illustrated by the case of Capsa Container, which is innovating around a main resource: the redevelopment of containers (Box 2.2). Capsa Container is a company in the Lyon region of France, specializing in the redevelopment and transformation of maritime containers. It offers innovative and customizable modular solutions to professionals and private individuals. Its director, Cédric Denoyel, was awarded the E&Y Entrepreneur Award in 2016.

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The history of Capsa is first and foremost full of expertise. The company was initially created by Cédric Denoyel’s father-in-law, which initially specialized in the rental of containers for construction sites. It was then a story of a meeting with an artist who proposed to the director a collaboration following the 2005 Fête des lumières (festival of lights). Today, Capsa is a growing company. In a few years, it has managed to grow from 2 to more than 50 employees. Its concept is simple in appearance: it reuses and redevelops a unique object, the container, by diverting it from its use for various uses. It is both a revolutionary idea and in the spirit of the times (valuing assets already depreciated, giving a second life to an object rich in history). But it is not so much the good idea of promoting containers that counts, but the fact that it demonstrates a diversity of uses that serves its customers (housing and storage, but also welcoming, exhibiting, producing, working) with the flexibility, modularity and creativity that a container allows. Through these multiple uses, the company reaches various categories of customers: offices, schools, hotels, factories, suppliers, etc. This strategy must require the company to constantly listen to its various customers, whose diversity of uses requires an understanding of the various ins and outs. For example, the use of containers in pop-up stores thus requires an understanding of the evolution of the distribution business. A good idea that the company demonstrates is its decision to control the entire production chain from the design office to production and marketing. Capsa relies on the multiple skills of its integrated design office (with construction project managers, designers, engineers, workshop managers and design and implementation managers). One of the characteristics of this company is to work in the framework of multiple cooperations, for example with Patricia Lasserre, interior designer and director of CREAD, to produce container rooms for hoteliers (Sens Art Container), in surprising and unexpected places. This is therefore a vector of an alternative tourism. Box 2.2. Innovating around an object: the case of Capsa Container. Source: (Hanssen 2014; Obs 2014)

Capsa Container is the example of a company that designs innovation in a global way around a resource to be developed. Thus, it is a company that does not position itself in a single sector, but in several, building an ecosystem around it. While it does not strictly speaking pursue a strategy of disruption, in the sense that it develops a new activity, it supports its clients’ disruption strategies by allowing them to break the codes of their sector, as in the alternative tourism sector.

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2.3.2.4. Seizing digital opportunities Many reports show that SMEs are lagging behind in digital technology and are using it as a growth lever. This is the case with the Monitor Deloitte report (Deloitte 2016), which highlights that French SMEs are lagging behind their European counterparts in the digital field. This delay poses problems for them in terms of overall visibility on the Internet, presence on social networks, online sales21, but also in terms of integrating this channel into their value chain to improve their productivity. This is especially so since French consumers are more likely to use digital solutions than French companies. The report by the Lyon Chamber of Commerce (CCI Lyon 2015), published in 2015, highlights a lack of awareness of the digital benefits and an overestimation of the costs and complexity associated with the development of digital technology in SMEs. This issue of French SMEs lagging behind in the development of digital technology is a policy concern on the agenda of public actors. But developing digital technology in SMEs is not an end in itself, as illustrated by the two main testimonies in this chapter (see the appendices in section 2.5). First, it is a way to improve the SME’s value proposition and its relationship with its customers. Beyond the development potential of e-commerce, digital technology enables SMEs in particular to reach consumers more easily and to better understand their needs. This is proving to be a strength in a context where the shortcomings of companies, particularly French ones, in terms of their commercial resources have been highlighted. This possibility of improving customer relations with digital technology is all the more important as, with the development of online sales, marketing, with editorial content issues, is regaining its reputation. This can be achieved by developing platforms that foster more participatory relationships with the customer. This strategy may even make it possible in the long term to revitalize the sales force in situ. Rossignol, which has made significant investments in digital tools, now makes the majority of its sales through its distribution network.

21 For example, the report shows that SMEs are four times less likely to make online sales than large companies (11.5% of SMEs compared to 47% of companies with more than 249 employees). It also shows that in 2015, one in eight SMEs received online orders for a turnover of almost 3% of the total turnover of French SMEs, half as much as online sales in Germany during the same period.

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This strategy is not just for large companies. In order to build a business relationship based on content and customer experience, there are digital solutions that are not expensive for SMEs. For example, uploading videos to YouTube is easy and inexpensive. This type of digital strategy, essentially based on social networks, also makes it possible to support niche strategies: small companies, even artisans, as well as young digital start-ups, can thus make themselves known. The aim is to exploit innovative solutions in a more open economy. The negative effect of this type of tool is, on the other hand, that it induces greater transparency, which must be controlled. 2.3.2.5. The collaborative economy as a source of inspiration: innovating in an ecosystem As we have seen in section 2.2, in digital technology, though the platform economy is a lever for developing a more collaborative economy, it is far from being the only lever. It sometimes happens that the digital mutation even reinforces an already existing collaborative economy project. This is particularly illustrated by the case of PME Centrale (Box 2.3). In the case of of this French SME, the collaborative dimension has been at the heart of the company since its origins. We note that, beyond the traditional advantages of cooperation for SMEs, the innovation process itself benefits from such openness (Vanhaverbeke 2017). As the head of the PME Centrale tells us in the foreword to this book, the origin of the company is first and foremost the story of a first failure. It is also the story of an intuition, if not a conviction, that sprouts very early in the leader’s mind: “Together we go further.” Faced with large companies, his idea is that SMEs have a strength, that of being able to group together and work together. At the beginning of the 2000s, Gaëtan de Sainte Marie created a company to share resources with construction companies. His idea was not to create a simple purchasing center, whose contribution was to increase tenfold the negotiating capacities of a network of members. He initially conceived it to be a collaborative adventure where the members were real partners. Moreover, in the company, there is no buyer; it is the buyers of each member company who work for the others. Today, the SME has 10,000 members who represent 150,000 employees. The savings achieved by members of PME Centrale are on average 27%. In addition to the strength of negotiation, it provides, through its network, a wide range of suppliers to make shared purchases. Since the beginning, the company has diversified its service offer: in addition to purchasing, it offers an outsourced staff committee, an employee training center, a purchasing solution for networks

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(associations, business clubs, federations, franchises) and a sales group management service. The SME has all the characteristics of a collaborative “platform”. But in this case, the digital dimension has succeeded the collaborative project. It is also currently developing its digitization capacities, through various applications that make it possible to improve the service. From now on, its development axes are international deployment, particularly in Europe, a continuation of digitization and a diversification of the services to be shared. In the case of PME Centrale, the collaborative economy is not a threat, it is even the foundation of the company. However, for the manager, this remains a source of inspiration that continues to drive SME growth. In this specific case, it is less the pooling of resources itself that strengthens the project, than the fact of innovating together at the heart of a real ecosystem. Box 2.3. The collaborative economy in the growth of a company: the case of PME Centrale

Innovation in the collaborative economy requires us to move away from the classic pattern of competition, to rethink our competitive space. A reflection in terms of the ecosystem can be stimulating in this respect. An ecosystem is first and foremost a “coalition” of companies linked to each other that provide complementary offers, around a community of interest or a common objective (such as increasing the value of their offers). Ecosystem thinking allows us to think differently about the positioning of a company in relation to its partners. In an ecosystem, a commercial activity develops first to meet an original need, then it generates a multitude of induced needs, which in turn can generate new commercial opportunities. It is a different way of perceiving an opportunity: it is also a different way of perceiving partners around the pooling of resources and skills. From this perspective, there is no limit to the number of elements to be shared. Box 2.4 suggests ways to help SMEs develop an innovation ecosystem. An innovation ecosystem is a new form of understanding the organization of economic activities according to the prism of innovation. It is rooted in a more or less extensive territory; it hosts interactions between actors of various statuses (public and private), of various sizes (large, medium, small) and it brings together technological, human and material assets (see infrastructures) (Guilhon 2017). When one of the actors innovates, it means convincing the whole ecosystem, that is many interconnected actors, some of whom are powerful. Succeeding in transforming this ecosystem is a challenge for all organizations, but especially for SMEs, which can appear as the “Little Thumb”. Faced with

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this challenge, Ihrig and MacMillan (2018) proposed solutions to achieve this based on a study in the pharmaceutical sector. Six steps are then highlighted: 1) identify the main stakeholders and their main needs: it is a question of going beyond the natural focus towards the end customer; 2) outline the stakeholders’ consumption chains: each of the stakeholders will not be satisfied in the same way. In addition, the proposed innovation can change everyone’s positions in the ecosystem; 3) classify the characteristics of the current offer and create offer profiles: some characteristics are non-negotiable (minimum level to be proposed), others are differentiators (demarcation of competition) and still others can cause dissatisfaction. These characteristics do not necessarily meet the expectations of stakeholders in the same way; 4) use profiles to create opportunity profiles: this involves adding a differentiator to each offer and/or removing a source of dissatisfaction; 5) identify stakeholder tensions: the addition and/or deletion of characteristics can have an impact on other stakeholders, resulting in resistance; 6) choose the best opportunity: the objective is to overcome resistance and imagine ways to achieve it. This method, accessible to SMEs, can help them transform their ecosystem in order to develop their innovation. Box 2.4. The transformation of an innovation ecosystem: a challenge for an SME

2.4. Conclusion The current economic situation is characterized by significant changes, to the point that we have considered that they constitute a structural mutation that we have compared, probably to excess, with the transition from Fordism to post-Fordism. We have shown that this transformation is multifaceted: while it is driven by the digital revolution, it is also driven by strong social aspirations of more horizontality in exchanges and more sharing. It contributes to radically changing economic models. This transformation is characterized by the emergence of new economic mechanisms, some of which are new, and contributes to the development of a qualified collaborative economy.

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It is difficult to say whether this economy is an opportunity or a threat for SMEs. While one aspect of this collaborative economy, uberization, may present a risk of destabilization for the latter through the upheaval it induces in and on different sectors, another aspect, that of the sharing economy, may present new development levers, or even a source of inspiration, particularly in terms of innovation. Continuing with our discussion on innovation, the characteristics of this economy seem to us to reinforce the structural strengths and weaknesses of SMEs. In terms of barriers, what limits SME innovation is always resources, especially access to financial resources. While technological resources are still the focus of SMEs, the commercial resource is a resource that needs to be taken into greater consideration, which digital technology can improve. In terms of assets, what favors SMEs is the coherence of the innovation strategy provided by the manager, provided that they have a clear vision and communicate it to the rest of the company. The mechanisms on which this strength of the SME manager is based will be discussed in more detail in chapters 3 and 4. Another asset is the organization of the SME, its ability to mobilize resources, its potential for adaptability and responsiveness, provided that environmental changes do not lock them into a status quo. Without claiming to be exhaustive, the crossover of the characteristics of current changes with the characteristics of SMEs in terms of innovation has led us to present various proposals for boosting innovation in today’s world. These recommendations concern first of all the attention that the SME must pay to its environment, beyond the traditional boundaries of its sector and beyond the observation of its competitors. In terms of innovation strategy and marketing, we have shown that the customer, real or potential, can serve as a basis for this observation. The proposals then focus on the type of innovation that needs to be developed. If technological innovation is a relevant lever to consolidate an acquired position, or even to cultivate its independence from principals, it must be integrated into a more global approach to innovation, placing the business model at the heart of the debate. In terms of improving the efficiency of innovation, we have stressed the role of digital technology in strengthening resources, particularly commercial resources, of SMEs. Finally, if the platform economy can be perceived through digital technology, we have suggested that the collaborative economy is an important source of inspiration for designing a more ecosystem-centred way of innovation.

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2.5. Appendices 2.5.1. Digital transformation innovations for SMEs?

and

servitization:

disruptive

Interview with Martine Seville, Professor at the université de Lyon – université Lumière Lyon 2, in charge of the AURA-PMI project. In your opinion, what are the important levers today for developing SMEs? Martine Seville – To continue to develop, industrial SMEs (now SMIs) must constantly improve the quality and scope of their offer, their value proposition. However, while internationalization has been their preferred means of development in recent years, its real impact on their profitability and survival remains controversial (Martineau and Pastoriza 2016). Moreover, as the possibilities of digital platforms, collaborative economy and extended networks multiply, the proposal of a digital industrial offer becomes crucial, for example, for a French industry lagging behind other countries. Finally, recent work has highlighted the importance for SMIs to seize servitization opportunities (Coreynen et al. 2017). Thus, digital transformation (known as “digitization”), which corresponds to a company’s ability to use digital technologies internally and with the outside world (Tarutė and Gatautis 2014), and servitization, known as the transformation of an industrial company’s “product” offer into a combined offer of “products and services”, or even into a “use” offer of an industrial process (Baines et al. 2013), are two new value creation tools available to French SMEs. These are two interdependent performance levers. Servitization means knowing the customer’s needs perfectly through data exchange and data mining; digitization speeds up servitization (Coreynen et al. 2017) and reduces costs, while simultaneously simplifying standardization and customization of service (Karimi and Walter 2015). Digitization and servitization provision would thus promote the increase in organization performance (Kowalkowski et al. 2017). At the same time, they would increase the price that the customer is willing to pay for a higher quality of the offer, and reduce their costs by increasing their efficiency (Loebbecke and Picot 2015). They would also facilitate their internationalization by promoting access to new markets (Shneor 2012), thus making their offer more differentiated.

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However, recent studies have highlighted the surprising and worrying delay both in terms of digitization (Deloitte 2016) and servitization (Boucher et al. 2014; Dachs et al. 2014) of French SMEs. How can this delay be explained when the managers of SMIs are fully aware of the need to seize new economic and technological opportunities to remain proactive “in the competition”? One of the hypotheses we put forward is that digitization and servitization imply a complete transformation of the SMIs’ business model. This represents a strategic shift, and in this respect constitutes genuine disruptive innovations whose risks are currently being assessed by company managers. It is this obligation to transform their business model that makes them fear, beyond the existing technical difficulties but which they can more easily overcome, that their financial equilibrium, their independence, their mode of governance and even their sustainability will be called into question. Creating value through digital transformation and servitization requires a “strategic realignment” of all dimensions of the organization (Celuch and Murphy 2010) and a business model that can be pivoted. This requires, beyond the dematerialization of processes, increased temporal and spatial flexibility and organizational agility, as well as significant and irreversible investments requiring the use of external funding. The delay in digitizing SMIs could therefore reflect their anticipation of low short-term returns on the digital and service investments they would have to bear, and a significant aversion on the part of their managers to the risks of distorting their business that these processes would generate. These business model transformations can therefore be considered as disruptive innovations with major consequences for the SME and serious risks that managers are currently seeking to assess, anticipate and manage. In your opinion, how can we make up for this delay? We need better support for SMEs. For example, the AURA-PMI project, which brings together the universities of the Lyon Saint-Étienne site supported by the Auvergne-Rhône-Alpes region as part of the “Research Ambition Pack”, aims to rethink the conditions under which SMEs can simultaneously adopt a digitization and servitization strategy, considered as forms of disruptive innovation (Karimi and Waler 2015). Our objective is to remove the scientific, technical, managerial and financial barriers that would

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prevent them from fully exploiting the leverage effects allowed by these processes. The aim is to understand the risks that managers associate with such disruptive innovation strategies as digitization and servitization. It is also a question of helping SMIs to carry out “pivots” to their BM, taking into account their capacity at three levels: first, to articulate their industrial activity with digital technologies, second, to explore the synergy effects of better coordination of their investment choice between digitization and servitization, and, third, to open up to new financiers. For the members of the project team I lead, this meant exploring four interacting dimensions: – aligning the company’s new value proposition with the value offer expected by its customers; – an organizational model capable of changing scale and design to meet the growing demand induced by digitization and servitization and data processing requirements, but which places the “person” at the heart of its functioning; – an economic and governance model that allows the SMI to finance the required investments and “monetize” its new offer; – adapted business intelligence systems. At our level, we are therefore developing targeted actions to support all the actors concerned by these dimensions. Thus, case studies, working sessions with company managers and representatives of public authorities, financiers and consulting and investigation firms, thesis and dissertation topics are proposed or implemented to define the challenges and limits for SMIs. This set of changes is related to these disruptive innovations. This also allows us to collect data, the analysis of which has a dual purpose. On the one hand, it is intended to enlighten the public authorities on the support to be provided to SMEs so that they do not get bogged down in a “valley of strategic death” by renouncing to transform themselves. And, on the other hand, it has an educational vocation among students, in order to train future senior managers in the challenges and limits of these transformations.

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2.5.2. New approaches needed for the digital revolution and innovation Interview with Loïc Moura, expert in strategy, management of transformation projects and speaker to economic, academic and political leaders. After a 15-year international career in finance, innovation project management and sales management, within large groups but also within SMEs, Loïc Moura completed an Executive MBA at EM Lyon Business School specializing in the management of transformation projects. Since then, he has supported Cisco Systems, the world leader in Internet networks, in leading a project in partnership with the French government to accelerate France’s digital transition. He also collaborates with the French Ministry of Education, universities and high schools to create programs aimed at boosting regions via large-scale developments of innovation skills, horizontal collaboration, and social or societal initiatives. Based on your professional experience, how is technological change now essential in order to study SME innovation? Loïc Moura – First of all, it seems important to me to emphasize that even throughout the history of humanity, globalization is a new phenomenon. This global revolution in societies highlights the limits of a model that often does not respect nature, human beings and cultures enough. It must also be recognized that the universalist vision and financialized models are not neutral in the way we approach the digital revolution and the management of this great societal transformation. Take the approaches of Disrupt or Be Disrupted (Morgan 2017; EY 2018) or Digitize or Die (Windpassinger 2017): the digital transition is now presented by lobbyists and multinationals as a vital and urgent need for technological change. The proposed vision is based on a “sink or swim” approach, which is now widespread and yet counterproductive. It raises fears, creates resistance and sterilizes the creativity, adherence and commitment necessary to collectively reinvent models of society and organization. Certainly, society and its constituent human organizations (companies, institutions, etc.) must undergo profound transformations. However the limiting approach and sense of urgency often push them to tackle their

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digital transition by focusing almost exclusively and superficially on the technological angle. This does not allow for the transformation of professional practices, cultures and ecosystems, or ultimately the underlying models of thought and action. Indeed, the digital revolution implies a systemic and strategic approach that goes far beyond technology. To illustrate this point, let us refer to Daniel H. Pink’s presentation on the types of motivation (Pink 2009), a former advisor to Bill Clinton. In his view, there are three distinct registers of motivation, based on different motivational sources and serving different objectives: – motivation 1.0: assumes that humans are biological beings and that they struggle to meet basic needs (food, safety and sexual); – motivation 2.0: assumes that humans also respond to rewards and punishments. It works for routine tasks, but it is incompatible with the search for meaning, the ability to motivate reflection and the willingness to change things. This is a questioning of the Disrupt or Be Disrupted or Digitize or Die approach; – motivation 3.0: assumes that humans also have a desire to learn, create and perfect the world. This is the intrinsic motivation that researchers in the psychology of creativity, such as Teresa Amabile, talk about. This motivation model is one of the main elements in creating a humanistic, responsible and respectful digital society based on competence/knowledge. I am thus defending a particular approach: a digital transformation of society and its organizations, based on a strong intrinsic motivation, liberating commitment, innovation, cohesion and encouraging change management. And this is clearly within the reach of SMEs. The 20th Century managerial model (Taylorism, lean, financialization of models, etc.) was then largely challenged, in favor of a new managerial era much more agile and collaborative. However, this requires a profound evolution of leadership and management styles in order to foster motivation and innovation. The transformation of models begins with our own individual evolution, involving the development of our personal resilience, our understanding of the world, our knowledge and skills. Hence the need to create, within the framework of the digital revolution, a more committed vision of support, showing a different path and not

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rejecting sole personal responsibility, the ability to understand, to train, to progress, to succeed, etc. This humanistic approach is a long-term one, for individuals, companies and society as a whole. It is a question of successfully guiding the digital revolution, by positioning it on a constructive motivational register, to reduce, if not annihilate, fears and unleash the potential of individuals, organizations, territories, etc. Because of the privileged links that SMEs have with their partners, and the proximity that exists between the members themselves, these companies can, in my opinion, play a pioneering role. Why is there an urgent need to change the model and approach to managing companies? It is worth recalling here the impacts of the digital revolution on employment, presented in Davos in 2018 by leading political and economic decision-makers and by the World Economic Forum. The world is changing at a high speed. However, the novelty lies not so much in the acceleration of change as in its nature: we are experiencing the end of a model. The model of economic growth that has driven globalization now seems to be leading the world to an ecological and human impasse. At the same time, the digital revolution is profoundly changing all our references: our relationship with time and space, social and human relations, cultures and professional identities, etc. We therefore need to change the paradigm to invent new practices and new models of organization and management. Yet, we are witnessing an increase in the power of management methods that respond only to the model of neo-American capitalism (Albert 1991)22, and is reflected in strong impacts on the work, social framework and education systems of all countries. For example, we are witnessing the uberization of employment, which is the result of a combination of technological and financial factors. The platformization of companies, the economy and institutions is often even perceived as the ultimate stage of digital transformation of organizations. Artificial intelligence allows companies to divide and model tasks and trades, regardless of the level of complexity.

22 Michel Albert is a member of the Académie des sciences morales et politiques along with Yvon Gattaz.

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These observations lead to several statements. Firstly, a large number of trades will disappear in the coming years, in all sectors of activity (Figure 2.2). Moreover, we know that the precariousness of employment is, among other things, linked to the quest to optimize results by reducing fixed costs, and in particular the wage bill. This pushes organizations to outsource more and more of their human resources, thinking in terms of task or mission, and looking for the best flexibility/cost ratio. The second observation is that digital technology facilitates this evolution, by creating multiple statuses that facilitate external and occasional collaborations. On the other hand, it raises new issues of protection and workers’ rights. While digital technology is transforming trades and can destroy jobs, it is not in itself responsible for the precariousness of the labor market, which results from political and management choices made by companies. However, we would like to point out that this approach to digitization, which may at first sight appear to be a godsend for companies, does not allow for the sustainable management of their human resources, i.e. their main asset. It also raises ethical and societal questions... In which society do we want to live and work? It therefore seems essential to undertake a real overhaul of the “social contract”. Humanism must be placed at the heart of this reflection, in order to allow the emergence of a responsible digital society. You mentioned that some trades would disappear. Nowadays, what are the most significant consequences that a young person should pay attention to? The future of society depends on its youth. However, much research shows that the evolution of technologies and the need for skills is challenging the education system to define programs to meet the future needs of the economic, industrial and intellectual world. Today, it is estimated that 65% of children entering elementary school will work in occupations that do not yet exist23. Beyond education, it raises the question of how to learn and the skills that need to be developed. The priority, historically focused on disciplinary skills, is thus increasingly

23 Karl Fisch and Scott McLeod in their joint research “Shift Happens”, cited by the World Economic Forum in their publication The Future of Jobs.

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shifting towards interdisciplinary qualities, such as creativity, collaboration, initiative and the individual’s confidence in their own capacities and development potential. The individual gradually emancipates from the traditional constrained frameworks of personal and professional development to enter in an era of uncertainty, where they are obliged to ensure their own adaptability. This can exacerbate the individualism which is already very present in our society. Generations currently experiencing working life are already feeling this pressure related to the evolution of their professions and professional practices as part of the digital revolution. Figure 2.1 shows the extent of the ongoing automation of jobs, which is accelerating, according to the OECD (OECD 2018) and Oxford University (Frey and Osborne 2013) studies. Automated occupations at a rate of more than 70% (disruption/risk of disappearing) Automated occupations rising from 50 to 70% (profound transformation) Automated occupation rising from 0 to 50% (partial transformation)

Figure 2.1. Percentage of occupations experiencing disruption by the use of digital technology in OECD countries and their automation rates. Source: OECD

The OECD stated in 2016 that 40% of workers who had received less than an upper secondary education were employed in jobs at high risk of automation, compared to 5% for college graduates. However, a study by Roland Berger (Dujin 2014), devoted to the categories of jobs impacted by the digital revolution, shows a contrario that it is middle managers and the middle classes who are particularly affected by the partial or total automation of their jobs.

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In France, the strategy consulting firm Roland Berger estimates that 3 million jobs could be destroyed by 2025. Many professions requiring a high level of training, such as radiologists, lawyers, consultants, middle managers, logisticians, etc., are likely to be “disrupted” in the coming years. Figure 2.2 presents a diagram of the business typologies and their level of exposure to automation. Share of highly automated occupations (>70%) within each occupation group

41.7%

Occupations that are very likely to be computerized or automated

Transformation industries

19.8%

Agriculture and primary sector Food industry Construction industry

Occupations at risk of being automated via the use of computers, robots and Big Data

18.6%

Administration jobs

Commerce and distribution

Transport and warehouse occupations Mechanical, electrical and electronic

Personal services

3.3%

Higher medical professions Senior management Social services

Occupations unlikely to be automated Artistic and media professions Surveillance and governmental roles Teachers Engineering

Middle management

Paramedics

Legal occupations

Research Technical occupations and programming

Average probability of automation

Figure 2.2. Probabilities of automation by occupation established by Carl Benedikt Frey and Michael A. Osborne (2013), applied to the French employment structure (INSEE). Roland Berger’s analysis from October 2014 (Dujin 2014)

For example, many researchers predict that within 20 years, there will be virtually no more employees in the banking and insurance sectors. There is even a mapping of professions at very high risk of disruption in finance (Kishan et al. 2017). In short, from taxi drivers to farmers to maritime transport, all occupations are changing.

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Some are already feeling the effects of this revolution; others are questioning each other or worrying: how can we reorient ourselves in order to bounce back? What skills should be acquired? Still others, the vast majority, do not yet see how the digital revolution could impact them. However, this employment revolution has begun and will not stop. According to INSEE24, France currently has 29.55 million working people. According to OECD projections, if 14% of jobs are destroyed by digital technology in the coming years, the country will have more than 4 million additional unemployed citizens. Not to mention the more than 10 million people who will see their jobs automated increase by 50 to 70%. Thus, a total of 14.2 million French people, from all socio-professional categories, will be strongly impacted by the digital revolution. We are already talking about “robot managers” managing workforces. The purpose here is not to stress young and more experienced workers in SMEs and large companies. However, this perspective makes it possible to become aware of the scale of the ongoing revolution, both at company and society level. To counterbalance these projections, it should be noted that other analyses highlight the job creation generated by new technologies. Nevertheless, the GAFA (Google, Apple, Facebook, Amazon) (Mirlicourtois 2017), whose market capitalization was equivalent to France’s GDP in 2017, ahead of the major players in distribution and industry, currently employ fewer people than the Volkswagen group alone. As historian Yuval Noah Harari explained during the Davos 2018 summit organized by the World Economic Forum (World Economic Forum 2018), the replacement of man by machine is a source of concern, because this hypothesis becomes plausible with the digital revolution, artificial intelligence and the platformization of entire sectors of our developed economies. All these remarks lead us to conclude by saying that it is important to develop innovation and creativity in order to generate new ideas. But we must take up the challenge of human support for these changes. This requires the evolution of individuals, organizations, including SMEs, and ecosystems, so that innovation is not only technological, but also social and societal, managerial and sustainable.

24 Tables of the French economy, INSEE, February 27, 2018.

3 Innovation and Creative Slack in SMEs

3.1. Introduction Innovation goes hand in hand with new, original and previously unheard of ideas (Amabile 1988). In other words, for there to be a propensity to innovate (Hadjimanolis 2000; Wang and Ahmed 2004; Kmieciak et al. 2012), it is not only the emergence, collection, selection and retention of ideas that are needed to innovate better (Liu et al. 2017), but there is also a need for a creative slack (or pool of ideas), from which to draw if necessary (Cohendet and Simon 2015). This slack is the breeding ground for innovation and differentiation strategy (Amabile 1988; Szostak 2017). We therefore consider the idea as being central to innovation. In order to define it best, we retain three characteristics that are significant (Parmentier et al. 2017b): – the idea is the result of an intention to act: it is not the result of chance, but of a motivated search for a solution to a problem; – it is based on existing knowledge; – it begins with a relatively vague statement and becomes a concept developed through modifications, additions, deletions and clarifications made by a group of individuals involved in the formulation of the idea (Ford 1996; Drazin et al. 1999). Thus, SMEs can differentiate themselves from other entities thanks to ideas (Julien and Carrier 2005), but also that they can succeed in surviving the economic changes they face (Zhang and Bartol 2010). Indeed, since the current era strongly challenges the frameworks of thought in force, all companies are obliged to reinvent very regularly, seek new ideas, explore

Innovation and Creativity in SMEs: Challenges, Evolutions and Prospects, First Edition. Claudine Gay and Bérangère L. Szostak. © ISTE Ltd 2019. Published by ISTE Ltd and John Wiley & Sons, Inc.

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hypotheses and maintain their competitive advantage. In a changing environment, companies can no longer simply “look in the mirror”, exploit known horizons and improve existing ones. Furthermore, the identification of original ideas is all the more important for SMEs because they have little room for manoeuvre in terms of their resources and because failure can be definitively fatal (Brockman et al. 2012; Seville and Szostak 2018b). It therefore seems necessary for the SME to identify new ideas to feed its creative slack. However, it should be recalled that the implementation of new ideas in SMEs must take into account, on the one hand, the many specific barriers and risks to innovation and, on the other hand, its particularities. According to St-Pierre et al. (2017),1 innovation risks can be of a commercial2, technical/technological/operational3, managerial4 or financial5 nature. In their research with Spanish SMEs, Madrid-Guijarro et al. (2009) highlight such internal risks, while pointing out that barriers to innovation are also linked to market turbulence, lack of opportunities or state support in innovation activities. Research on organizational creativity complements this understanding of the barriers and risks to innovation readiness. As early as 1988, Teresa Amabile, a psychologist specializing in the study of individual and organizational creativity, listed factors specific to the organizational environment that are still unfavorable to the search for new ideas: inadequate management (inappropriate rewards, lack of cooperation, unrealistic evaluation), excessive constraints, a lack of interest in the project, insufficient resources, or even exacerbated competition. While these risks could lead SMEs not to engage in innovation, it must be recognized that, if they want to survive in a changing economy, they must innovate and nurture their pool of ideas – and this is the subject that this 1 The article by St-Pierre et al. (2017) provides a detailed summary of these risks identified in the literature. 2 Examples of commercial risks: lack of market and customer information, poor interaction with customers and suppliers, failure of business intelligence. 3 Examples of technical risks: low investment in R&D, lack of skills among affected personnel, poor relations with research laboratories. 4 Examples of managerial risks: difficult collaboration between departments and members of the dedicated project team, low staff motivation, lack of recognition of ideas, innovative processes with little structure. 5 Examples of financial risks: lack of budget monitoring, few financial partners involved, lack of sufficient resources.

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chapter focuses on. Moreover, while the particularities of the SME set out in the introduction and the first chapter of this book could also hinder its commitment to innovation, we first retain that ideas involving an intention to act and a commitment to act (Parmentier et al. 2017b), depend mainly on the fact that the SME manager is seen as a leader (Puccio et al. 2007). Furthermore, it is true that ideas require a network of knowledge. We retain that it is often reduced to SMEs (St-Pierre et al. 2017), because of the proxemic law (Torrès and Gueguen 2008; Torrès 2015). In addition, ideas are fed by a network of internal actors, which is, by definition, small in size in terms of SMEs: this limits the number of interactions, while facilitating said interaction (Trépanier and Aka 2017). Finally, the emergence of ideas is based on a network of external partners, which is also facilitated by local relationships (Torrès 2015) and openness to the environment (Vanhaverbeke 2017; 2018). In response to these observations, we argue that new ideas, allowing the existence of a creative slack, depend on two classic dimensions: the organization (through leadership, knowledge and the internal network) and the environment (through the external network). It should be noted that, while these spheres interact (see the developments in Chapter 1), we differentiate them mainly for reasons of clarity. In practice, this distinction is not so easy to make, especially in the era of open business models and other strategies that make the organization’s boundaries porous (co-design, crowdsourcing, hackathons, etc.). Also, in view of our research with SMEs and the results of current scientific work, we argue in this chapter that it is important to identify in SMEs what feeds the creative slack, and to understand where the ideas come from to develop a new product or service, to imagine an original way of producing, distributing, and organizing work, or creating a market, etc. Thus, in section 3.2, the internal source of new ideas for creative slack in SMEs will be discussed, and in section 3.3, the external source. 3.2. An SME’s internal components as a source of new ideas We consider that the SME, as an organization, is itself a source of new ideas, resulting in a greater propensity to innovate (Liu et al. 2017). It is therefore a question of going back first to our approach to the “SME”. Indeed, although organizational theories approach the organization itself

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from various and complementary angles (Desreumaux 2015), here we focus on the actors, in this case the leader seen as such and the employees. There are two reasons for this choice. First, the SME manager is central; and even if he is under the influence of stakeholders, in the end, he is perceived as the author of the decisions taken. Second, this influence, but also the simplified structure, refers to the employees present in the company. Consequently, even if it would be possible to approach the SME according to, for example, the sector of activity, the legal structure or the capital structure, it seems to us that the actor as the level of analysis allows us to best summarize this entity6. That is why we will consider leadership as a source of new ideas in section 3.2.1 and employees in section 3.2.2. 3.2.1. Leadership and creative slack According to the leadership approach, the leader guides, orients and influences all company members to voluntarily move towards achieving a vision. The literature shows that the leader’s commitment to creativity and innovation activities is essential for an organization to be oriented towards innovative and creative projects (Amabile 1988; Andriopoulos 2003; Szostak 2006a; Dubois 2013). One of the most obvious reasons is that the leader has a major influence on the organizational climate (Ekvall 1996; Zhang and Bartol 2010; Carrier and Gélinas 2011a), whether to encourage members to be creative and innovative, to support them with resources in their creativity and innovation activities, or to select potentially risky ideas. However, this commitment must be clearly perceptible to all stakeholders, and first and foremost to employees, who, in SMEs, are close to the manager (Torrès 2015). The question then arises: how can this commitment be made perceptible, while taking into account the SME’s limited resources? Two points seem essential to us to consider closely. For the first point, we would like to return to the main stakeholder who must engage in SMEs: the leader. Without discussing the psychological considerations for understanding the leader’s personality, traits and behavior, we retain research dedicated to these subjects, that there are several common attributes (Carrier and Gélinas 2011a7). While specifying that each leader is 6 We would like to point out that it is not our intention to consider the other approaches as inappropriate. 7 Chapter 1: “Leadership and creativity”

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unique because of the combination of each of these attributes, Cardinal (2018) proposes five: – a clear vision in mind: the leader may seem obstinate; his objectives are unwavering; – self-knowledge: he knows who he is, and what he is not. The leader is clear about their strengths and weaknesses; – knowledge of others: insight allows the leader to surround himself with the right people to fill in the gaps; – effective action: the leader makes decisions, and, if possible, at the right time; – charisma: convinced of his vision, he makes his project credible and lead others. With regard to creative slack or a pool of creative ideas, this means that the leader is constantly searching for new ideas. He is aware of his personal capacities in creativity8 and those of those around him (family9, friends, other members of the management team, employees); he is surrounded with different people (Box 3.1): and he shows how essential creative slack is. All these decisions and actions drive others to also seek to feed this pool of ideas. The SME leader therefore has a major responsibility to make the company’s commitment to identifying new ideas visible. He must closely examine his relationship with creativity, because “an organization can hardly be more creative than its leaders allow10” (Carrier and Gélinas 8 Teresa Amabile (1988) identifies several abilities that can be linked to being a creative individual: being tough, curious and enthusiastic, having good energy and intellectual honesty, capable of achieving a relative level of autonomy, liking the challenge, having the special ability to think creatively, attracted to risk, the ability to develop expertise and possess social skills. Similarly, we can also refer to Mihaly Csikszentmihalyi’s work (2006). He proposes defining a creative individual according to 10 contradictory skill pairs: having lots of energy and being able to relax fully (naps, sleeping), the ability to adopt convergent and divergent thought, the ability to mix impulses with discipline, the ability to move between fanciful imagination and practicality, the ability to switch from being an introvert and an extrovert, the ability to show pride and humility, the ability to adopt male and female characteristics (see psychological androgyny), the ability to be conservative and iconoclastic, the ability to feel passion for and attachment from work, and experience great joy but also great pain. 9 On the specific case of family businesses, read the appendix to section 3.5.1, written by Professor Céline Barrédy. 10 Translation by the authors

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2011a, p. 14). And this is reflected in management style, which is the second point addressed in this section. When the size of the SME increases, the manager is surrounded by a Top Management Team. This group of people is also invited to bring creative slack to life and nourish it. However, since new ideas emerge more in a diverse group (Shalley and Perry-Smith 2008; Carrier and Gélinas 2011a; Parmentier et al. 2017a), it is recommended to recruit people with diverse profiles (status, role, age, experience, gender, ethnic origin, etc.). Through her studies on the brain structures responsible for the human personality, anthropologist Helen Fisher shows, in addition, that we must also think about this diversification of the group through the temperament of individuals. Two scientists continued this research to adapt it to company context and innovation (Vickberg and Christfort 2018). They propose four personalities: – pioneers take risks, are imaginative, and have a holistic vision; – guards are meticulous, reserved, structured; – pilots like challenges, are the driving force behind projects, and are logical; – integrators are empathetic, diplomatic, and favor relational skills and the group’s interest. Thus, the SME leader could demonstrate his commitment to the creation and maintenance of creative slack by recruiting for his team members who complement his own personality. Box 3.1. Towards more diversity in the SME’s Top Management Team

As a leader has a major role in SMEs to feed the pool of new ideas, they will put their personal creativity at the service of the company and become a role model for others (Carrier and Gélinas 2011a). In other words, they will be an inspiration. The leader offers a variety of ideas, identifies opportunities, uses skills and engages in the use of creative tools. The leader will also support the creativity of others, and in particular that of employees. To this end, the organizational climate for which they are largely responsible should enable them to express their ideas, even the most comical ones, to experiment with new approaches through dedicated tools (Box 3.2), and to foster links between stakeholders. In addition, the leader publicly supports employees who have dared to propose their ideas.

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Large companies, such as Renault, Google, Michelin, PSA and AlcatelLucent, have long understood the need to offer employees tools to experiment with their ideas. Thus, they have set up tools to collect ideas by mobilizing digital/technological advances. While most SMEs have mostly remained focused on the use of traditional tools, it would certainly be beneficial for them to be inspired by these tools. We will mention two of them. The first is the internal FabLab (Morel and Le Roux 2016; Lô 2017). This Fabrication Laboratory is a workshop dedicated to creativity and innovation, and allows employees to test ideas through rapid prototyping with a 3D printer, for example. Success depends on the leader’s ability to attract a wide range of employees and create a community of regular users11. The second tool is the internal idea competition, which often uses ideation platforms. Over a specified period of time, employees can propose their ideas to a particular challenge. Then, ideas are selected according to criteria such as economic validity, technical feasibility and market desirability, with reference to the design thinking method. Success depends on the dynamics created around this event, but also on the leader’s ability to complete the creative process, in particular by testing the selected ideas. Box 3.2. Tools dedicated to the experimentation of ideas

In short, the SME manager will favor what is called “transformational leadership” (Bass 1999; Bass et al. 2003). This type of leadership is specific in that it involves a close relationship with employees, which is one of the strong characteristics of an SME (Torrès 2015). This involves taking the time to share a vision and listen carefully employees, recognizing their ideas and knowledge, cultivating a positive image, and paying particular attention to the individualized development of each employee’s abilities. More concretely, the practices implemented can consist of clarifying the meaning of various decisions in relation to innovation and in particular in what and how they are supposed to nourrish creative slack. It may also involve trusting employees in some of their decisions that are intended to generate ideas (purchasing databases, meeting experts, visiting creative places, etc.). Or, the leader can encourage the exchange of views on experiments in a positive and benevolent spirit. They will then express more humanist values in their form management: collaboration, support and consideration (Boudrias and Brunelle 2015). 11 For further reading on the FabLab, see Fabbri 2017.

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To summarize, we believe that, if the leader is a major creative and innovative in all organizations, this is even truer in the case of SMEs. The leader is a source of new ideas and, as such, allows creative slack to exist. Through its ability to inspire others, this pool is also nourished thanks to the creativity of others. However, it should not be assumed that all SME managers are de facto transformational leaders. For some, this style of leadership in their company is only possible because of the existence of a Top Management Team composed of people corresponding to a character conducive to this leadership, if not the leader’s. However, SME managers should not believe that this is inaccessible to them. Boudrias and Brunelle (2015) show that a transformational leader is not necessarily an exceptional person and that they “do not need to have extraordinary personal characteristics to be perceived as transformational by fellow team members12” (Boudrias and Brunelle 2015, p. 28). They point out that a leader’s commitment to employees is an important prerequisite for the emergence of transformational leadership, which reminds us of their role in all organizations. This can be witnessed in small and medium-sized enterprises where there are strong local relationships between actors. 3.2.2. Employees and creative slack In this section, we focus on the second internal component, which is potentially a source of creativity and new ideas. In line with section 3.2.1, it should be recalled that transformational leadership has a positive impact on employees’ affective commitment (or emotional attachment based on identification with the organization). It can also affect normative commitment (or a sense of moral obligation to other members of the company) (Dumdum et al. 2002; Bono and Judge 2003). The leader supports their individual creativity (Carrier and Gélinas 2011a). Also, it seems important to understand who these employees are. In this sense, we want to go beyond the actor’s rational approach by focusing on two aspects which, according to the SMEs with whom we are regularly in contact, seem essential in creativity management. The first is that employees are seen as emotional and sensitive actors; the second is that they are also autonomous individuals.

12 Translation by authors.

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Concerning emotions, we consider that a person’s emotional state is to be distinguished from the affective state (feeling, mood, temperament) according to at least four criteria: – a high degree of particularity of the stimulus between the object and the person experiencing an emotion; – the high intensity of the reaction; – the short duration; – the characteristic somatic experience (red cheeks, sweaty hands, etc.) (Herbeth et al. 2016). Emotions can include joy, pleasure, pride, excitement, surprise, fear, sadness, anxiety, shame, anger, guilt, contempt, etc. This state influences an individual’s ability to propose (or not) new ideas. The more positive the emotions, the more people express their creativity (Lubart and Getz 1997). In addition, Zhou and George (2003) explain that employee creativity is influenced by the leader’s emotional intelligence. This type of intelligence refers to the ability to accurately perceive, evaluate and express emotions; the ability to access emotions and/or generate feelings when they facilitate thinking; the ability to understand emotions and emotional knowledge; and the ability to regulate emotions to promote emotional and intellectual growth (Mayer and Salovey 1997). Thus, employees are sensitive to this ability in their management, and will become more involved in creativity. SME management can therefore question the degree of emotional intelligence. Indicators can help, such as a high rate of turnover, absenteeism, illness, the existence of tensions within teams, etc., as well as, more simply, the nature and quality of the exchanges engaged on a daily basis with employees. It is also important that the leader takes into account the well-being and interests of employees during debates and discussions (Tesluk et al. 1997). This facilitates the freedom of expression and thus the expression of each employee’s individual creativity. For example, during a creativity session, employees must truly feel that the SME’s management appreciates their ideas, even if they question its decisions. The paradoxical injunctions “be creative, be free!” will not generally be enough. The leader will have to think about the organizational context favorable to their creativity (Ekvall 1996; Brion and Mothe 2017), upstream, and adjust it over the course of the session with regard to the interactions between the actors.

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These results should therefore encourage the SME leader to be attentive to the employees’ emotions when involved in creative and innovative projects, and to their own discourses and actions, knowing that they can foster positive emotions. Close relationships in SMEs should encourage such attention. This can also be encouraged by creative methods that clearly integrate the actors’ emotions (Box 3.3). Aware that some people need to be stimulated to express their ideas, but also that it may be necessary to revitalize a creative process, many specialists have continued to propose methods since Alex Osborn developed the brainstorming technique in the 1940s. This technique was intended to be the expression of a humanistic creative approach, favorable to personal development. This emblematic method, which involves expressing all ideas on a theme, has been enriched over many years thanks to expert experience. Hal Gregersen renamed the method “brainstorming for questions”. Indeed, instead of emphasizing ideas from the beginning, this researcher values in his version of brainstorming an innate behavior in humans: questioning and challenging assumptions. He then proposed, after presenting to the group the challenge a person faces when at a dead end, to get questions flowing. The objective of this step is to feel in a positive emotional state and no longer feel frustration or even fear, but rather excitement. Then, the person groups the questions by theme, and picks one (Gregersen 2018). Another emblematic method explicitly emphasizes emotions: Dr. Edward de Bono’s “six hats” method13. It provides a framework for reflection by adopting different points of view. In a vivid way, this psychologist suggests wearing a hat, whose different color each time indicates the reflexive state to adopt. Of the six, the red hat represents emotions. It is a question here of expressing one’s emotional state, but also one’s intuition and impressions of an idea, a fact, an analysis, and then finding a consensus to transform, for example, a fear into pleasure. Box 3.3. Examples of creative methods including emotions

With reference to Adler and Chen (2011) it is now known that when trust between employees exists, there is no fear of being robbed of their ideas. Rather employees feel more inclined to take risks and engage in creativity for the benefit of the company. A confident employee who respects ideas will feed more into the creative slack of the SME. Management contributes to this respect by implementing it at its level, but it also requires employees 13 The method is patented. See: www.edwddebono.com/.

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to commit to practising it, without necessarily being under the constraint of the Top Management Team. In this sense, research conducted on a population of students is instructive. Verzat et al. (2016) showed that when a group of students was able to demonstrate more freedom in its knowledge learning process, it developed more proactive behavior: the group created, took initiatives and transformed ideas into action. The researchers then highlight that this was possible because of several emotions: joy, pleasure, pride, excitement and surprise. In fact, the autonomy provided by the teacher allowed them to express their creativity more fully. Even if employees are not students and the leader is not a teacher, it is still possible to imagine that autonomous employees are more inclined to identify and share creative ideas. Indeed, autonomy, which etymologically means “governing oneself according to one’s own laws”, is a significant characteristic in studies of organizational creativity (Amabile 1988). This may seem contradictory to the status of being an “employee”, which implies a subordinate relationship between individuals in different positions, as well as specific functional and operational rules and practices. In fact, autonomy as a characteristic of the organizational context allows actors to exploit areas of uncertainty in the organization, not only for their power (Crozier and Friedberg 1977), but also to seize opportunities, adapt to changing situations, propose solutions resulting from “system D” for example to overcome a lack of resources in an innovative project in SMEs. In addition, employees now have new expectations of their work and aspire to more equal relations with management (Chanlat 2003). In innovation, this is reflected, for example, in the development of collaborative tools for managing creativity and innovation (internal FabLab, competitions, etc.), behavior such as intrapreneurship (Box 3.4) or procedures such as communities of practice (Box 3.5). Intrapreneurship refers to a specific form of entrepreneur, namely employees who are under the control of an existing company. These intrapreneurs develop new ideas within their own structure, with qualities similar to those of the entrepreneur. In SMEs, five approaches favorable to intrapreneurship can be selected (Carrier and Gélinas 2011b). Firstly, it is a question of the SME being open to this type of behavior among employees and supporting them. Secondly, the leader must actively seek them out. Thirdly, it is important to create an intrapreneurial innovation unit composed of creative and resourceful employees.

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Fourthly, employees must all be invited to submit ideas. Fifthly, an incentive to spin-off or create one’s own business promotes intrapreneurship. Thus, intrapreneurial employees in SMEs are certainly major sources of new ideas and enrichment of creative slack. Box 3.4. Intrapreneurship, a behavior conducive to creativity in SMEs

Communities of practice bring together members of the organization who share knowledge, successes and failures, to identify good practices, and design common solutions (Lave and Wenger 1991). In an SME, this seems to be favored because of the small size and proximity between the actors. However, this coordination procedure is specific in that it takes the hierarchy (the SME manager or the Top Management Team) out of its usual role as “innovation champion”. The manager or management team must be positioned therefore more as an orchestrator. This can facilitate interactions and create generosity in providing the means to make these interactions possible, while also remaining discreet (Sarazin et al. 2017). Box 3.5. Fostering creative slack through communities of practice

We would like to highlight two limitations to the ideas developed here. Firstly, employee autonomy is not innate. It can be learned, however it requires a certain maturity to understand the company, to understand oneself and others in the broadest sense (employees, customers, shareholders, suppliers, etc.), and to deconstruct the rules in force to invent new ones. For an SME, the question then arises: how are employees considered? Are they considered as autonomous people – even in the process of becoming autonomous? What is being done to increase their autonomy? Answers can be found in scientific research, particularly that dealing with postmodern enterprises (Silva and Strohl 2016). As inspiration, we can use the work of Hill et al. (2014). They show that innovation in all organizations depends on two dimensions: will and capacity. While in SMEs, the will is mainly based on the leader within his role the ability to innovate requires, according to these researchers, three organizational capacities: – creative abrasion is the first ability; its objective is to foster collaboration in order to produce ideas. Discussion and debate are the goals, that is speaking out, defending points of view with arguments and listening to others; – the second ability is creative agility: it consists of testing ideas and experimenting with them by trial and error using conceptual euristics;

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– creative resolution is the third capacity, which provides the opportunity to make a decision that gathers potentially opposing ideas. The second limitation concerns the desire to make employees proactive. Karoline Strauss (2018) shows that, while proactivity has positive consequences, the other side of the coin, in this case stress at work, should not be neglected. Indeed, proactivity implies that people question the routines in place, or even challenge authority, which is a source of conflict. Moreover, since managers, and in particular the management team and the SME manager specifically, often consider this type of quality to be part of their prerogatives, they may not see favorably that employees also do so, which can be a source of tension. In fact, according to Strauss (2018), this stress is all the more significant as employees force themselves to be proactive, when they are not motivated to be so. This should therefore encourage the SME leader to take into account the motivation of individuals. To recall, we retain that the creative slack in SMEs is nourished by employees, who are seen as emotional individuals, and sensitive to the leader’s emotional intelligence. They are also considered autonomous, and therefore capable of deconstructing existing rules and creating new ones. On the other hand, this implies that SME management must set up a favorable and encouraging organizational context, while considering the real motivation of individuals to commit themselves to innovation and creativity, as well as accepting with humility that they are not always so central and the “champion” of innovation. While these two internal components of the organization contribute strongly to creative slack, they are not isolated from their environment. It can, in fact, be a space of constraint, a strategic resource for SMEs by drawing ideas from it, or even a space to be transformed by new ideas. 3.3. The SME environment as a source of new ideas The work dealing with the question of the emergence, capture, selection and implementation of new ideas, that is organizational creativity, is mainly based on four approaches. The first is called componential (Amabile 1988): the level of analysis being the individual in an organization, the environment in the strategic sense of the term is absent or, at best, it is to be surmised implicitly. The same is true in the second approach, which is the organizational climate approach (Amabile et al. 1996; Ekvall 1996), as well as in the third, so-called

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interactionist approach (Woodman et al. 1993), where organizational factors, which are seen as evolving due to their interactions, are essentially considered. On the other hand, the fourth approach leaves a significant place for the environment: Ford (1996) defends an evolutionary approach to creativity and, by extension, the need to take into account individuals’ dispositional factors, situational factors, as in previous approaches. However, in this particular approach, he integrates environmental factors into it. Thus, if the environment was essentially seen as a well-known starting point, it becomes a major factor of influence, which is now reinforced by the opening of SME borders to macro- and micro-economic spheres, as well as new organizational configurations (multiplication of alliances and partnerships with customers, suppliers, institutions, competitors, etc.) (Vanhaverbeke 2017; 2018). Our purpose is therefore in line with this last approach. Given the specific characteristics of SMEs, and in particular their territorial roots and the development of their external network (Julien 1993; Rogers 2004; Torrès 2015), we choose here to discuss the environment further in accordance with two axes, first, the territory and, second, interorganizational relations. This is in order to understand how both allow the emergence, capture, selection and implementation of new ideas. 3.3.1. The territory: a cognitive space for the emergence of ideas SMEs generally demonstrate strong integration in their local environment (Julien 1993). They establish privileged relationships with other actors (public and private, large or small companies) present in their environment to respond to calls for projects or develop innovations (Rogers 2004). SMEs are also involved in local social and societal actions, particularly when developing a Corporate Social Responsibility (CSR) strategy (McWilliams and Siegel 2001; Bocquet et al. 2012). Yet it exploits accessible resources, for example in competitiveness clusters, while helping to increase them (e.g. the creation of new knowledge) (Kogut 2000; Szostak 2007; Deltour et al. 2016). Thus, and as highlighted in Chapter 1, the external environment is not only a constraint that determines the company’s strategy and, more generally, decisions according to a deterministic approach. It is also not ignored, to the benefit of the company’s internal resources in accordance with a “resource” approach. It is itself a resource that feeds creative slack.

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Many researchers have been interested in the role of the territory in innovation from the Marshall district to the creative territory (see, among others, Marshall 1906; Arrow 1962; Nelson and Winter 1982; Florida 2005). In fact, the concept of a “territory” is difficult to define because of the many approaches involved (Gay and Picard 2001; Lauriol et al. 2008; Loilier 2010). Above all, it is a social and political construction that evolves over time and can be modulated in terms of physical space. Here, we consider it under the prism of creativity and we propose to show how it participates in the emergence, capture, selection and implementation of new ideas feeding the creative slack in SMEs. We are not discussing the merits of this or that approach, but we acknowledge its role in new ideas. Three axes seem important to note for SMEs: the territory as a framework for creative slack (section 3.3.1.1.1), the territory as a source of inspiration (section 3.3.1.2) and the limits to be retained to these approaches to the territory (section 3.3.1.3). 3.3.1.1. The territory: a framework for creative slack The first axis concerns the territory as a space for framing new ideas. Indeed, Ford (1996), who studied the factors that intentionally lead to creative action by individuals rather than routine action, emphasized the influence of the individual’s past (beliefs, failures, successes, capacities), but also the influences of social fields (groups, organizations, institutions, markets). At the organizational level, this means that it is important to understand what these past influences are. In particular, we want to focus, firstly, on the history of the environment in which the SME is integrated, and, secondly, on its culture, which also allows us to better understand the form and nature of the networks involved. Let’s take the example of design agencies in France, whose main activity is creativity. The territory influences the actions of these small companies. Indeed, design has its origins in mass production, craftsmanship, but also art (De Noblet 1988; Guidot 2000). It is therefore important to understand the movements that have worked to combine art and industry, such as Arts & Crafts, Werkbund and Bauhaus, and what form this has taken in France (De Noblet 1988; Guidot 2000). It should be noted, in particular, that the discipline of “applied arts” was created during the period of Arts & Crafts, in school curricula at the end of the 19th Century in France; schools back then trained students in engineering, artistic and technical skills (Cummings et al. 1991). Émile Gallé, a craftsman of glass, earth and wood in Nancy, eastern

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France, was inspired by this approach, while at the same time bringing with him the need to increase the rate of production by machines. He therefore refused to consider machinism as a source of distress for the worker and even developed workshops with a staff numbers of around 200 people (Thiébaud 2004). Since then, designers who still hold a degree have adopted the pedagogical approaches considered characteristic of the profession by the Arts & Crafts movement. They retain the criteria of respect for materials and craftsmanship to judge the quality of design, and they add the need for industrial production. This perspective specific to the French territory then allows design agencies to set the scene for their activity, and to understand their dependence on the path, regardless of the geographical perimeter chosen (Box 3.6). In this case, the history of the territory becomes a cognitive space (Sarazin et al. 2017) for the construction of ideas that frame the creativity and innovation of these SMEs. The Loire region of France is marked by a particular industrial, economic, and even sporting, artistic and gastronomic history (Szostak 2007). SaintÉtienne, the prefecture of the Loire region, is labelled as a “creative city” by UNESCO. In the 2000s, this region decided to boost the economic structure, especially SMEs; political actors are relying on design so that subcontractors can become purchasers, and so that SMEs can be more independent. Indeed, the successive economic crises linked to major sectors of the territory (coal, textiles, metallurgy, weaponry) had unfortunately overwhelmed the major purchasers, such as Manufrance, GIAT Industries and Creusot-Loire. More than 60,000 jobs that were both directly and indirectly related to these sectors were affected. However, the restructuring of the territory was done in reference to this history. The choice was inspired by the long tradition of creating industrial products and highly industrial and commercial activities14. Thus, today, the many active business networks, including SMEs (ViaMéca, NuméLink, Pôle Optique, etc.), encourage in this region the emergence of creative ideas framed by this tradition. Box 3.6. The case of the Loire region in France and the innovation of SMEs

14 Étienne Mimard (1862–1944) founded the Manufrance company, which designed and manufactured hunting weapons, bicycles, sewing machines, etc. It distributed its offer through a mail order catalogue with a circulation of more than one million copies: the Saint-Etienne company was known throughout the country.

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3.3.1.2. The territory: a source of inspiration for the creative slack The second axis proposes to consider the territory as a source of inspiration for new ideas, from which SMEs can benefit by opening their borders (Chesbrough et al. 2006; Vanhaverbeke 2017; 2018). We refer here in particular to the creative territory (Florida 2005), which is composed of three interacting levels. The first is the upperground. According to Simon (2009), this includes institutional organizations, innovative, renowned and recognized companies in the following sectors of technology, art, culture and education. The second level is the underground, which brings together creative individuals engaged in activities such as painting, sculpture, fashion, cooking, etc. These individuals participate in the creation of a specific creative climate on the territory. The third level is between the two previous ones, the middleground. It allows isolated creative individuals, and those who tinker in their garage, to share their creative ideas with upperground actors through devices set up at middleground level. These may include idea competitions (Hutter et al. 2011; Liotard and Revest 2015), cafés or restaurants where everyone can exhibit their work, street demonstrations, etc. (Cohendet et al. 2011). SMEs can benefit from this creative territory in different ways depending on their access to a specific level (Figure 3.1).

Figure 3.1. Examples of access to the creative territory for SMEs

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Studies show that these three territorial levels influence organizational creativity (Sarazin et al. 2017). More precisely, Dechamp and Szostak (2016) conclude, in their research on industrial SMEs, the importance of procedures set up at the middleground level to fully exploit this creative territory, while leaving the SME free to decide whether or not to get involved (Box 3.7). Indeed, the influence of the creative territory depends on the participation of the organization in the activities of this territory. This influence is not permanent and involuntary. On the contrary, it is the result of the organization’s decision to participate, for example, in an ideas competition, to seek ideas in ephemeral exhibitions during street demonstrations, or others. This echoes the leadership commitment discussed in section 3.2. This research also emphasizes that the boundaries of the SMEs studied are open to the environment, but not continuously; rather, it is a sequential opening (Gandia et al. 2011). This sequential opening would allow SMEs, on the one hand, to preserve internal balances, which are in fact disrupted by new ideas, and, on the other hand, to effectively manage the creative slack (Cohendet and Simon 2007). If new ideas emerge or are constructed, there is still a need to carry out work to capture and implement them, taking into account the SME’s resources (see Chapter 4). Cohendet et al. (2011) and Sarazin et al. (2017) detail four middleground procedures that favor encounters between, on the one hand, the formal structures of the creative territory and, on the other hand, the creative talents of the underground: – places: physical places (third places, Fablabs, co-design rooms, etc.), and virtual places (forums, Wiki); – spaces: cognitive spaces conducive to the construction of ideas and their dissemination; – events: festivals, forums, conferences, hackathons, street parties, etc.; – projects: projective spaces allowing the actors to align their vision, share their experience and concretize an idea. These procedures are naturally accessible to SMEs. Some SMEs are even dedicated to them in order to increase their capacity for innovation (e.g. competitions initiated by public institutions, third places for SMEs). Box 3.7. Middleground procedures accessible to SMEs

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3.3.1.3. The territory and digital technology The third axis of this section pushes to relativize the role of the physical and geographical territory, all being due to the digital age. It should be recalled that while SMEs have limited resources, they have access to many others thanks to Information and Communication Technologies (ICT), which can be disseminated in very remote areas. Whether for SMEs in Italy (Cainelli et al. 2006), Luxembourg (Martin and Nguyen-Thi 2015), the United Kingdom (Higón 2012) or Brittany (Deltour et al. 2016), ICTs have a positive impact on the willingness to innovate. Explanations can be found, among other things, in reducing costs and increasing the efficiency of innovation activities, but also in the possibility of making collaborating remotely easier, reducing development time thanks to remote collaboration tools (Banker et al. 2006), better understanding the market via crowdsourcing, or co-developing new offers with customers (Kmeiciak et al. 2012). Thus, thanks to ICTs, the perimeter of the local environment in which SMEs are anchored can be very large. However, we have three points we wish to raise. Firstly, this environment must remain accessible via the Internet, which requires heavy government investment. Secondly, accessible resources must be made compatible with the digital medium. This requires that the owners of these resources transform these originally material resources, and/or design them directly according to this new medium. All this requires investment, but also specific skills. Thirdly, SMEs accessing such resources must also have internal IT skills, ICT assets, that is a diversity of ICT uses15, and they must appropriate the Internet, knowing that: “It is more the ability to mobilize varied and complex tools [...] than the use of the Internet by the greatest number of people that seems to affect the firm’s ability to implement new products or processes16.” (Deltour et al. 2016, p. 50) To summarize this section, we retain that SMEs can feed their creative slack via the territory, which can frame the emergence of new ideas because 15 By use of ICT, the following can be used: electronic data interchange (EDI), intranet, mailing lists, shared schedules, shared workspaces, process definition and management software, business software, electronic certificates, websites, social networks and videoconferencing (Deltour et al. 2016). 16 Translation by the authors.

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of its history and local culture. The territory can also be a source of ideas through the existence within it of a middleground. Finally, this source of ideas can be much more extensive than expected, due to ICT. If the environment is a space of constraint, opportunity and threat, it is also a strategic resource for SMEs (Durand et al. 2013; Dechamp and Szostak 2016), as illustrated by the case of the territory of rench Polynesia17. This result is also evident if we look in more detail at the inter-organizational relations of SMEs. 3.3.2. Inter-organizational relationships in SMEs: a source of new ideas As Spithoven et al. (2013) point out, SMEs engage in open innovation strategies because of their resource constraints, and open up to their environment as detailed in section 3.3.1. However, in this section, we are changing the level of analysis of this environment. From the territory as a source of new ideas, we focus on the inter-organizational relationships of SMEs. The main reason is that, according to SME managers we work with, it is important to look at the actors who make up this environment, and that a macro approach remains insufficient to really appreciate the role played by the space around the SME, in innovation. Robinson and Stubberud (2009) explain how these relationships impact innovation in SMEs, despite the costs and risks involved. Thus, the time spent managing the relationship can be counterproductive (Watson 2007). However, many studies show that, for an SME, inter-organizational relationships have a positive impact on innovation capacity (Robinson and Stubberud 2009; Vanhaverbeke 2017 and 2018), in particular by directing the search for new ideas. Indeed, it allows SMEs to access resources not owned, to share the risks mentioned earlier in this chapter, to increase their organizational capacities (by sharing expertise, skills, knowledge, etc.), or to share activities in a fragmented value chain. These relationships established by a company with other actors (suppliers, customers, competitors, partners, laboratories, institutions) go hand in hand with coordination, and therefore the need to plan, organize, structure and arrange the work induced by the purpose of the relationship. For example, 17 See Damien Charitat’s interview in the appendix, section 3.5.2.

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when developing a video game, studios establish relationships with video game console manufacturers, but also with publishers and distributors (Gandia et al. 2011). Their creativity therefore depends on these relationships, because if, on the strength of the demands of the players’ market, publishers demand this or that type of game, this guides the story, the characters and the sets created by the studios. However, if we acknowledge the impact of these inter-organizational relationships on the innovation capacity of SMEs, we wish to qualify it with regard to at least two aspects: the nature of the relationship and the quality of the other partner. Concerning the first aspect, Pisano and Verganti (2008) show the importance of being more precise in the approach to these collaborations, if two important questions are retained: – is the project membership open or closed? In other words, can everyone participate in the innovation project? The difference between the two cases comes from the potential clear identification of the other partner; – is the network governance structure hierarchical or flat? In other words, who defines the problem and chooses the solution: the group or a named actor? This leads to highlighting four ways of collaborating in innovation (Table 3.1).

Nature of the collaboration

Governance

Open

Closed

Hierarchical structure Innovation mall: A company publishes a problem on a platform and chooses a set of solutions proposed by actors not selected by it (see crowdsourcing). Elite circle: A group of practitioners is selected by the company, which has posed the problem, and chooses the solution.

Flat structure Innovation community: A network of people provides problems and solutions.

Consortium: A private group of participants jointly chooses a problem, how to organize the work and selects the solution.

Table 3.1. Four ways to collaborate. Source: adapted from (Pisano and Verganti 2008, p. 82; Burger-Helmchen and Pénin 2011, p. 258)

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Among these four ways of collaborating, we would like to focus our attention on the case of crowdsourcing18, which is developing strongly in our economy (Chesbrough 2017; Felin et al. 2017; Wang et al. 2018). Three characteristics should be noted. Firstly, this search for ideas from anonymous individuals, many of them and all different from each other, adopts the premise that it is not necessary to be an expert on a subject to have relevant ideas. Secondly, it is the company in its own right, which intentionally engages in crowdsourcing, according to a logic of production and wealth creation, by proposing a business model (Burger-Helmchen and Benin 2011). And, thirdly, an intermediary generally facilitates the relationship between the company and the host of individuals for reasons mainly of transaction costs (Penin and Burger-Helmchen 2012); this is often a digital platform. While there are so few studies interested in crowdsourcing in SMEs (Benin and Burger-Helmchen 2012; Ruiz 2016; Ruiz et al. 2017), we can highlight, however, several factors to be taken into account in the exploitation of this mode of collaboration, which feeds the creative slack. Through its study on the company Raidlight, a French SME specializing in outdoor sports and present in Asia and the United States, Ruiz (2016) puts forward: – cultural factors: SME identity, employee involvement, support for the Top Management Team; – organizational factors: coordination methods with the crowd, activity management, integration of the system into the company; – knowledge factors: management and exploitation knowledge, development of absorptive capacity.

of

external

Cultural factors are particularly important to take into account when deciding to adopt this mode of collaboration. Organizational ones mainly 18 Original definition of crowdsourcing (Howe in Burger-Helmchen and Pénin 2011, p. 254): “Simply defined, crowdsourcing represents the act of a company or institution taking a function once performed by employees and outsourcing it to an undefined (and generally large) network of people in the form of an open call. This can take the form of peerproduction (when the job is performed collaboratively), but is also often undertaken by sole individuals. The crucial prerequisite is the use of the open call format and the large network of potential laborers.”

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play a role in the concrete implementation of crowdsourcing. Knowledge factors are particularly decisive at the end of crowdsourcing operations, in order to ensure that this mode of collaboration is sustainable. For an SME, this requires it to take these factors into account in order to limit or even avoid the barriers to innovation specific to this mode of collaboration. However, it is worth being aware of the fact that they accumulate with each other as forms of crowdsourcing adoption progress (Ruiz 2016). The impact of inter-organizational relationships on the innovative capacity of SMEs should also be put into perspective according to the quality of the other partner involved. And it is the second aspect discussed in this section that echoes the closed inter-organizational relationships, to use the terminology of Pisano and Verganti (2008). In this case, the identity of the actors is clearly announced. The classic case is that of a company’s relationship with an external stakeholder19. The impact, however, is different depending on stakeholder identity. In this sense, a study of design agencies in France shows that the creative performance of these SMEs is explained by several types of inter-organizational relationships (Szostak 2006b). Thus, institutions, which are emblematic of the upperground in particular, allow these innovative SMEs to develop creative practices. This result is contrary to the conclusions on isomorphism20 induced by institutions (Szostak 2006b). If this is in line with one of the specific features of design companies, which is to be able to manage multiple constraints (Borja de Mozota 2002), this result shows that design institutions legitimize design professionals. It would also be a mistake to approach these institutions from the unique perspective of isomorphic pressures, and to ignore their support for the emergence of new ideas. The same study also shows that the nature of customers influences the creative performance of SMEs. The more a design agency works for wellknown clients, the less it expresses its creative performance to companies in various sectors. For these agencies, it appears that the requirements imposed by reputable clients (leaders and/or CAC4021 listed companies) limit their freedom of creativity. With regard to national partners, such as specialized 19 They may be consultants and experts, or a consortium (Pisano and Verganti 2008), but also a supplier, a professional partner, a research laboratory, a school, a cluster, etc. 20 Isomorphism refers to the fact that organizations in the same field all tend to resemble each other and adopt the same organizational characteristics. 21 A benchmark French stock market index.

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service providers and industrialists with expertise in a specific technique or expertise, the creative performance of these SMEs is a decreasing function of the multiplicity of these relationships. While design agencies certainly benefit from such relationships, it seems that the fear of being controlled or even spied on in terms of their creativity hinders their ability to express new and useful ideas (Amabile et al. 1996). In short, if the inter-organizational relationships of these design agencies allow them to feed their creative slack, institutions are more stimulating than reputable clients and other partners. Without generalizing these results, we note that, for SMEs, not all inter-organizational relationships are as rich in identifying new ideas, and that, to increase innovation capacity, they must therefore be analyzed very closely. 3.4. Conclusion After highlighting the major changes facing SMEs at present, the objective of this chapter has been to show how they can identify new ideas in order to feed the creative slack – that the pool of ideas aims to enable to increase their capacity for innovation. We show that two large classical spaces potentially structure this identification: the organization seen through two main components (leadership and employee), and the environment understood according to two levels of analysis (territory and interorganizational relationships). It appears that other angles could have been chosen to facilitate the intended purpose. However, the objective of this chapter is not to be exhaustive, but to propose avenues for reflection in relation to recent scientific topics that are considered essential for SME managers. At this stage of the book, we therefore want to encourage the reader to investigate further how an SME can feed this creative slack, with the particular constraints and barriers, without assuming that the results on this subject, resulting from work in large companies, are similar. Moreover, it seems important to us, given the specificities of SMEs, to further discuss the points addressed in these two parts through empirical surveys in SMEs.

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3.5. Appendices 3.5.1. Family businesses and innovation: the same DNA or expression of a paradox? Céline Barrédy is a doctor of finance, a specialist in family businesses and currently a full professor at the University of Lorraine. Her work concerns the finance and governance of family businesses. She is particularly interested in the valuation of family businesses and in the interactions between family and external partners. Her publications include work on the role of external directors on the boards of directors of family businesses, legal structures as a governance mechanism for family businesses, the role of private equity in family businesses and the influence of family law doctrine on the value and longevity of family businesses. She participates in international projects around the family business such as the STEP project led in France by Audencia Business School. Family businesses are the prevalent form of enterprise in the world: they account for 80% of the global socio-economic landscape. They are characterized by a dominant family in the ownership structure and by the presence of at least one family member in the management. The family business is characterized by a desire for the transgenerational transmission of ownership and mangement. The family continuity can last for centuries, as is the case with Beretta in Europe, founded in 1526 and still a family company today. Yet others are struggling to make it through the second generation. While these companies have the particularity of going through the ages, they are sometimes presented as retrograde and struggling to innovate. If innovation is defined as the set of activities carried out by a firm to design, manufacture and market new products, technologies, systems or techniques (Freeman 1976), then there is a debate about the ability of family businesses to innovate, with innovation having been identified as a major determinant of business survival and their ability to generate superior performance. Is the ability to create new products, new processes or new forms of organization a paradox for family businesses? On the contrary, are their longevity explained precisely by this ability to innovate? In this case, wouldn’t innovation in family businesses be different in nature and implementation compared to non-family businesses? How does the particular nature of family businesses lead to innovation procedures that are different from and therefore less known than non-family businesses?

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3.5.1.1. Family businesses: what are their characteristics? Family businesses are characterized by the involvement of a family in the ownership and management. The family business is most often defined as the place where three subsystems interact: family, shareholders and business (Tagiuri and Davis 1996). While for a long time there was debate about the thresholds for holding voting rights, today the family business approach is more qualitative and focuses more on the specific behaviors that these companies develop compared to non-family business (Chua et al. 1999). They are therefore characterized by a long-term vision (Miller and Le Breton-Miller 2005), produced by dominant family coalition in a perspective of sustainable development across generations (Chua et al. 1999). A major distinction therefore comes from the existence of non-economic goals related to the family’s attachment to the company and the family’s mark on the company. Two contributions can then be highlighted. The first is the socioemotional wealth produced by the family (Berrone et al. 2012). The second concerns the creation of a set of family-specific resources generated by the multi-generational relationships of family members between themselves, as well as the relationships of these same members with players outside the company (Arregle et al. 2002). Indeed, the socialization of family members is based on the (very) long length of time, the sharing of their history, routines and especially the values shared by the family. With external members, such as suppliers or customers, it is not uncommon for relationships to have also been established for several generations. These internal and external relationships are based more on trust and information sharing, than on opportunism. This set of resources is called familiness (Habbershon and Williams 1999). A direct consequence of the existence of familiness and non-economic priorities is the observation of higher economic performance of family businesses (Anderson and Reeb 2003; Villalonga and Amit 2006). As for financial performance, the results are more mixed since the family business uses little debt. If familiness is considered as a source of competitive advantage, it can also be translated into the dark side and, therefore, generate value destruction. This is the case when family members adopt a paternalistic management style where any change is prohibited, or when family priorities harm the company, as in the case of nepotism, by producing agency conflicts specific to the family (Schulze et al. 2001). What is the situation in this context of innovation effort for these companies?

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3.5.1.2. Family businesses: the family’s mixed influence on innovation Much work has been done on the issue of innovation in family businesses and the results are ambiguous. When the main indicator is the product of innovation, results show that family companies file fewer patents than nonfamily companies, regardless of the location of the study around the world (Czarnitzki et al. 2009). When R&D investments are taken into account, the results are quite similar, that is family companies invest proportionally less than non-family companies (Chrisman and Patel 2012). Finally, the financial behavior of family companies against external sources of capital can only slow down the effort to finance innovations. According to PWC in 2016, 60% of the financing of family businesses came from self-financing. On the other hand, other studies show a positive link between family control and innovation (Craig and Moores 2006). This link is particularly evident when we consider the introduction of new products/services. Craig and Dibrell (2006) show that the involvement of the family in the company generates more flexible structures and decision-making processes that promote innovation. Cassia et al. (2012) show that family ownership is positively associated with long-term innovation. König et al. (2013) show the importance of context in characterizing the influence of family control when adopting radical innovations. The main question raised here by the paradox highlighted is based on the fact that knowledge in family businesses is accumulated over many generations and passed on from generation to generation. The major difficulty is therefore to capture sources of creativity that, without calling into question ancestral knowledge, make it possible to evolve towards innovations. These results, it seems, reveal elements intrinsic to the family enterprise to remove this ambiguity. What if the issue of innovation in family businesses is not properly captured? To conclude, we would like to point out that family businesses have a DNA that produces original forms of innovation because of two major stakes. The first reflects the fundamental characteristic of family shareholding, namely its long-term purpose. Zellweger (2007) shows that family businesses are more likely to be in long-cycle sectors such as industry, goods and services production, and insurance. Thus, the pace of innovation is not as short as in other sectors and requires the accumulation of financial resources over the long term. The study of innovation in family

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businesses cannot therefore be carried out without taking into account this essential temporal dimension. This provides a better understanding of the empirical results. Family businesses innovate in the long term. Capturing innovation efforts in the short term does not capture what family businesses are doing in terms of innovation. The patient shareholder base represented by the family is therefore able to give time to radical innovations, but does not focus on rapid and spontaneous innovations in the short term (Schier 2014). The second challenge is the materialization of the innovation produced by family businesses. Many innovation actions are not identified in comparative studies between family and non-family businesses. Indeed, innovations produced in family businesses can come from the family’s new generation. It is not uncommon in this case for the family to create a new organizational structure to develop this innovation outside the main activity. In short, it is a matter of considering families in business more than family businesses to better capture the innovative actions of family businesses. 3.5.2. The territory of French Polynesia: a space of constraints, opportunities and resources for small businesses Interview with Damien Charitat, founder of several companies, including LOGIC and the Académie des Télécoms. He holds a doctorate in Management Sciences. Damien Charitat entered the telecom sector in 1997. He started his consulting activities in 1999 and those as a trainer in 2000 still in his preferred sector of activity: telecoms. He was President of Numélink22, the first French cluster of companies operating in the digital world, and is a business expert for several institutions (Datar, Agence de développement économique de la Loire, Comité d’entreprise de l’OPT-NC, SIPF, etc.). In addition to his private practice, he is also an associate lecturer at the Université de Lyon 2 and a professor at Télécom Saint-Étienne (Institut Mines-Télécom). LOGIC – Académie des Télécoms has had a secondary school in French Polynesia since 2017 and this SME has been present in the South Pacific since 2009.

22 Now known as the Digital League.

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How is this environment a resource for local SMEs? Damien Charitat – French Polynesia, more than 15,000 km from23 France, is a pearl of the Republic in the heart of the Pacific Ocean. The country enjoys an excellent strategic geographical situation due to the maritime area covered, political stability and a dynamic economy. French Polynesia is an overseas country whose particularity, like New Caledonia, is to have a territorial government, a territorial assembly and an economic, social and cultural committee. It also has a High Commissioner in charge of national interests, law enforcement and public order. In 1984, French Polynesia had its first internal autonomy statute, which was strengthened in 1996 and again in 2004. French Polynesian Assembly has the power to pass “country laws” in the exercise of its powers, but also to repeal or amend legislative or regulatory provisions that fall within its field of competence. The vast majority of Polynesians (275,918 inhabitants in 2017) are concentrated on the islands of Tahiti and Moorea. The vast majority of companies can be found on Tahiti Nui, particularly in the north to northwest zone (Arue, Pirae, Papeete, Faa’a, Punaauia). While the economy is structured around large public or private groups, particularly in the energy and mass distribution sectors, it is also characterized by a network of crafttype companies, very small and small businesses in other sectors. Several are active in the fishing and pearl culture sectors (maritime economic zone of about 5.5 million km², or 47% of the French exclusive economic zones!), which has seen a strong increase in its exports over the past 30 years, thanks in particular to the Polynesian black pearl, which has become famous in the luxury industry. It is the first export from French Polynesia in terms of foreign currency, ahead of the vanilla that follows it. However, pearl farming is facing new challenges, particularly due to an international context that is not very promising. There are other important activities to highlight in this unique territory. First of all, there is tourism. This sector occupies a dominant position in the Polynesian economy as the main source of exports of goods and services. This industry brings together some 2,820 companies (11% of the total in 2015) that generate 15% of turnover. Secondly, agriculture and livestock, considered as pillars of the development of the archipelagos, remain mainly

23 Distance from Paris to Papeete.

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artisanal, with small family farms. They only partially meet the needs of the internal market. In addition, the industry is growing. However it is constrained by the size of the domestic market and the difficulty of exporting, particularly due to the geographical position of French Polynesia in the South Pacific: far from continental growth markets (Americas, Asia, etc.). Industrial enterprises are very small in size: 85% of the 2,457 enterprises listed in the ad hoc register in 2015 had a maximum of two employees. The constraints of the internal market restrict economies of scale, favor monopolistic positions, and penalize the competitiveness of “Made in Fenua” products. Finally, it should be noted that traditional crafts contribute to maintaining populations in the various archipelagos by providing jobs for the local population. Companies in this sector are often one-person companies, but also associations. They contribute to social cohesion, particularly in remote islands such as the Austral and Marquesas archipelagos. This territory is also characterized by the distances between islands and cities. Transport is also characterized by two links: a maritime link and an air link. French Polynesia’s main port area is the autonomous port of Papeete, and its main airport area is Faa’a airport... the only international airport in a territory as large as Europe! In addition, retail, outside the major retail chains, accounts for 21% of companies. It is composed of a large majority of local shops. Faced with all these sectors, we note that the telecommunications, energy and digital sector is experiencing a real boom, particularly since 2010, when the international submarine cable link allowing the transmission of telecommunications and data flows between Tahiti and Hawaii (Honotua cable) came into service. Although the digital economy in French Polynesia is still in its infancy, the investments planned, both to reduce the digital divide suffered by remote archipelagos and to secure international links through the introduction of a second submarine fiber optic cable, will boost a growing sector and even the entire country. Indeed, the territory of French Polynesia has, for me, a strategic role to play in the digital economy for the coming decades, especially if it succeeds in its own digital transformation. This digital transformation can make Fenua one of the world’s digital safes. All stability indicators are green to help achieve this objective: geographical positioning, political stability, economic

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stability, telecom and digital training provided on the territory for the acquisition or upgrading of human resources, etc. This is why the structure I created, LOGIC – Académie des Télécoms, has partnered with TEP (Transport d’énergie électrique en Polynésie) to offer the first level IV and III courses, and labelled a Grande école du numérique24, in the telecommunications and networks sector. This collaboration is an example of the economic and social innovations that digital technology allows, in dynamic territories such as French Polynesia. Indeed, an SME (LOGIC) joins forces with a public company (TEP) to offer training leading particularly to the return to employment of people who are far from achieiving so. It is also a question of creating and developing, as the territory allows thanks to the very close proximity of all the actors (economic, political, social, etc.), an ecosystem of innovation and an innovative dynamic for the economic actors. This is the reason why other stakeholders are involved as key partners for LOGIC and TEP in the implementation of its first telecommunications training courses: RSMA (Régiment du service militaire adapté) and SEFI (Service de l’emploi, de la formation et de l’insertion professionnelles). Innovation is not only technological, it is also social. It is supported by all its stakeholders and is supported by the Government of French Polynesia and its dedicated departments or services, such as the DGEN (General Directorate for the Digital Economy) and the SIPF (French Polynesia Information System). This example of public/private collaboration shows that French Polynesia has the capacity to promote the development of initiatives that meet multiple challenges: political, economic, social, societal, technological, etc., and the sovereignty of a territory. However, for the momentum to continue, the deployment of telecommunications and data networks is one of the critical success factors. French Polynesia has understood this well and is putting in place significant means to connect as many people and businesses as possible in its territory and beyond. And in a very concrete way, since 2017, it has developed a 24 Some public French higher education institutions recruit their students through an admission examination, at the end of two years of preparatory courses for the “Grandes écoles”. They include tests that are the same for all, and that are anonymous.

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digital action plan called Smart Polynesia25. It is a plan that brings together institutions, companies of all sectors and sizes, to an innovative project, one of the objectives of which is to support the country’s digital and sectoral transformation. To conclude, in my opinion, digital technology, particularly its services (uses and content), is one of the challenges of this new millennium, particularly with the aim of opening up territories, but also of contributing to the transformation of businesses, in particular SMEs and craft businesses. The objective is to adapt them to changes in the economy or to make them more competitive in their markets. It is also a means of emerging radical services or technologies. The territory of French Polynesia is a very good illustration of this.

25 See the website: www.smart-polynesia.com/.

4 Innovation and Social Construction of a New Idea in SMEs

4.1. Introduction Faced with changes in the environment, SMEs must be able to innovate based on ideas that are new enough to differentiate themselves from their competitors (Carrier and Szostak 2014). In Chapter 3, we showed that this objective requires the existence of a creative slack, a pool of ideas (Cohendet and Simon 2015), which must be intentionally nurtured and whose content and ideas are based in particular on existing knowledge (Parmentier et al. 2017b). This slack also has the merit of paying attention to the sources of these ideas, both in terms of the components of the organization and the environment, and therefore of better understanding who is behind them, which individuals are involved in the formulation of these ideas (Ford 1996; Drazin et al. 1999), and how to foster their emergence, collection and selection. However, addressing the issue of these new ideas and the creative slack in SMEs without addressing the more concrete question of their transformation into innovation, would be similar to tasting a famous chef’s dish on the pages of a beautiful cookbook. We would have the colors of the food. However, we would miss its delicate sound under the fork, its scents brushing the ends of our nose and its flavors on the tongue. It is important to understand how the vague statement becomes an elaborate concept (Parmentier et al. 2017b). This chapter therefore aims to present more concretely how new ideas cannot be eliminated, and, on the contrary, be desired and “cooked” as raw material within the organization (Akrich et al. 1988; Kotter 2016) taking into account the specificities of the

Innovation and Creativity in SMEs: Challenges, Evolutions and Prospects, First Edition. Claudine Gay and Bérangère L. Szostak. © ISTE Ltd 2019. Published by ISTE Ltd and John Wiley & Sons, Inc.

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SME (St-Pierre and Labelle 2017). We argue that this requires, above all, the ability to convince stakeholders that the idea is worth exploring, testing and implementing (Royer 2002). This is why we propose an approach to the social construction of ideas in SMEs, in order to better understand how these ideas become more widespread and more valuable. Based on our previous work and case studies on SMEs, we argue that the ability to convince is based on the legitimacy of the idea promoter, who is usually the SME manager, but also on messages formulated with the intention of persuading, as well as on managerial tools and practices dedicated to creativity and innovation. By legitimacy, we can define it as “Legitimacy is a generalized perception or assumption that the actions of an entity are desirable, proper, or appropriate within some socially constructed systems of norms, values, beliefs, and definitions” (Suchman 1995, p. 574). The SME exploiting a new idea of the creative slack has the responsibility to signal its legitimacy to do so, but also to demonstrate that the idea is in conformity with the norms, values and expectations of groups concerned by the idea. We consider that the legitimization of the idea follows two consubstantial axes forming the parts of this chapter: – the rhetoric; – the action taken around it. For the first axis, we look at the texts (dialogs, words, discourses) that are listened to and/or read and recognized by the actors as significant (Phillips et al. 2004). However, they are not disconnected from the action in the sense that they can either come from it, generate it or be performative1. Nonetheless, in the first part, we focus mainly on rhetoric and, more precisely, on two points: – the author (or rhetorician) who is the promoter of the idea in the SME or the champion (Burgelman 1983; Royer 2002); – rhetorical strategies to convince and persuade the audience internally (both employees and the family of the SME manager) and externally (banker, accountant, partners, suppliers, customers) (Scott and Lane 2000; Suddaby and Greenwood 2005).

1 To be performative means he/she “who performs an action by the very fact of enunciation”.

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For the second axis, we show, on the one hand, that the adoption of tools for creativity and innovation, such as design thinking (Verganti 2006; Liedtka 2011; Carlgren et al. 2016), contributes to the social construction of the idea resulting from the creative slack. And, on the other hand, we consider a management practice likely to legitimize this idea, which still needs to be further developed in the case of SMEs: intellectual property (Le Bas and Szostak 2016; Corbel and Reboud 2018). The final objective of this chapter is to show that it is essential to jointly exploit these two axes to engage SME stakeholders around the idea that gives rise to innovation, while accepting that this assembly leads to an evolution of the initial statement. This indicates de facto to the manager the qualities and skills to be developed on a personal level, but also those to be fostered within the organization to promote this trajectory from idea to innovation. 4.2. The social construction of a new idea in SMEs through rhetoric John P. Kotter, Professor Emeritus at Harvard Business School, explains that the more you explore topics, the more obvious it becomes that convincing others to embrace new ideas is both a human issue and a life skill (Kotter 2016). He added that to achieve this objective, it is important to determine the best way to get people to understand the nature of a subject. These comments are all the more accurate in SMEs because proximity between actors promotes interpersonal relationships (relational proximity, hierarchical proximity), which should therefore facilitate the adoption of ideas internally, due to the proxemic law that characterizes them (Torrès and Gueguen 2008). However, SME professionals point out that this is not so obvious, and that ideas are not always easily retained. It therefore seems important to us to come back to one question: how does the person who brings the idea and defends it succeed in convincing the SME stakeholders? This part will thus address, in section 4.2.1, the legitimacy of the holder (or rhetorician) whom we consider to be essentially the manager of SMEs2 2 This is not to say that employees cannot promote a new idea of which they are the authors. But we consider that, because of the particularities of the SME and the level of analysis retained in the book – in this case the corporate or organizational level − the manager cannot avoid being directly concerned by the idea’s implementation, especially when it is a question of convincing a member of the family, a client, the banker, to accept the potential change brought about by the idea. That being said, the arguments put forward in the section can be a source of reflection for an SME employee wishing to bring an idea to the manager.

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(Torrès 1998), and, in section 4.2.2, the rhetorical strategies adopted by the promoter supporting the social construction of the idea that is to be transformed into innovation. 4.2.1. The legitimacy of the idea promoter as an SME Whatever the organization, it must be recognized that the creative and innovative individual, wishing to change a situation, disrupts. A paradox then emerges: on the one hand, everyone is convinced of the need for change, especially in the changing world in which we are now living, and on the other hand, change is not welcome, because it requires us to question our practices, even our ways of thinking, without knowing whether, in the end, the change will make it possible to achieve the objectives pursued. The risk in SMEs is that of the status quo. This well-known paradox in innovation (Burgelman 1983; Dean 1987) is heightened when it comes to an idea (Royer 2002) because little information is available and reliable to assess its validity. In addition, decision support tools for selecting an idea are essentially based on subjective assessments. The consequence may be to see a stronger resistance to innovation that will be produced from this idea. It then seems essential that there be a “champion”, who carries the idea, and who is led to speak out to convince all the actors involved. In SMEs, the manager is generally seen as this champion (CorbettEtchevers et al. 2013; Adla and Gallego-Roquelaure 2016). Indeed, the manager’s central position in the organization leads them to be a priori legitimate in the implementation of a new idea. However, it seems important to them that their legitimacy is not a “preconception”, but rather a collective and common belief held by the stakeholders. In this sense, Weber (1971) proposes three types of legitimacy: – rational or legal legitimacy: the underlying belief is that there are rules and rights conferred on persons exercising legal domination; – charismatic legitimacy: belief concerning the sanctity, the exemplary value of the person, which is imposed on all; – traditional legitimacy: belief echoes a custom or routine here. The SME manager with a new idea must be seen as legitimate from these three angles. The first type of legitimacy is acquired by the very fact of being, at the legal level, the leader. Before the law, they are considered as the person

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in charge of the organization. With regard to the second type, while Chapter 3 has already detailed how much the type of transformational leadership plays a major role in ensuring that ideas emerge, we understand that it is also essential to implement these ideas for innovation. Thus, transformational leaders, such as Steve Jobs, René Angélil or Gérard Mortier3, are emblematic illustrations of this type of legitimacy: the history of their professional careers clearly shows the importance of this form of legitimacy for a manager in a context where creativity counts (Cardinal 2018). On the other hand, we would like to further develop the third type of legitimacy, which refers to a shared vision between the actors, a tradition accepted by all. And we want to refer here to the vision, or current belief very prevalent in society and the economy, that the leader is an “entrepreneur”. In other words underlining that the social construction of the SME manager’s idea cannot ignore their wider environment, history and customs (see Chapter 2). Moreover, far from seeing the environment in terms of its deterministic nature, SME managers are encouraged to adopt a more proactive strategic behavior and to consider this vision of the entrepreneur as a strategic resource that enables them to defend their creative idea and the innovation that results from it. And what is the current vision of the entrepreneur? As Boutillier and Tiran (2017, p. 30) indicate, “the theory of the entrepreneur has been built over the centuries according to the structural transformations of capitalism4”. The question then becomes: how is the entrepreneur perceived in society today? And with regard to the subject discussed in this section, how would the status of “the entrepreneur” allow the SME manager to be legitimate to bring about a new idea? Works on the entrepreneur are numerous (Tiran and Uzunidis 2017). Economic thinkers such as Richard Cantillon, Jean-Baptiste Say, Joseph Schumpeter, Mark Casson and David Audretsch, have helped to better understand the entrepreneur’s place and role in the economy; researchers in management sciences have studied their mode of action (Gartner 1990; Julien and Marchesnay 1996; Marchesnay 1998; Filion 2000), skills (Baum 3 For precision, Steve Jobs (1955–2011) was the founder of Apple, René Angélil (1942– 2016) was Celine Dion’s manager, Gérard Mortier (1943–2014) was the director of the Paris National Opera (Cardinal 2018). 4 Translation by authors.

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1995; Lorrain et al. 1998) or entrepreneurial action (Sarasvathy 2001; Bréchet and Prouteau 2010; Marchesnay 2012). Without entering into historical debates on the entrepreneur, we retain, first, David Audretsch’s analysis as emblematic of the current conception of the entrepreneur (Boutillier 2015). This author shows that, thanks in particular to technological changes, but also to social policies, work organization has become freer and capitalism more creative (Audretsch 2007). Entrepreneurs are therefore encouraged to be creative and innovative. Moreover, following his research with Zoltan Acs on technological innovation in large and small companies (Acs and Audretsch 1987; 1988), this researcher points out that the entrepreneur does indeed propose new forms of production. This work therefore focuses the attention of researchers and society in general more on strategic and business model innovation. The innovative entrepreneur, and therefore here our SME manager, is therefore recognized as daring to change the way we create and capture value. Secondly, to draw conclusions from our previous understanding of an “entrepreneur”, we retain Marchesnay’s work (2017). This researcher affirms that we are in the third industrial generation5, characterized by an individualistic ideology, going hand in hand with an increase in the legitimacy of entrepreneurship and more precisely, an increase in the declared willingness to create one’s own company6. Being an innovative entrepreneur then becomes a desirable social position in the economy and it is even of good taste to say that you want to start your own business. And we can only confirm these conclusions. We can see in the academic and university community, as well as in that of professionals from support to business creation, the enthusiasm for creativity and innovation, especially those of the business model7. In short, the SME manager claiming to be an entrepreneur therefore refers to this vision and belief shared by all. It is

5 The first corresponds to the 1780s (steam engines) and 1830s (rail networks), the second to the 1880s (innovation in the steel industry) and 1879 (light bulbs), and the third to 1975 (electronic chips) and the 1980s (computers and PCs) (Marchesnay 2017, pp. 33–48). 6 For example, according to the French Entrepreneurial Index 2018, the figure for declarations of intent to create or take over a business is 19% in France. 7 We are thinking, for example, of Osterwalder and Pigneur’s effective and renowned proposal concerning the business model canvas, the many seminars on business model innovation, in higher education and in incubators, etc.

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therefore in their interest to present themself as such to their stakeholders to defend a new idea. However, if the SME manager appears legitimate to bring an idea as an entrepreneur, this need should not have the opposite effect, which would consist of seeking at all costs to meet expectations, standards, beliefs, and, thereby distorting the idea, which could lead them to stop innovating. It is therefore essential to be reasonable in terms of seeking legitimacy for the leader. Germain (2017, p. 53) goes so far as to state: “Legitimacy [in entrepreneurship] must rather be considered as a secondary constraint that must be the subject of permanent negotiation in order not to undermine the integrity of the entrepreneurial project”8. This caveat highlights the challenge of balancing singularity and compliance. Moreover, if this balance remains to be assessed in a specific way for the leader, it must be noted that the exercise of convincing people of the usefulness of the idea also leaves its mark, in particular through texts, words and discourses, which is the subject of section 4.2.2 (Szostak and Dhuyvetter 2010). 4.2.2. Discourses to convince people of the usefulness of the idea According to J. Kotter (2016), when it comes to innovation, it is important to remember that we expose our ideas to human beings who sometimes have opposing opinions, who can be subject to anxiety and who fear the consequences of any interaction on their position within the group. He added that there is a certain skepticism in principle about new ideas. How then to convince the organization’s stakeholders of the usefulness of a new idea? How can we prevent conflicts from paralyzing organizational renewal? The feedback from the managers and executives with whom we have been working for years indicates that the answers depend on the type of stakeholders involved: internal (SME employees) and external (customers, partners), because the stakes are different. 4.2.2.1. Convincing employees Concerning the first type, that is SME employees, we can consider them to a certain extent, as the first “customers” of the idea resulting from the creative slack. In regards to this, we are following in the footsteps of Defélix 8 Translation by authors.

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(in Gallouj and Stankiewicz 2014, p. 234), who emphasizes the role of human resources (or HR) and human capital management in innovation: “Innovation of any kind is developed by people, which must be managed as well as possible”9. But when innovation is at the idea stage, this sentence turns out to be even more accurate. Indeed, Royer (2002) recalls, in her research on the development of a new product, that the decision at the idea stage is essentially socio-political, before moving towards a more rational decision to lead to innovation (Figure 4.1). If the two dimensions coexist throughout the process, it is obvious that when the idea, or the intention of action and hypothesis (Parmentier et al. 2017b), becomes knowledge, based on more objective data, rational arguments are easier to put forward to convince employees. The HR challenge for SME managers is therefore primarily at the socio-political level. Idea Poor or very poor available information Decision making tools which rely on subjective evaluation. Resistance to innovation and necessity for mobilization for implementation.

Socio-political decision

Implementation More abundant and available information More precise decision making tools using more objective data Strong resistance to innovation

Rational decision

Figure 4.1. Evolution of the nature of the decision during the development of a new product. Source: Adapted from (Royer 2002, p. 23, Figure 5)

The rare studies addressing the issue of innovation and HRM (Human Resources Management), (Defélix et al. 2015) in SMEs (Aït Razouk 2014; Adla and Gallego-Roquelaure 2016) show the importance of involving employees in decision-making. The objective is that they feel integrated into the decision-making process and that they understand the meaning of their commitment to the process of identifying, collecting and evaluating ideas, and then transforming them into innovation (Aït Razouk 2014). According to Adla and Gallego-Roquelaure (2016), other HRM practices contributing to innovation in SMEs include internal communication. This consists of developing active listening to employees, and in particular the anxieties 9 Translation by authors.

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mentioned by Kotter (2016), the constitution of reflection groups and meetings conducive to exchange. On the part of the leader, this implies discourses supporting the idea put forward, in order, first, to convince everyone and, second, to overcome the obstacles encountered and the resistance. To be more specific, here are the rhetorical strategies that Roy Suddaby and Royston Greenwood (2005) suggest may be used to theorize change (Table 4.1), as well as illustrations to these strategies (Table 4.2). Rhetorical strategies Ontological

Historical

Teleological

Cosmological

Value-based

Definition The arguments are based on logical categorizations that highlight what can and cannot coexist a priori. Suddaby and Greenwood (2005) use terms such as “fundamental conflict” and “inconsistent concept” (p. 51) in their study to reflect the antagonism. The discourse refers to history and tradition. This rhetorical strategy can be used both to justify and oppose change. Change can be approached in terms of path dependence, in an evolutionary logic, for example. The arguments put forward justify change as a response to an ultimate objective. The disruption is inevitable to ensure future well-being. It is a choice that expresses the willingness of the actors to participate in this grand design. The argument is similar to that put forward in a strategy of teleological rhetoric, but differs from it in terms of the actors’ roles. These developments are in response to universal laws that are inexorable. The authors cite forces such as “globalization” or “client demand” (p. 55). The line of argument is underpinned by an ethical vision of change. To what extent can change contribute to improving or deteriorating what the organization believes in? This rhetorical strategy refers to normative or moral legitimacy (Suchman 1995).

Table 4.1. Rhetorical strategies to convince people of the legitimacy of a new idea. Source: Adapted from (Suddaby and Greenwood 2005) Rhetorical strategies

Fictional illustrations

Ontological

“It is impossible to develop this idea, which is fundamentally at odds with what made us successful.”

Historical

“Our trajectory proves that we are successful in carrying out such projects; we will succeed again!”

Teleological

“The current changes leave us no choice. We must change before it is too late.”

Cosmological

“Customers expect us to be able to respond flexibly and quickly. We must reinvent ourselves in this direction!”

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Value-based

“We are an organization for which environmental protection is crucial. We cannot develop our idea with this partner who ignores their carbon impact.”

Table 4.2. Fictional illustrations of rhetorical strategies

The aim here is to encourage SME managers to pay close attention to internal communication in order to legitimize the idea they want to develop. Their “texts” are very important because they are read, quoted or used by others (Scott and Lane 2000), and first and foremost by employees. It is common in a company to hear the phrase: “The boss told us that...” Or, in the digital age: “The boss tweeted, posted a message on LinkedIn...” This communication must therefore not be the result of chance (Schwebig 1988); it is to be thought of and worked on when it comes to the development of innovation. However, it should not be assumed that once a new idea has been adopted internally, the work of social construction is over. Customers and partners are also concerned by the subject, which is addressed in the section 4.2.2.2. 4.2.2.2. Convincing customers and partners If convincing internally of the relevance of an idea of creative slack is far from being a sinecure (Kotter 2016), this is no less the case when it comes to customers and other partners of the SME. The sanction of the market remains heavy with consequences for an organization, in particular if these actors do not adhere to the idea. How then to convince them of the usefulness of a new idea? In line with the discussion in section 4.2.2.1, we focus here on the rhetoric of SMEs that is voluntarily communicated to external stakeholders, and in particular through the organizational image. As illustrated in the foreword by Gaëtan de Sainte Marie, the objective of this strategy is to appear desirable, and to be perceived as appropriate and correct in relation to their expectations. This is more precisely what is known as the “institutional image”, that is the voluntary projection of an organizational image that refers to the institutional logics of the organizational field for stakeholders (Szostak 2006a, p. 10). This image is an interface between the organization and external stakeholders. It reflects not only the perception of the organization’s members (e.g. employees), but also the way others perceive the organization itself (Fombrun and Shanley 1990; Dutton and Dukerich 1991; Gioia et al.

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2000). The aim is to increase the attractiveness of the SME engaged in developing a new idea to propose an innovation, to improve its credibility in their eyes, and to avoid blame (Zuckerman 1999). This therefore requires the company to, first, identify the expectations, norms and values that are crucial for stakeholders (Elsbach and Sutton 1992), second, to translate them into a specific vocabulary, and third, to formulate the image, with proper reference to it (Box 4.1). According to this approach, the environment, composed of customers and partners, becomes a real strategic resource to be mastered for SMEs. Design agencies in France are mainly SMEs. Their mission is to develop and support their clients’ creativity. Studies show that three sets of values, norms and expectations coexist, each of which results in a specific vocabulary (Szostak 2009; Szostak and Dhuyvetter 2010; Durand, et al. 2013). We present and illustrate them below: – the first set is summarized by the aphorism “the form follows the function”, which is the characteristic of the so-called functionalist logic. The emblematic vocabulary includes words and expressions, such as rigour, technical mastery, advanced knowledge, efficiency, rationality, etc.; – the second set of values, norms and expectations is in opposition to the first. This is the formalist logic, which emphasizes eclecticism, the diversity of colors and emotions. We find words like dream, seduction, artist creation, sensitivity, etc.; – the third set emphasizes the “business” and commercial dimension: the strategic logic. The vocabulary chosen reflects words such as key success factors, a management tool, investment design, competitive advantage, etc. Each of these sets can be selected by design agencies to formulate their institutional image and thus appear desirable to their clients. They can also be articulated with each other. However, there are limits to this exercise: some values are contradictory (for example, valuing black and white for functionalist logic, and colors for formalist logic). But, it may also be a willingness to be surprised by the paradox. In any case, the conclusion to be drawn from this illustration is that SMEs, and here design agencies, must choose their words and expressions carefully when formulating their institutional image. Box 4.1. The case of institutional images in design agencies

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In addition, Elsbach (1994) explains that verbal narratives are defined by both content and form. Thus, this image translated into texts should be considered according to these two approaches. How is the text written (font and font size, colors, drawings)? What is the nature of the text (prose, poetry, haiku)? What is its layout? Are there any writing games like an acrostic, the integration of “smileys”, etc.? Given the role of these texts, which are supposed to legitimize creativity and innovation, the SME manager must give real thought to their formulation. In the age of 140-character instant tweets, emails and instant messaging, it may seem surprising to encourage the leader to take the time to think about both the form and content of discourses. However, neglecting these dimensions would mean forgetting the role of writing in the construction of humanity, which, despite everything, is being modified by digital technology (Box 4.2). In short, for SMEs, it is a question of complementing the discursive approach of the institutional image with that of text visualization (Meyer et al. 2013; De Vaujany and Vaast 2016). Visual representations are part of the subjective evaluation of an idea. This is all the more obvious when the social construction of the idea is addressed by design thinking (sketches, visual storytelling, prototyping, etc.), which is discussed in the next section. Digital technology has changed our relationship with writing. From the work carried out by Jeanne Bordeau (2016) in her book Le langage, l’entreprise et le digital, we understand that the digital language cannot be improvised. Indeed, several characteristics make it special and deserve the attention of SME managers wishing to express themselves through communication channels of this nature. First of all, it is a social and collaborative language, which invites everyone to express themselves and debate (example of “reply all” on an email or “retweeting/retweeting with a comment” on Twitter). If it is also informative, it is also subject to fact-checking or verification of information, with the risk of bad buzz. It is also immediate and increased, even scripted, thanks to images, hyperlinks, smileys, GIF images, etc. Finally, it is shortened and imposes a synthetic, direct and effective expression, which can harm the nuance and subtlety of ideas. The SME manager who produces digital texts should therefore exploit these communication channels while being aware of all these characteristics. Box 4.2. Writing a text in the digital age

To summarize this first part, we show that the legitimacy of the promoter of the idea (or rhetorician), in our view the SME manager, can be combined or not, through the legal status of the manager as the legal manager of the

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company, through the form of leadership adopted, but also by referring to the figure of the entrepreneur, who is currently on the rise. It will also enable them to formulate rhetorical strategies to convince employees, who are their “first internal clients”, as well as an institutional image for clients and partners. This social construction of the idea through discourse and words is not enough for us, however. Concrete actions must be associated with it; in other words, “making” social construction. 4.3. “Making” the social construction of a new idea in SMEs With reference to the method inspired by the quotation from Ralph Caplan, designer and author of the book By Design (1984) – “a hand that draws is a hand that thinks”, we consider that action (here, drawing) leads the actor to reflect: “making” this convinces him of the relevance of the idea and, in return, facilitates the assembly of other actors (Akrich et al. 1988). The objective of this second part is thus to understand how concrete actions carried out within the SME can promote the social construction of a new idea. As we are not aiming for exhaustiveness, we have chosen to focus in particular on two actions, which are currently booming in SMEs. First, we discuss the case of design thinking as a management tool dedicated to creativity and innovation (Verganti 2006; Liedtka 2011; Carlgren et al. 2016). Secondly, we discuss the practice of capture of the value of the idea by intellectual property in SMEs (Le Bas and Szostak 2016; Corbel and Reboud 2018). 4.3.1. The exploitation of design thinking in SMEs10 Design thinking (Brown 2010) is a user-centred method (Veryzer and Borja de Mozota 2005; Ward et al. 2009; Johansson-Sköldberg et al. 2013; Carlgren et al. 2016). Many large companies and SMEs apply it (Ward et al. 2009; Liedkta 2011; Johansson-Sköldberg et al. 2013; Gerlitz et al. 2016). 10 Some of the ideas mentioned in this section are the result of the collaboration of Bérangère L. Szostak, since 2010, with François Lenfant, General Manager at Healthcare Experience and manager of the Global Design department for the Europe/EMEA region of GE Healthcare, the medical branch of the General Electric group. They also benefit from regular exchanges with designers in agencies. These ideas were transcribed in 2015 in a book, La boîte à outils du design management (B.L. Szostak and F. Lenfant, Dunod Editions) and defended at academic and professional conferences (Design Days in Paris, Forum de l’innovation du réseau de recherches sur l’innovation in Paris, Biennale du Design de St-Étienne).

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The premise of design thinking is collective intelligence. Several people voluntarily meet in a group to address a specific problem. Among them, a professional designer is automatically included. Various profiles are associated with it: engineers, sociologists, philosophers, architects, technicians, marketing specialists, senior managers, etc. All have different interests in design. However, they work together to create and innovate in line with the company’s developed strategy (section 4.3.1.1.1), using emblematic practices, in this case prototyping and empathy (section 4.3.1.2). 4.3.1.1. Design thinking, a strategic innovation management method Design thinking echoes design, a discipline in the field of creativity (Verganti 2006 and 2008; Dechamp and Szostak 2016). We see design as a means for individuals working in a complex social system to create, capture and transform ideas of value into innovation (Woodman et al. 1993; Carrier and Gélinas 2011a; Szostak 2016). Design thinking therefore promotes the transition from creativity to innovation. In addition, we consider that design can be a strategic capacity, because of its ability to strengthen, or even create, sustainability and legibility for stakeholders, the competitive advantage of the organization, and thus, be a strategic innovation management method. In this sense, we focus on four main dimensions for which design plays a strategic role in a company, and which the SME must understand (Figure 4.2). The “physical” dimension refers to the role of design in designing a differentiated offer in line with the company’s vision and customer needs. It can be the shape of the product (colors, material, etc.), but also the organizational design of a service offer. The “emotional” dimension underlines the ability of design to create a unique and strong relationship with stakeholders due to the satisfaction of the experience with the company. For an SME, this reminds it of the importance of taking into account the actors’ emotions, whether internal or external. The “spiritual” dimension emphasizes the brand values to which stakeholders adhere, hence the need to clearly formalize them, particularly in a portfolio of drawings11. And the “intellectual” dimension characterizes the organizational processes that allow the design to transform ideas into a value proposition that the company

11 On this subject, we can refer to the work of marketing researchers specialized in brand personality (Aaker 1997; Graeff 1997; Wee 2004).

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can capture. This point will be further explored in section 4.3.2 with the theme of intellectual property. RELATIONSHIP Stakeholder satisfaction

EMOTIONAL

PROCESSES Efficiency of design tools

The INTELLECTUAL key dimensions of design

PHYSICAL

OFFER Differentiation of the offer

SPIRITUAL

BRAND Stakeholder retention

Figure 4.2. The key dimensions of design. Source: (Szostak and Lenfant 2015, p. 16)

Thus, a new idea resulting from the creative slack which is worked according to the perspective of design, will be transformed according to the four dimensions. It is important, however, to assess whether or not the objectives of each dimension have been achieved. In this sense, Table 4.3 proposes evaluation and control indicators, which are generally used by companies. Physical dimension

Evolution of absolute and relative market share. Shape recognition of the products.

Emotional dimension Degree of satisfaction with the product (for the customer). Level of satisfaction with mode management (for employees).

Spiritual dimension

Level of adherence to the perceived image and values of the brand. Nature of loyalty to the brand.

Intellectual dimension Share of the design in the cost of R&D development. Capacity to capture innovation through intellectual property rights.

Table 4.3. Examples of control and development indicators in terms of dimensions of the design. Source: Adapted from (Szostak and Lenfant 2015, p. 16)

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On the other hand, if these indicators remain simple in themselves, they may still appear complex for an SME. Indeed, this implies at least three conditions. First, the SME must be technically equipped. Second, it must be organized to create, collect, process and secure the data necessary for the various evaluations suggested by the indicators. Third, they are asking for access to certain data, such as market shares. More broadly, the question then arises of the information system, which often deserves to be developed in an SME (Julien 1997). For example, here is an important question for an SME: has it developed an accounting information system that allows it to isolate design investment when developing a new product? Chapellier et al (2013) show, based on their study on Syrian SMEs in Aleppo, that, while an SME accounting information system does not generally include complex data, it is developed under the condition of simplification and adaptation. It is also necessary to take into account structural and contextual characteristics (size of the company, type of strategy, nature of the environment), as well as the profile of the managers and professionals concerned (internal accountant, external firm). From this work, we understand that, in the case of design exploitation, and in order to assess its accounting performance, the accounting information system will have to be adapted and integrate design as an important position. This should also facilitate access to innovative and complementary financing to bank loans, such as securitization12. On the other hand, all this implies that there is a will and intention to do so, and that the manager focuses on design in their innovation strategy to the point of setting up an information system, for example an accounting system, allowing them to use the indicators mentioned. In our opinion, the actions induced by the research of evaluation and control contribute to the social construction of the creative idea and innovation. But they impose a real commitment on the part of the SME’s management, which is not always easy, according to the designers13. This condition for success is also present when it comes to the exploitation of typical design thinking practices, such as prototyping and empathy, which is the subject of section 4.3.1.2.

12 On the particular case of securitization, see the appendix to section 4.5.1, written by Alexandre Quiquerez. 13 On this subject, read the interview with designer Jean-Baptiste Sibertin-Blanc in the appendix, section 4.5.2.

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4.3.1.2. Typical design thinking practices to be used in SMEs Design thinking as a method is based on an organized process of research, improvement and development of new ideas (Ward et al. 2009; Johansson-Sköldberg et al. 2013; Carlgren et al. 2016). Three main steps can be identified (Brown 2010; Chanal and Le Gall 2016): – inspiration is used to collect insights into the thoughts, practices and needs of users. The main questions the company answers are: “Who are our users? What is most important to them? What are their needs?”; – ideation is based on classical creative methods (such as brainstorming) and summary prototyping. The objective is to generate and collect many ideas, even the craziest ones; – implementation involves the selection of the idea, in particular through the implementation on scale 1 of the desired experience to test the desirability, feasibility and viability of the idea. The questions to be addressed are then: “How can we make our idea tangible? What works well or poorly for the user in this prototype?” During these stages, all the company’s internal actors, that is employees and SME managers, are involved. External actors, such as consumers, suppliers and even society as a whole, are also mobilized at certain stages through philosophers, writers, entrepreneurs, politicians, students, etc. This diversity is characteristic of design thinking (Kelley and Kelley 2013; Carlgren et al. 2016). The interest here is to bring these actors together to gather ideas, but also to develop a privileged relationship with each of them. Two major design thinking practices promote this in particular: empathy and prototyping. They are widely available to SMEs. Indeed, they do not require significant resources or extensive expertise, but above all emotional intelligence, imagination and manual skills. Concerning the first, empathy, this involves putting yourself in someone else’s shoes, without judgment, by understanding the personal motivations of each person leading to particular actions (Liedtka 2011 and 2015; Carlgren et al. 2016). It is based on the ability to reason with emotions (Goleman 2018). Empathy allows us to imagine the world from the points of view of internal and external actors, to open our eyes to better observe them and understand their behaviors (Brown 2010) (Box 4.3). For example, Yoo and Kim (2015) explain, in the case of Samsung, a company known for its design but also for its commitment to Corporate Social Responsibility (CSR), how the idea of the

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first flip-cover cell phone without an external antenna could be developed internally. The creative director adopted the engineers’ mindset to convince them of his idea. “To bring them on board, he [the junior designer] reached well beyond the usual design role and took on an engineer’s mindset” (Yoo and Kim 2015, p. 76). Samsung has worked in this way with its “internal customers”, but it has also worked with suppliers. In the case of the development of the One Design flat panel television, the company was indeed confronted with strong resistance from suppliers. To convince them, it adopted their point of view and understood that the sticking point was essentially logistics. It then invented a new supply chain model, allowing it to save money on this position, which then convinced suppliers to distribute the product. Thus, this practice has fostered the emergence of new ideas that are directly useful to the stakeholders involved, and has fostered the development of the innovation that results from a new idea. The transformation of a creative idea into innovation requires a mental reconstruction of reality. Empathy promotes this reconstruction. According to Goleman (2018), empathy has three forms and each contributes to it: – cognitive empathy is the ability to understand the point of view of others; – emotional empathy is the ability to feel what the other person is feeling; – empathetic concern is the ability to feel what the other person expects from you. In the case of design thinking, it pushes the actors involved in the method to be curious about their customers to understand them. Hence the use of surveys to approach the reality of customers (“what do they do, how, why, when, where, with whom, etc.?”). Empathy also leads these actors to feel the emotions of customers when faced with a situation that leads them to implement the idea into an innovation: anger at a low-performance product, the joy of reaching a goal, the sadness of losing a valuable object, etc. Finally, empathy leads the actors to engage in the search for a real and concrete solution to meet the needs of customers. Box 4.3. Realities of the three forms of empathy in design thinking

While empathy is a practice that favors the social construction of a new idea, Goleman (2018) points out that it has limits, including compassion fatigue and anxiety, which can lead actors to make poor decisions. The three stages of the design thinking process can then appear as a method to overcome these possible limitations. Another way to reduce these limits is to

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use a second practice: prototyping. It complements the first because it “brings ideas to life” by facilitating the visual expression of ideas (Ward et al. 2009; Johansson-Sköldberg et al. 2013; Carlgren et al. 2016). To some extent, the practice of prototyping is part of a more global movement involving that of makers (or do-it-yourselfers) (Box 4.4). The aim is to test the concepts as they are formulated, to stage them, and to enable the various actors involved to assess their relevance in the light of their own constraints (Sutton and Hargadon 1996; Ben Mahmoud-Jouini 2016). The makers’ movement originated in the United States in the 2000s. The term maker seems to have been coined by Dale Dougherty in his magazine Make in 2005 (Hussenot 2017). With reference to a study conducted by sociologists from organizations (Berrebi-Hoffmann et al. 2018), makers are inventive people, who themselves make objects useful in everyday life, but also less common objects (such as a drone), or even works with an artistic message. Their posture consists of valuing manual and artisanal work, in the spirit of the Arts & Crafts movement in Germany. Three subcultures form the basis of the movement: – the first is DIY (do it yourself): makers use 3D printers, laser cutters and CAD made available in FabLabs to create and repair objects. The underlying belief is that a person learns by doing; – the second subculture is that of hackers, that of the world of free software, which aims to be a protest and an alternative to capitalism. One of the values is to think about the emancipation of individuals by giving them the means to produce objects; – art is the third subculture, and it is pointed out that makers often adopt principles of life close to artists (for example, working on personal projects and responding to commissions) and also imagine decorative objects. Hussenot (2017) also points out that manufacturers go beyond the manufacture of new products: they also invent a new way of working. That being said, we retain that these people pass through materiality to give substance to their ideas and, thus, put them before the eyes of their interlocutors. Box 4.4. The makers or how to give substance to ideas

To demonstrate the power of prototyping practice, the MIT Media Lab adopts the aphorism “Demo or Die”. Indeed, the prototype, even if quickly tinkered with, facilitates the establishment of bridges between the past and the possible future (Liedtka 2011; Yoo and Kim 2016). It allows progress towards a better definition of the final concept. Here, the actors can engage in a dialog on an intermediate object, objectified through a tangible and

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visible model in a form common to all (Brown 2010; Liedtka 2011; Carlgren et al. 2016). They can then verbalize their constraints, doubts, questions; and the model serves as proof for their demonstration. Thus, from a sociopolitical logic (Royer 2002), the creative and innovative process becomes more material and rational, as information begins to stabilize in terms of knowledge. It is therefore in the interest of SMEs to take advantage of this practice, which is easy to develop internally, but also to take advantage of places that make the necessary prototyping equipment accessible, such as FabLabs (Box 4.5). That being said, it is true that there are risks inherent in using this method in SMEs. For example, the verbalization of doubts and questions is not such an easy act for the actors, including the SME manager, for fear of not appearing to be fully engaged in the creative and innovative process. It seems necessary that these actors and the manager in particular have a certain maturity in mastering design thinking (Cucuzzella 2016; Seville and Szostak 2018). Prototyping is “a design process that consists of iteratively producing prototypes, with varying finishing stages, in one or more copies, in order to carry out partial but realistic tests” (Fabbri 2017, p. 13514). Drawings and sketches are generally the first forms of the prototype. Then comes 3D shapes with models. If design thinking encourages quick and dirty prototyping (modeling with cotton, cardboard, draft sheets, etc.), it is also welcome to propose more advanced prototypes. And that’s what FabLabs can do. These design workshops, present in more than 500 locations around the world, imitate Neil Gershenfeld’s, professor at MIT and head of the “How to Make (Almost) Anything” course, who then filed a charter in 2002 to be in keeping with the use of the term’s name. In these spaces of about 150 m2 are offered at a lower cost, machines, digital equipment, and also traditional tools (saws, drills, pneumatic drills, etc.). These spaces are open to all, and SMEs benefit from them. In this sense, Suire (2018) shows that FabLabs do not establish the same relationships with their members, depending on whether they are a large or small company. Based on the study of 48 international FabLabs, this research highlights that, when FabLabs interact with SMEs, the projects developed are more exploratory. The accumulation of knowledge, which at some point translates into a prototype, therefore benefits these companies by stimulating new projects. The role of materiality in the activities of these design workshops contributes to this result. Box 4.5. Prototype ideas within FabLabs 14 Translation by authors.

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In summary, we mainly consider that design thinking, whether through the methodology developed as a whole or through the practices of empathy and prototyping, allows SMEs to involve all the actors concerned in the transformation of the idea into innovation. Design thinking promotes a cognitive and emotional understanding of these actors and physically shows the value of the innovation developed. This value can be functional, formal, reputational, societal, environmental, or economic. Whatever it may be, however, there is the question of value capture, which is the subject of intellectual property rights. 4.3.2. The role of intellectual property in SMEs If intellectual property (IP) is accessible to all organizations, it requires a legal capacity, which is “the ability of the company to integrate data from the legal sphere to develop legal resources” (Roquilly 2009, p. 14615). There are two kinds of these resources in a company: those generating rights that are based on ownership, and those related to the knowledge and skills of legal experts, which are based on knowledge. However, it must be noted that SMEs have to develop such a capacity: they often invest modestly in both kinds of legal resources (Le Bas and Szostak 2016; Szostak 2017; Corbel and Reboud 2018), while the question of valuing new ideas and innovations remains crucial (Pisano and Teece 2007). Thus, this section presents uses of intellectual property rights in SMEs (section 4.3.2.1) and then discusses other ways to capture the value of innovation in SMEs, including through cloud computing and creative commons (section 4.3.2.2). 4.3.2.1. The use of intellectual property rights in SMEs According to several surveys, SMEs do not make sufficient use of IP rights when they innovate (Crevoisier et al. 2005; Holgersson 2013; Reboud et al. 2014). The first hypothesis consists of the fact that they are not sufficiently familiar with these legal resources (Crevoisier et al. 2005), hence the actions developed for them by competent organizations16. In this 15 Translation by authors. 16 In France, several organizations support SMEs in the development of innovation and address the issue of protection through intellectual property rights. There are, for example, the Banque publique d’investissement (or Bpifrance), the Institut national de la propriété intellectuelle (INPI), the Chambres de commerce et d’industrie (CCI), etc.

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sense, Box 4.6 summarizes the main IP rights. The second hypothesis reflects their financial and human resources, which would be insufficient in view of the cost of filing and possible defence proceedings before the competent courts (Ayerbe and Mitkova 2008). Intellectual property distinguishes two main types of assets: – literary and artistic property (copyright, related rights); – industrial property (patents, trademarks and designs). The former are born of creation, while the latter require formalism (Gay 2017; Quiquerez and Szostak 2018). The patent: this property right protects a technical solution to a technical problem for a maximum of 20 years. The solution must be new, the result of an inventive step and industrially applicable. The patent application is filed with the INPI in France, the European Patent Office in Europe, and the World Intellectual Property Organization (WIPO) internationally. The trademark17: this right protects any distinctive sign capable of graphic representation (patronymic name, combination of numbers, sound trademark, etc.). It can also be a three-dimensional brand (or 3D brand), such as Bang & Olufsen’s Beolab loudspeakers. Drawings or models18: this right concerns the appearance of bi or tridimensional objects. On the other hand, the form must not be the result of a technical function. Copyright19: this right automatic as long as the work is original, that is it bears the author’s brand and personality, whatever the genre, form of expression, merit and purpose. Box 4.6. Overview of intellectual property rights

This being said, we note that the strategic uses of IP in innovation to protect the benefits of its innovative potential (Teece 1986; 2007) are varied (Gay 2017). The most traditional remains that consisting of excluding a third 17 See Article 2 of Directive 2015/2436 of the European Parliament and of the Council of 16 December 2015 to approximate the laws of the Member States relating to trademarks. 18 See Book V of the French Intellectual Property Code. 19 See Article L. 112-1 of the French Intellectual Property Code.

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party from the exploitation of the proposed solution, because it is made private. It is about enforcing your rights and, in return, respecting the rights of others. While companies have long exploited a single right to protect themselves, many are now adopting multi-protection strategies (Grandstrand 1999; Reitzig 2004; Corbel 2009), including SMEs (Le Bas and Szostak 2016). By multi-protection, we mean a combined legal innovation consisting either of accumulating several IP rights on the same subject matter or in juxtaposing rights. For example, if the Bang & Olufsen Beolab loudspeakers take the 3D shape of the brand, they are also protected in terms of design (Quiquerez and Szostak 2018). The main interest is to benefit from the advantages of each of these rights, in particular as regards the term of protection, and to exclude as much as possible any unauthorized use of the innovation. Multi-protection is also used in SMEs to strengthen each of the rights (Le Bas and Szostak 2016), but in specific strategic situations (Corbel and Reboud 2018) (Box 4.7) and according to the type of innovation undertaken (Box 4.8). In their research, Corbel and Reboud (2018) show that not all SMEs adopt the same intellectual property protection methods. There is no standard strategy. Four behaviors are proposed by the authors: – “commercial” behavior is found when the environment and organization are assured and simple. These SMEs do not exploit IP much, except for the brand; – the “selling” behavior emerges in a certain environment and a more complex organization. SMEs set up technological monitoring, use brands and protect their design. They enter into confidentiality agreements with their partners; – “administrator” behavior exists more when the environment is uncertain, while the organization is simple. SMEs rigorously manage the issue of confidentiality and file high-value patents; – “CEO behavior” reflects environmental uncertainty and high organizational complexity. SMEs combine IP rights and file patents in order to negotiate with partners. Box 4.7. The uses of IP by SMEs according to strategic behaviors

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While SMEs do not use IPRs in the same way depending on the nature of their environment and organization (Corbel and Reboud 2018), this is also the case if they engage in exploration and/or exploitation innovation (March 1991; Chanal and Mothe 2005). In her research, Szostak (2017) shows that the extent of the IPR portfolio (patent, copyright, trademark, and design) varies according to the nature of the innovation. More precisely, an operating innovation goes hand in hand with a broad portfolio (the four IPRs), while an exploration innovation sees a variable extent (two, three or four IPRs). The latter result depends on the activity carried out. Thus, when SMEs use new technologies, they tend to have a smaller portfolio than when they experiment with radically new ideas. In addition, the study concludes that SMEs innovating through exploration and/or exploitation are more likely to offer a portfolio that includes the patent and another IPR. Box 4.8. A separate portfolio of IP rights by innovation exploration and/or exploitation

The traditional use of IP is also reflected in the fight against counterfeiting. On this point, SMEs generally consider that they are not in a position to bring long and costly proceedings against counterfeiters, often strangers, who are not subject to the same Intellectual Property Code (provided that there is one). This then encourages SMEs to imagine, first, other uses of IP and, second, other ways to protect themselves (section 4.3.2.2.2). Concerning these other uses, we will focus on three main ones. The first concerns the company’s strategic positioning in its market. IPRs allow a company to mark its environment by taking an advantage over competitors, who will only have as a solution the obligation to imagine the circumvention of IPRs, in order to enter the market. This upward differentiation strategy allows it to generate additional margin. The second use is linked to organizational image: through IPRs, the company communicates about its status as a pioneer in innovation, it increases its reputation among its stakeholders, but also its financial value, particularly towards shareholders and financiers. A third use is in inter-organizational relations as a mediation tool (Pénin 2005): SMEs can promote innovations that are not exploited internally during these collaborations. IPRs are, in short, negotiation tools. They also make it possible to organize these same relationships by defining the knowledge base of each partner. The latter’s use echoes the emergence of

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new SME practices to capture the value of their innovation, by addressing technological and societal changes, which is discussed in section 4.3.2.2. 4.3.2.2. Prospects for the capture of innovation in SMEs by Cloud Computing and Creative Commons While traditional IPRs are used by SMEs and convince stakeholders of the relevance of the innovation developed, they still appear risky (Corbel and Reboud 2018). They also imagine, in addition, other ways of protecting themselves. We choose to present two of them. The first way is of an organizational nature. For the SME, it is a question of thinking about the organization of its innovation in order to avoid the diffusion of ideas and solutions created. Cloud Computing is proving to be an opportunity for SMEs in this respect. Indeed, this “cloud” can make it difficult to identify where the value created by innovation comes from and how it is generated. To better understand it, Le Bas and Szostak (2016) studied the case of an SME in the mechanical sector. This SME has taken advantage of the research of medical scientists at the St-Étienne University Hospital to propose several new ideas that are useful to the medical community, clients and patients, and the company. It is a technological product that puts to music the results of professors’ scientific research in an apparatus for monitoring the ANS (or autonomic nervous system) of patients potentially subject to, among other things, hypertension or sleep apnea. For SMEs, the definition of the value of the idea is multiple: the reputation of the protagonists (researchers and managers of the SME), the raw data collected from customers, which are then used in scientific work, and the financial margin withdrawn. To avoid copying, value capture takes place in several ways, in response to the manager’s question: “How to ensure the sustainability of the product for the next ten years?” (Le Bas and Szostak 2016, p. 13820). The objective is also for researchers to progress in their work. To this end, it creates a clearly identifiable legal structure (LMC). It brings together the associated actors to formalize a community of destiny; it allows researchers to continue to publish based on new data21. In addition, a multi-protection system has been set up for the product developed and marketed, which has the advantage of formalizing for everyone how and 20 Translation by authors. 21 The data collected from patients feed a database allowing them to develop their research.

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what they will capture. The SME then combines patents, trademarks, designs and copyrights around its innovation (Granstrand 1999; Reitzig 2004; Corbel 2009). Where the SME is clever is that it completes all of this with a specific organization set up thanks to Cloud Computing. Indeed, the manager decides to separate the analysts from the data collected into two categories. The former proceed to the cleaning of the file associated with each user, and the latter carry out a more thorough processing. Analysts do not know each other; none are supposed to be able to reconstruct the entire production system. In addition, to adapt to the volume of activity, the SME recruits analysts who have the status of self-employed entrepreneurs; they then work from home. This quasi-virtual organization is flexible. In fact, Cloud Computing is becoming an additional organizational asset that is proving to be an opportunity to better appropriate the value of a new idea, subject to caution with regard to risks that have not yet been controlled. This includes in particular acts of malicious data destruction. Such an organization can only support the legitimacy a new idea with stakeholders, as it provides guarantees on the capture of the value created. The second way of protecting oneself is part of another approach to property, and consists of not owning all the rights induced by ownership, but considering property as a common resource in the sense of Ostrom (2010) and Schlager and Ostrom (1992), that is a shared resource without a rights holder (Coriat 2015). More precisely, it is a question of not considering IPR as a monolithic whole, but as a bundle of rights (use, copying, modification, and distribution of the work), which may be granted by the author to a third party. This third party can be anyone. It can also be identified as a contributor to innovation; and this is what Potts (2012a; 2012b) proposes with Innovation Commons. These commons involve the pooling of resources (technical, material, HR, financial, etc.), in the same way as physical commons, while recognizing that the value of these resources is not so obvious a priori. The knowledge held by each individual is also shared: this knowledge takes on a certain value when it is gathered and in a particular context. These innovation commons are therefore temporary and constantly renewed thanks to the knowledge and the collaboration between stakeholders. This is made possible by the Creative Commons22 licenses. It should be noted, however, that the originality lies in the fact that these licenses 22 See the website: https://creativecommons.org/.

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contractually exploit IP; Creative Commons do not oppose IP (Quiquerez and Szostak 2018). According to Professor Nicolas Binctin: “The free movement proposes licensing models for the circulation and adaptation of intellectual property. The free model does not call into question intellectual property; it uses its foundations to exploit the contractual freedom attached to it. Most of the literature describes the different conventions resulting from the free contract model. In this context, many intellectual assets are offered, including software, databases, music, images, the wiki model and the Creative Commons movement, etc.” (Binctin 2015, p. 10123) If the objective is thus to encourage the circulation of innovation, exchange and creativity of everyone, respecting the different degrees of openness of the innovation, this can allow the SME to convince stakeholders of the legitimacy of the idea for three reasons. First, they can personally benefit and contribute to innovation, demonstrating their commitment. Second, they may see it as an opportunity for future innovation developments. Third, if stakeholders are sensitive to the values promoted by the Creative Commons (sharing, pooling, collective play), this can be a real socio-political argument to convince them, which is essential to transforming a new idea into an innovation. To summarize this last part, we have put forward that a new idea resulting from creative slack can become an innovation, if the SME thinks of its social construction in terms of “making”. It does this by using tools and methods of creativity and innovation, such as design thinking. These allow actors to work together to get to know each other better through, for example, empathy, but also to translate their idea into 3D via prototyping. Managerial practices can also be mobilized. We discussed the one related to intellectual property: SMEs can use IPRs to convince, knowing that there are also other practices to capture the value of innovation. In short, “making” SMEs get to know all stakeholders better in order to understand what they expect from them, to use traditional tools and practices to convince them of the usefulness of a new idea, while agreeing to make it evolve according to everyone’s points of view and knowledge.

23 Translation by authors.

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4.4. Conclusion Successfully developing a new idea in SME innovation requires the manager to think about engaging internal and external stakeholders. Under the pretext of proximity as discussed by Torrès (2015), it would be easy to believe that this assembly is simplified. And so, hierarchical proximity would encourage employees to embrace a new idea; the proximity information system would make it possible to collect key information to monitor specific design indicators, for example; or spatial proximity would lead to more dialogue and the use of rhetorical strategies to convince all stakeholders. The purpose of this chapter is to show that it is not so easy for SMEs to engage in the social construction of a new idea in order to develop an innovation. Several recommendations emerge from the arguments put forward. First, the SME managers should not underestimate the need to think about their discourse in all its forms (oral, written) and whatever the medium (paper, digital, informal conversations), while taking the time to listen and observe the actors. Secondly, it would be relevant not to neglect the physical and material dimension of transforming the idea into innovation, because the actors also think with their senses. Third, there is no single approach to the social construction of an idea: it must be created for each innovation project. This does not mean that there are no routines in the sense that a clearly established procedure would have to be followed. This means that the routine must be able to create and not to reproduce. If companies in the cultural and creative industries have understood this well (Cohendet and Simon 2015), it would be welcome if all SMEs could also take up this issue. 4.5. Appendices 4.5.1. Securitization for SMEs: an innovative and alternative financing instrument Alexandre Quiquerez is an associate professor of private law at the université Lumière Lyon 2, France and member of the Rights, Contracts and Territories research team (EA 4573). He teaches business law, intellectual property, banking and financial law. He is the author of several articles and books in these fields, particularly in the field of innovative securitizations. Strongly criticized since the subprime crisis, securitization remains a financing tool used by banks and a variety of companies, in France and

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abroad. Originally a technique reserved for large banking institutions, securitization was then deployed in various large commercial and industrial companies. More recently, market participants have been working hard to make this financing technique available to SMEs. The definition of the complex technique of securitization needs to be clarified. This operation consists of issuing financial securities (most often bonds) backed by assets (Asset-Backed Securities). A more technical definition is: the transfer of assets, such as receivables, to a special vehicle/entity (company, fund, trust), which issues financial securities paid for by these assets. There are also more sophisticated and less frequent transactions, called “synthetic securitizations”, where only risks (and not assets) are transferred to the vehicle. A practical and financial observation must be made: SMEs traditionally have access to bank loans or the issue of shares to finance themselves over the long term. However, they suffer from a lack of liquidity in their cash flow and do not have easy access to financial markets. Securitization is likely to offer an alternative financing solution in this respect, which is certainly complex and costly, particularly in terms of the number of participants required, but allows them to expand their sources of financing through the involvement of many and varied investors. To achieve this, SMEs have at their disposal a formula that seemed innovative in the 1980s because of the originality and complexity of the legal structure, but which can already be described today as old. This is the “multi-seller” securitization structure for trade receivables. More recently, operations have emerged where companies have borrowed from securitization vehicles. Even more innovative and promising transactions consist of combining digital technologies and securitization. 4.5.1.1. An old formula: multi-seller transactions of trade receivables The securitization method traditionally used by commercial companies is a multi-seller program: a securitization vehicle, called a “conduit” in practice, acquires receivables and loans from several companies. The manager of the conduit (referred to as a “sponsor”) is generally an investment bank that manages its day-to-day operations and provides it with a liquidity line or other forms of credit enhancement. The securities issued by the conduit are generally ABCP (or “commercial paper”), short-term debt securities. The use

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of a conduit has the advantage for selling companies to benefit from cost savings by pooling costs. They do not need to set up or use their own securitization vehicle, but use a common and pre-existing vehicle. As with factoring, the conduit buys the trade receivable for less than its nominal value (e.g. 80 euros a receivable with a nominal value of 100), which allows the company to receive money without waiting for the receivable to mature. In return, the conduit and then the investors are remunerated through the payment of the receivable and receive a profit resulting from the difference between the nominal value and the sale price (20 euros in the example), after the deduction of management fees. Debtor

Debtor

Debtor

Transferor A

Debtor

Transferor B

Costs

ABCP conduit

Bank (sponsor)

Return (principal and interests) Subscription of bonds

Investors

Figure 4.3. Multi-seller securitization arrangement (arrows indicate flows of payment from the payer to the recipient)

This type of arrangement corresponds to the traditional image of securitization: the vehicle acquires receivables. This is the preferred method of securitization for large groups, some of whose subsidiaries (by sector or country) securitize their trade receivables. However, another type of securitization has recently emerged, particularly in France. 4.5.1.2. A recent formula: the commercial enterprise borrowing from the securitization vehicle In other types of structures, the vehicle does not acquire receivables, but provides financing by subscribing to bonds issued by companies. The

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securitization vehicle proposes to subscribe to bonds with certain characteristics (over time, in terms of interest rate, etc.) for the benefit of companies that meet eligibility criteria, in order to advance them the funds they need. In practice, this type of structure seems to be used mainly by medium-sized companies. For example, the NOVO 2 securitization pool focuses on financing French companies with an intermediate commercial, industrial or agricultural activity (excluding financial and real estate activities and LBOs). The entire development project can be financed for loan amounts between 10 million and 50 million euros. The investment philosophy of the NOVO 2 fund is conservative (maximum 10% for the same company and maximum 20% for the same sector) and favors companies with strong growth potential. This fund has the legal status of a securitization fund (FCT), and is eligible for the “label” of an economic loan fund (FPE for fonds de prêts à l’économie), which allows it to target insurers in particular, who are authorized to invest in this type of fund. 4.5.1.3. An innovative and promising formula: the combination of digitization and securitization Fintech – an alliance of finance and technological innovation – is being introduced into various financial practices; securitization is no exception to this phenomenon. Some securitizations are now based on an electronic platform. This is the case for Finexkap AM, which offers SMEs and VSEs the possibility of transferring their trade receivables to a securitization fund (FCT). Receivables are short-term (average payment term of 60 days after acquisition) and denominated in euros or foreign currency. The use of this financing offer involves three steps: – first, the user (SME representative) logs on to the finexkap.com website and tests its eligibility with its SIREN number. From this simple information, Finexkap AM is able to immediately and automatically verify the company’s first eligibility criteria using its databases and scoring algorithm; – then, if the SME is eligible, the user creates their account and accesses the secure financing request platform. Finexkap AM undertakes the necessary steps in less than 48 hours to formally validate eligibility; – finally, the user sends Finexkap AM the invoices (in digital form) it wishes to finance and the financing request will be analyzed by Finexkap

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AM. Invoices must relate to services between professionals. Their existence is verified by Finexkap AM, in particular with the debtor. The use of this technology aims to accelerate obtaining financing and to secure the correct payment of the various participants. The approach seems to meet its market since, according to Finexkap AM, as of August 31, 2018, more than 1,100 companies had been financed, for a total amount of more than 194 million euros, through its platform since its launch in 2015. Another securitization technique using electronic platforms is crowdfunding: investors learn about a project presented on a website and subscribe online to securities issued by a securitization vehicle. In the end, we would like to point out that securitization is not only a technique for transferring risks, in particular the risk of default on securitized receivables, and even less so the simple speculative technique that sometimes still makes it famous since the appearance of subprimes. It is also a financing instrument, in the same way as loans and factoring, for various companies, without excluding the smallest ones. The new terminology used by ordinance no. 2017-1432 of October 4, 2017 is not neutral: securitization undertakings are now attached to a new legal category, called organismes de financement (financing organizations). With this paradigm shift in securitization, the most difficult question is ultimately how to make it a sustainable and beneficial technique for companies, both from a legal and operational point of view. The democratization of securitization necessarily requires market participants and regulators to be particularly vigilant about investor and systematic risk. It seems to us that one of the keys to a successful securitization boom is a high degree of transparency of the legal and financial arrangements for securitization, despite their complexity and the confidentiality that their creators often want to maintain to protect their innovations from competitors. Transferor or borrowing companies, as well as investors, must be fully informed of the different characteristics of the proposed securitization. Financial operators and regulators must remain on the lookout for innovative forms of securitization and consider how this transparency requirement can be met. The European Regulation 2017/2402 “STS” of December 12, 2017 is a step in this direction: the European authorities hope to promote “good securitizations” and encourage the financing of companies, including SMEs, by offering the possibility of benefiting from the “simple, transparent and standardized securitization” label. The legal framework for securitization therefore proves to be an

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opportunity for SMEs in need of greater financial resources than loans and factoring can provide, in particular to finance the development and implementation of technological innovations. Where the banker may be reluctant to lend money to a start-up given the risks of the project, investors may be willing to finance the project through securitization because of their appetite for risk. 4.5.2. Five components favorable to the integration of design in SMEs Interview with Jean-Baptiste Sibertin-Blanc, conducted in September 2018. A singular career path inherited from two backgrounds, a cabinetmaker with a diploma from the École Boulle, and a designer with a diploma from the ENSCI Paris, gives Jean-Baptiste Sibertin-Blanc a multidisciplinary view between design, industry and manufacturing. Creative Director of Cristallerie Daum (1999–2011), a 100% French SME located in Lorraine, he has developed projects with creators, designers and artists from all over the world. Since 2011, he has been working at Studio JBSB and continues his research with, for example, Hermès, Ligne Roset, LVMH Cheval Blanc, Maison Berger, Saint-Gobain Glass, etc. His entire approach was recognized at the “Sommet du luxe et de la creation” in Paris by the Talent de l’élégance in 2002. In 2014, he participated in the “Académie des savoirfaire”, created by the Hermès Foundation. A lecturer at the École nationale supérieure d’art et de design de Nancy since 2012, he has been coordinating the design teaching of the Master of Science, Luxury and Design Management at the ICN Business School in Nancy since 2013. How can we successfully integrate design in SMEs? Jean-Baptiste Sibertin-Blanc – The relationships of SMEs in design are complex, like the relationship that each one maintains with a certain idea of beauty as well as good, we might say. Each project is a unique adventure to write, no matter who in the company we will be working with. There are many unknowns. In order to better clarify the basis for this future dialogue, we have developed a structure based on the five main components of any project: – the brand; – the emotion;

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– the service; – the material; – the process.

Figure 4.4. Compendium of a design project. Source: Studio JBSB, 2018

The brand – whatever the size of the company, even if it has formulated specifications, does it really know what it wants, what it is looking for? Nothing could be less certain. It is up to us to create a relationship of trust, intimate, I would say, as the great Italian designers have done, made of listening and empathy. At the right time, you have to know how to exceed demand, disobey and subjugate your interlocutor. The emotion – creation is above all a subjective, sensitive affair, where emotion is in the background. There is nothing scientific in the choice that will be made, but beyond the “I like/don’t like”, there is the right common

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denominator that must be tested. The proposal must be in tune with the emotion that contributes to the final choice. The service – is the service to which the function is immediately linked capable of being challenged? This is an essential axis to which the new design is confronted and must respond. What latitude do we have to transgress the brand’s codes, while supporting its story? The material – material is the tactile shell of objects. Every project is or will be in contact on a physical level. The material carries the drawing as it serves it. It is animated by textures, rhythms, brilliances and “colorful” scales. We must deploy this new language, sometimes unknown to our interlocutors, who question themselves before being able to choose. The process – whatever the project, dedicated to the industry, to a factory, it requires expertise that underlies investments. It is imperative, at the beginning of the project, to fully understand the characteristics and potential of the tool we have at our disposal. We must integrate it as a determining factor in the project’s possibilities. These five components have become our tool for dialogue with our customers, including many SMEs, because we must put the right words to the ambitions and expectations of a program. They make it possible to position the priorities and original outlines of a new project from which the picture will find its autonomy and legitimacy.

Conclusion

The driving force of innovation in the competitiveness of enterprises and in the growth of countries is no longer in doubt (Baumol 2002). However, innovation is not a matter of course. As exciting and motivating as it is, it is a process that presents at least two major obstacles: the probability of failure is high and it involves disrupting habits (Soken and Barnes 2014), which is not easy in a context of change and crisis (Weick 1988). Innovation is therefore characterized by a dilemma: innovation is essential, but uncertain and complex. If this dilemma concerns all enterprises regardless of their size, the purpose of this book has been to show that it is even more so for SMEs. In this sense, and to shed light on SMEs’ capacity for innovation, many academic studies first highlight the obstacles. For example, econometric work that analyzes the impact of different criteria, including size and sector, on innovation efforts or production generally highlights the difficulties of small firms compared to large ones, while presenting sometimes contradictory results (Rahmouni and Yildizoglu 2011). Work using survey data (Mohnen and Rosa 2000; Baldwin and Lin 2002; D’Este et al. 2012) provides a more accurate picture of obstacles as perceived by enterprises themselves. They confirm that SMEs are generally hampered by issues of cost, difficulty with financing and access to resources, resulting in their borders being opened up, as Wim Vanhaverbeke (2017; 2018) points out. Studies that focus on a more precise analysis of SMEs’ innovation strengths confirm, for the most part, the intuitions commonly mentioned: it is in their organizational capacity and leadership that SMEs have an advantage (St Pierre et al. 2013).

Innovation and Creativity in SMEs: Challenges, Evolutions and Prospects, First Edition. Claudine Gay and Bérangère L. Szostak. © ISTE Ltd 2019. Published by ISTE Ltd and John Wiley & Sons, Inc.

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SMEs therefore have specific characteristics with regard to the innovation that we wanted to explore in this book. To do this, we have made three main choices in our proposal for a framework of thought dedicated to SME actors and researchers involved in this subject: – we have placed our thinking at the heart of the current context, made up of major technological, economic and social changes; – we have intimately linked innovation and creativity; – we have combined economics and management sciences to meet our objective of explaining what makes SMEs so innovative and creative, when certain characteristics should prevent them from doing so. As each chapter of the book contains a conclusion that summarizes its content, we would like to take advantage of this general conclusion to address a specific category of reader, students, part-time students and young adults, to whom we try to transmit knowledge, skills, and a compass to evolve in their professional activity. The aim is to extract some advice from the reflection we have carried out on how to conduct innovation. The first piece of advice concerns the very conditions for successful innovation. A first critical success factor is the control of two key areas: organization and the environment. Experience shows that it is important to know and understand the identity, history and culture of the enterprise in which their career is taking place. While in large enterprises there are usually explicit websites on the subject, they are either silent or limited when it comes to SMEs. Being in contact with the manager and older employees in the structure can help young people to understand the obstacles already encountered, to discover possible past failures, or to identify creative slack ideas that have not yet been implemented. This involves active listening, observation and a certain curiosity. These qualities will also allow them to discern the environment of the SME and the actors who compose it. Another critical success factor is the understanding of new models of interorganizational collaboration. Young people could, for example, seek to successfully mobilize crowdsourcing in practice, knowing that in SMEs, cultural, organizational and knowledge-related factors can be real obstacles to the development of this practice. By experimenting, from school and university, with this highly developed form of collaboration, they will learn how to overcome the obstacles linked to the various factors mentioned.

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The second piece of advice echoes design thinking practices: empathy and prototyping. Concerning the first, we note that, if these young people are generally trained to understand rational intelligence, they are much less aware of how to reason with emotions, whereas in creativity and innovation, this is essential, whether with regard to SME actors, customers, suppliers, partners, etc. (Brown 2010; Kotter 2016). With reference to Blaise Pascal (1931) in Pensées, “the heart has its motives, which the mind does not know”: the mind and the heart have access to complementary knowledge. Thus, empathy can be considered as a quality to be developed. And this can be learned. For example, Helen Riess, director of the Empathy and Relational Science program at Massachusetts General Hospital in Boston, offers doctors seminars to develop their emotional empathy to help them feel what their patients are feeling (Goleman 2018). She proposes to work on their posture in front of the patient (nature of looking and listening), their breathing, the intensity of their concentration, etc. Such practical training involving knowledge of the humanities and social sciences would certainly be welcome for young people. Concerning the second practice, prototyping, it would rather be a question for young people to remember their manual work when they were children and to value it as an expression of their intelligence. To this end, they could go to places suitable for such manufacturing such as FabLabs, or even create such a place in their higher education institution, if it does not yet exist. While these brief tips are intended for the youngest of society, they also concern the educational world and the teaching staff, of which we, the authors of this book, are also members. These last lines are therefore intended to encourage this population to take a step back from the knowledge transmitted and, above all, the methods chosen to achieve this. In particular, it seems relevant to us to better consider and value the relational qualities of students, to encourage the development of their emotional intelligence, or to support manual and technical activities. Not only will this help them to enter the labor market more easily, but it will also enable them to become constructive and caring adults in enterprises (and elsewhere). What can we wish for the best for our society? To conclude this advice, we would like to point out that, while the current changes in the environment may seem confusing for many SMEs, they are also real openings towards new horizons combining technology and social/societal issues. With this in mind, we have invited a number of experts

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to provide their analyses on how to innovate in Africa, China and Argentina. These testimonies help to put into perspective another element of the conditions for successful innovation in SMEs, namely their cultural environment. To conclude, at the end of this book, we strongly hope that SMEs will be perceived as being, certainly, beautiful, to echo Schumacher’s book (1974), but also creative and innovative, bearing in mind that: “Straight ahead of him, nobody can go very far.” Antoine de St-Exupéry, 1942, from The Little Prince. Appendices Innovating in Africa Interview with Vanessa Casadella, Senior Lecturer, université Picardie Jules Verne, CRIISEA, Head of Science Technology Development Seminars (Réseau de recherche sur l’innovation − RRI). Between 2000 and 2017, Africa’s economy grew at an annual rate of 4.7%, making it the second most performing region in the world (OCED 2018a). Nevertheless, the dynamics of growth, employment and inequality vary from one region to another. The African continent reveals a very great heterogeneity in all its economic and social dynamics. On the issue of innovation, while the recent literature is encouraging by showing Africa’s potential in this field (Kamdem 2016), it is nevertheless necessary to moderate these comments because of the multiple constraints related to the development of entrepreneurship. What types of innovation are we talking about in Africa? Vanessa Casadella – Talking about innovation in Africa is first and foremost about interpersonal trust between stakeholders (Kuada 2003). Social ties, through trust, empathy and emotional relationships, are qualities that allow for the rapid acquisition of knowledge and the promotion of innovation. In African industrial clusters, the cluster effect, linked to geographical proximity and strong social capital, encourages the sharing of innovation and opportunities to learn new techniques.

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Innovation is then represented by low and medium technology sectors without being limited to high-tech sectors and R&D (Johnson and Lundvall 2003). While innovations in high-tech sectors are sophisticated and based on science and radical innovation, innovation in Africa reflects routine learning opportunities within small traditional structures. Innovation is, in fact, mainly conducted informally through practice, use and interaction. R&D activities are not clearly and formally linked to enterprise strategy. Moreover, the types of innovation can only be understood by taking into consideration the context of innovation in Africa, which is often complex. Economies are unstable and vulnerable, and innovation strategies are linked to their macroeconomic, political, institutional and financial environments (Cassiolato et al. 2014). Understanding the history and functioning of these economies is crucial. The heterogeneity of development trajectories should be considered, as should the dynamics of adjustment through the development of technological capacities. Moreover, we note that African innovation dynamics are interpreted through their construction and not their technological result. It is not possible to mention the a priori (ex-post) nature of innovation, which describes the innovation processes of industrialized countries with a strong institutional base and advanced infrastructure. Innovation in Africa, as more generally in developing economies, is a posteriori (ex-ante), so that analysis on innovation processes moves further upstream, on its emergence and development conditions (Lundvall et al. 2002). The last aspect of the type of innovation in Africa is related to inclusion and development strategies; the literature approaches this from the perspective of “innovation in the South” (Cozzens and Sutz 2014): it is innovation in development and poverty reduction strategies. The unequal treatment of minorities and poor local governance, through problems of corruption, divert the real construction of innovation capacities. The supported system and clientelism do not favor the creation of knowledge, nor do the government strategies of poorly trained elites, often based on personal ambitions.

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Innovation is generally associated with entrepreneurship. What about Africa? Innovation and entrepreneurship are indeed linked to the same concern for creativity, whether in developing new products, services, processes or organizations. In this sense, entrepreneurship in Africa has played an important role in the development of territories at different levels: local, regional and national. Enterprises contribute to development in a variety of ways: they generate a large share of the government’s tax revenues, they enhance and improve human capital, productivity and income. By improving product quality and lowering prices, they increase the purchasing power of consumers, including the poorest. In a context of persistent unemployment and demographic explosion, entrepreneurship is even becoming the main mechanism for the social integration of young populations into the economic sphere. Nevertheless, economic instability is a barrier to entrepreneurial growth. It is complicated to undertake when actors lack trust around local institutions or when production systems are unbalanced in the sense that some aspects of them are inefficient or simply non-existent. More generally, small businesses face an external environment that is not conducive to their development: price instability that is unfavorable to the setting of expectations, difficulties in accessing financing, etc. The result is a choice for informal activities, with very low capital intensity and a growing domestic market. This development of the informal sector accentuates the independence of these production units from national markets and, consequently, increases their vulnerability. In addition, in Africa, a large proportion of enterprises are foreign-owned. Indeed, it must be acknowledged that this continent lacks the potential for quality entrepreneurs, which sometimes explains the delay in some economies. Although some efforts have been made to stimulate the private sector (corporate tax cuts in Ethiopia or a wave of corporate privatizations in Senegal), their impacts still seem small (Gad 2012). And even today, young graduates prefer large enterprises that are more secure than the risks of starting a business. Others are part of entrepreneurial nomadism as a solution to their social condition (poverty, exclusion). This nomadism is mentioned for three main reasons: the importance of household budgets, limited production capacities and the entrepreneurial spirit (Doumbouya 2011).

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In this perspective, the mode of governance and collective mechanisms for conflict resolution through structural policies will be decisive. The current urgency for Africa is therefore to be able to both regulate the country via the development of innovation policies (by fighting clientelism and corruption) and to integrate African countries into the global system (Casadella and Uzunidis 2017). It is well known how the difficulties of national regulation limit the diffusion of innovation capacities and the resolution of problems related to the interconnection of innovation actors (in particular the lack of links between production systems and academic and research systems). In any case, local policy solutions should be sought in entrepreneurial levers far from the standardized trajectories of westernized economies. In conclusion, we can conclude that the SME environment in Africa is currently proving to be a constraint, even an obstacle, to the development of innovation, which makes it difficult to develop new ideas. And yet, there are real challenges in innovating in this region of the world, hence the relevance of the frugal innovation approach. Innovative SMEs in the Chinese economy Interview with Zeting Liu, PhD in Economics. As guest editor, she edited the special issue of the journal Marché et Organisations about China. She is the author of numerous articles on the Chinese innovation system and innovation ecosystems in China. When it comes to talking about innovation, China is often known for issues related to counterfeiting. However, there are innovative SMEs. Who are they? Zeting Liu – To understand the role of innovative SMEs in China, it is first necessary to establish the framework for reflection. Indeed, the current Chinese economic system is the result of structural reforms implemented since 1978. Although the market is an increasingly powerful regulatory force, planning plays an important role in Chinese economic life as it is both the main tool of the Chinese government to mobilize resources to achieve economic and social objectives, as well as the basis for evaluation by local authorities. This system relies heavily on State-Owned Enterprises (SOE) to achieve the socio-economic objectives set at the various horizontal (ministerial/sectoral) and vertical (central government and territorial authorities) levels (Liu 2016).

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On the eve of the 1978 economic reforms, all enterprises, regardless of size or sector, were public. During the first phase of structural enterprise reforms, the emergence and expansion of Township and Village Enterprises (TVEs) contributed to the formation of the non-public economic sector and the development of the economic structure of SMEs (including sole proprietorships and self-employed workers). After the consolidation phase between 1992 and 2002, public SMEs were either privatized, sold to their managers or employees or closed. After a timid start in the niches neglected by the public sector, the private sector, composed mainly of SMEs, saw its expansion accelerate after 1992 (Liu 2014). The number of private enteprises increased from 140,000 in 1992 to 2.4 million in 2002, an annual growth rate of 33.1% (Huang 2012). Further strong growth was recorded after the inauguration of the Law on the Promotion of Small and Medium Enterprises in 2002. Today, SMEs are mainly part of the private sector of the Chinese economy. By 2013, micro, small and medium-sized enterprises (SMEs) represented 97% of the total business population and contributed to 80% of urban employment and 60% of GDP in China. In addition, 60.2% of small businesses operated in the service sector, 18.5% in manufacturing and processing, 5% in construction and 3.2% in agriculture-related industries (OCED 2016). However, the SME category includes a very exogenous population of enterprises whose differences in terms of number of employees and turnover can vary widely between sectors. Indeed, the definition of SMEs in China is very complex and differs from the main international statistical standards (OCED, Eurostat). Article 2 of the 2002 Law on the Promotion of Small and Medium Enterprises includes in the category of Small and Medium Enterprises (SMEs) “different forms of enterprises at the scale of small and medium production and operation, under different ownership regimes, established in the territory of the People’s Republic of China, which meet social needs and create employment opportunities, and which comply with the State’s industrial policies”. The definition of SMEs is formulated according to “the number of employees, total assets, turnover, etc., associated with the characteristics of the sector”. The law was amended in 2017 by adding microenterprises to the SME family.

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According to the most recent definition, we find that the size of a medium-sized enterprise varies from one industry to another. For example, in the field of information transmission, there are on average between 100 and 2,000 employees in a unit, which generates between 10 million and 1 billion yuan in turnover. In the computer industry (software and computer technologies), these are enterprises with an average of 100 and 300 employees and generate between 10 million and 100 million yuan in turnover. This complex system of definition creates confusion, makes it difficult to use statistical figures, in turn making it difficult to have a global overview of Chinese SMEs. With these benchmarks in mind, what are the areas in which Chinese SMEs are innovating most? Chinese SMEs have been developing on the fringes of state intervention and in niche markets since the reforms. While this distance has allowed them to expand rapidly for 30 years, it also removes them from the colossal resources allocated by the State for building the technological and innovation capacity of public enterprises. We can say that SMEs are subject to unfair market treatment in terms of access to public procurement, financing, skilled personnel and technology; they are also subject to disadvantageous taxation. State-owned enterprises that are predominant in the economic system have greater access to finance and technology through their proximity to the banking and scientific systems, which are also controlled by the State. SMEs therefore lack the financial, human and technological resources to develop their innovativeness. However, since the 2000s, China has been implementing measures to promote SME innovation. The national orientation of SME innovation policies is based on three components: – creating an environment favorable to SMEs, particularly microenterprises; – improving the public services system to support SMEs; – facilitating access to loans and reducing the burden on SMEs.

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The main measures resulting from these policies are as follows: – support for gazelle enterprises1 through direct financing (Innofund), tax credits, facilitation of procedures, opening up to public procurement; – encouraging research institutes to create spin-offs; – the creation of a favorable legislative environment (in particular by strengthening intellectual property); – the integration of SMEs into the national innovation system; – the development of the venture capital industry (Liu 2014). In 2016, SMEs (micro, small and medium-sized enterprises according to the 2017 definition) represented 94.8% of all enterprises in this industry. They contributed 55.3% of jobs, 43.7% of total turnover, and 48.4% of industrial production. Medium-sized enterprises were the main contributors in this category (Torch Program 2017). However, this example should not hide the fact that the innovative capacity of SMEs in general is still lagging behind. The study by the Chinese Ministry of Science and Technology recalled, in its call for innovation projects in 2018, that only 36% of micro and small manufacturing enterprisses carried out innovation activities in 2016, compared to 79.3% of large enterprises and 58.4% of medium-sized enterprises (MOST 2018). The result of this study is certainly biased by the sector studied, with SMEs, especially micro and small enterprises, being mainly present in the service sector. On the other hand, it identifies the main problems faced by SMEs outside high-tech enterprises: – ignorance of the importance of innovation; – the use of ageing production methods; – non-participation in the local, regional or global value chain (Zhang and Xia 2014; Lin et al. 2016). In conclusion, I would like to recall that, since 2014, Chinese economic development has entered a phase of a “new normal” with an annual growth 1 By gazelle enterprises, we mean young, fast-growing enterprises.

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rate considered modest: 6/7% instead of 10% (Chen and Groenewold 2018). In this context, the contribution of SMEs to the dynamics of the economy and job creation is attracting the attention of the Chinese government. Indeed, despite efforts made since the 2000s, obstacles to innovation for SMEs persist. And the objective is to reduce or even eliminate them. To this end, new measures, the latest of which is the amendment of the law on the promotion of small and medium-sized enterprises in 2017, are being put in place to accelerate business transformation, promote innovative entrepreneurship and create start-ups in promising sectors such as information technology, e-commerce and the Internet economy. These measures aim firstly to facilitate access to financial, human and technological resources for SMEs, secondly, to simplify the tax system and reduce the tax burden on SMEs, and thirdly, to facilitate the integration of SMEs into the innovation networks of large enterprises (Lin et al. 2016). The economic, social and political environment therefore plays a major role in the development of innovation by Chinese SMEs. Innovative SMEs in Argentina: portrait of an economic structure facing the obstacles of development Analysis proposal by Cynthia Srnec, researcher at IIEP-Baires Conicet and the Max Weber Center of the université Lumière Lyon 2, and Eliel Markman, researcher at université Paris Dauphine. Introduction Being Argentina’s second largest employer, their SMEs represent 99% of local production2. They are also responsible for 40% of GDP (CAME 2017). These figures conceal a contrasting reality, as the integration of SMEs into value-producing channels remains limited. For example, they represent only 10% of total exports (Bekerman et al. 2014). In an Argentinean context characterized by inequalities, a number of enterprises, particularly SMEs, nevertheless succeed in innovating. A contrasting Argentine economic context In recent years, the recession, the country’s economic disarticulation and the sharp devaluation of the currency in 2018 have weighed heavily on the manufacturing structure. The economic difficulties are all the more 2 Available at: www.telam.com.ar/notas/201706/192914-argentina-empresas-activas-cifrasmayoria-pymes.html. Accessed on September 20, 2018.

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significant because SMEs have a vast social inclusion function. Poor domestic market forecasts and an aggressive Argentine policy towards medium and small industries have serious consequences for employment. Argentine SMEs are currently shrinking and reducing the costs associated with their current operations and investments. More specifically, it is estimated that 68% (Gallo 2018) of SMEs slow down their innovation investments due to cash flow difficulties, as customers are finding it increasingly difficult to pay their debts. In addition, the recent tremors in the Argentine market have brought the ghosts of the 2001 crisis to the country. The memory of unemployment and the difficult years is still alive. In response and because of a fear of bankruptcy or loss of employment, many workers are occupying their factories. This is not a new observation. Between 2001 and 2004, 120 enterprises were bought by their own employees and then managed as a cooperative (Ruggeri et al. 2010). Far from being afraid of it, Néstor Kirchner’s government accompanied this dynamic, during the 2003–2015 period, with the aim of protecting national industry and encouraging R&D. In the mid-2000s, a campaign to promote and support scientific research and innovation was launched. As a result, various public investment funds and new government agencies have been created to facilitate Public-Private Partnerships (PPPs). For example, an ICT support policy has fostered the development of the software industry. In addition, this sector has benefited from numerous tax exemptions and a wide range of financing. By this we can say that the State has renewed itself by actively supporting both innovative and traditional enterprises (for example in the agri-food sector). However, the impact of such a policy was limited by the duration of the experiment. In 2015, the retraction of the market, the increase in fixed costs (linked in particular to the increase in the prices of public services) and raw materials caused the number of bankruptcies to explode. At the same time, the experiences of employees of private enterprises taking over in a self-managed form (management and production) have accelerated at an unprecedented rate. Profiles and trajectories of innovative industrial SMEs Once reduced to the volume of investments on direct benefits, industrial SMEs are the ones that devote the major part of their resources to innovation(s) (INDEC 2008)3. However, SMEs investing in innovation are 3 To be more precise, the proportion of turnover dedicated to innovation is 2.1% for the smallest enteprises, 1.6 for medium-sized enterprises and 0.8% for large enterprises.

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diverse, both in their profiles and in their enterprise policy. Therefore, a real innovation policy is only perceptible in half of SMEs. We distinguish four profiles of innovative enterprises: – most innovations are non-technological and more organizational and commercial. They are generally enterprises dependent on natural resources whose investments depend on access to bank credit. They are also often in close contact with consulting firms, public bodies and chambers of commerce; – next come innovations focused on technological products and production methods (factories, robots, etc.). This characterizes enterprises with intensive production that is often supported by equity capital; – they also innovate product design and research and development enterprises; – enterprises combining technological innovations, production mode innovations and design are in the category of innovative sectors (Mancini 2016). The last two types owe a great deal to the public technical-scientific system; they have benefited from PPP policies designed to encourage innovation that is now obsolete. Most of these enterprises specialize in information technology (software or machines). In fact, in terms of information technology, Argentina oscillates between an “intermediate” and “advanced” level compared to the rest of the world (according to an ICT index developed by the Union internationale des télécommunications (UIT) – and the United Nations). These same indicators estimate that 99% (CESSI 2016) of IT enterprises are SMEs (Guercio et al. 2016). Until mid-2018, these types of SMEs were in better financial health than the rest of the industries with positive annual growth and job retention. In short, it is a dynamic and growth-generating sector, despite a decline in the local market. However, they also face the same challenge as other enterprises: access to finance is the major obstacle to development in the internal market (Estayno et al. 2009). Currently, self-financing seems to be the main development lever for small enterprises. Finally, we note that the enterprises most likely to adopt an innovation policy are those that manage to maintain business relations with the global economy. More concretely, the most successful enterprises are those that maintain international markets and export local products in particular. Their strength is to be able to index themselves on the international market, which is what ICT SMEs are able to do. At present,

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this dynamic is driven by the healthy IT market, which remains R&Doriented (Mancini 2016). Conclusion In addition to the economic and political reality mentioned above, it should be stressed that, following the recent devaluation of the peso, the Argentine economy is now facing two challenges: – on the one hand, the country could protect its local industry from the pressure of low-cost imports; – on the other hand, this devaluation has led to a surge in international or national commodity prices when they are indexed to international prices. In short, the difficulties faced by Argentine SMEs testify to the major structural bottlenecks in the local production apparatus. They hinder the development of a sustainable innovation strategy, which can only take place in the medium/long term. We can then say that, in Argentina, the SME environment is more of a constraint to be curbed than a resource to be exploited.

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Index

B, C breakthrough strategy, 13, 14, 18, 20–23, 51, 54 business model, 17 canvas, 17 innovation, 18, 53 platform 19, 37, 40 Camille Carrier, 74–76, 78 Changes or mutations depending on context, 2, 29, 31, 43, 49, 51, 102, 103, 111 Cloud Computing, 127, 128 collaborative economy, 38–41, 56, 57, 60 territory, 85 community, 42 collaborative, 40 innovation, 91 of practice, 81, 82 Creative Commons, 128, 129 communities of practice, 82 crowdsourcing, 92 employees, 78, 82 leadership, 74 slack, 71, 76, 77, 84, 88, 103, 104, 109, 112

creativity, 93 digital, 63 motivation, 64 D, E design, 85, 93, 94, 113, 116, 117 product, 6, 24, 86, 119, 135 thinking, 77, 114–116, 119, 120 discourse, 104, 109, 111, 114 disruption, 37, 50, 51, 68 ecosystem, 54, 56, 57 of innovation, 57, 101, 145 empathy, 51, 119, 120, 136, 141, F family business, 97 finance advertiser, 36 choices, 11 crowdfunding, 39 difficulties, 45, 47, 139, 144 family business, 97 in Argentina, 151 in China, 147 innovative, 118, 130 offer, 61, 114, 127, 133

Innovation and Creativity in SMEs: Challenges, Evolutions and Prospects, First Edition. Claudine Gay and Bérangère L. Szostak. © ISTE Ltd 2019. Published by ISTE Ltd and John Wiley & Sons, Inc.

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I

N, O, P

ideas, 72, 76, 82, 83, 88, 92, 94 brainstorming, 80 emotion, 79 employees, 78, 80 FabLab/makers, 77, 121, 122 leadership, 74, 76, 77 organizational climate, 74, 76 platform, 35, 77 social construction, 85, 104, 105, 107, 112, 114, 115, 118, 120 space, 86, 88 territory, 84, 87 valuing, 123, 126 innovation in Africa, 142 in Argentina, 149 in China, 145 innovativeness, 49, 139, 147, 148 intellectual property, 105, 115, 123, 124, 140 types, 142 intrapreneurship/intrapreneurs, 81

new economy, 32, 33 OECD, 67, 69 open-innovation, 90 platform, 34 content, 35 cross-side effects, 36 digital, 34 economic mechanisms, 35 focal company, 35 for exchanging, 35 innovation, 35 jobbing, 35 networking, 35 prototyping, 77, 119, 121, 122 in China, 148 prototypage, 141 proximity, 12

K, L, M knowledge, 44, 46, 48, 71, 77, 79, 110, 128 communities of practice, 82 crowdsourcing, 92 of others, 75 self, 75 learning, 46, 81 marketplaces, 34 Michel Marchesnay, 108 middleground, 87, 88, 90

R, S, T, U R&D, 6, 30, 44, 45, 97 risk, 8, 11, 44, 45, 49–51, 62, 67, 106, 114, 122, 128, 134, 72 sharing economy, 39, 41, 40 Teresa Amabile, 64, 72, 83 territory, 27, 57, 85, 87 cognitive space, 84 creative, 85, 87, 88 French Polynesia, 98 Loire region, 86 Torrès, Olivier, 10, 11 trust, 11, 67 brand, 136 employees, 77, 80 empowerment, 40 family business, 96 in Africa, 142 trusted third party, 35 Uber, 19, 35, 37, 39, 40 underground, 87, 88, 93

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in Innovation, Entrepreneurship and Management

2019 AMENDOLA Mario, GAFFARD Jean-Luc Disorder and Public Concern Around Globalization BARBAROUX Pierre Disruptive Technology and Defence Innovation Ecosystems (Innovation in Engineering and Technology Set – Volume 5) DOU Henri, JUILLET Alain, CLERC Philippe Strategic Intelligence for the Future 1: A New Strategic and Operational Approach Strategic Intelligence for the Future 2: A New Information Function Approach FRIMOUSSE Soufyane Innovation and Agility in the Digital Age (Human Resources Management Set – Volume 2) HELLER David, DE CHADIRAC Sylvain, HALAOUI Lana, JOUVET Camille The Emergence of Start-ups (Economic Growth Set – Volume 1)

HÉRAUD Jean-Alain, KERR Fiona, BURGER-HELMCHEN Thierry Creative Management of Complex Systems (Smart Innovation Set – Volume 19) LATOUCHE Pascal Open Innovation: Corporate Incubator (Innovation and Technology Set – Volume 7) LEHMANN Paul-Jacques The Future of the Euro Currency LEIGNEL Jean-Louis, MÉNAGER Emmanuel, YABLONSKY Serge Sustainable Enterprise Performance: A Comprehensive Evaluation Method MILLOT Michel Embarrassment of Product Choices 2: Towards a Society of Well-being N’GOALA Gilles, PEZ-PÉRARD Virginie, PRIM-ALLAZ Isabelle Augmented Customer Strategy: CRM in the Digital Age NIKOLOVA Blagovesta The RRI Challenge: Responsibilization in a State of Tension with Market Regulation (Innovation and Responsibility Set – Volume 3) PRIOLON Joël Financial Markets for Commodities QUINIOU Matthieu Blockchain: The Advent of Disintermediation ROGER Alain, VINOT Didier Skills Management: New Applications, New Questions (Human Resources Management Set – Volume 1) SERVAJEAN-HILST Romaric Co-innovation Dynamics: The Management of Client-Supplier Interactions for Open Innovation (Smart Innovation Set – Volume 20)

SKIADAS Christos H., BOZEMAN James R. Data Analysis and Applications 1: Clustering and Regression, Modelingestimating, Forecasting and Data Mining (Big Data, Artificial Intelligence and Data Analysis Set – Volume 2) Data Analysis and Applications 2: Utilization of Results in Europe and Other Topics (Big Data, Artificial Intelligence and Data Analysis Set – Volume 3)

2018 BURKHARDT Kirsten Private Equity Firms: Their Role in the Formation of Strategic Alliances CALLENS Stéphane Creative Globalization (Smart Innovation Set – Volume 16) CASADELLA Vanessa Innovation Systems in Emerging Economies: MINT – Mexico, Indonesia, Nigeria, Turkey (Smart Innovation Set – Volume 18) CHOUTEAU Marianne, FOREST Joëlle, NGUYEN Céline Science, Technology and Innovation Culture (Innovation in Engineering and Technology Set – Volume 3) CORLOSQUET-HABART Marine, JANSSEN Jacques Big Data for Insurance Companies (Big Data, Artificial Intelligence and Data Analysis Set – Volume 1) CROS Françoise Innovation and Society (Smart Innovation Set – Volume 15) DEBREF Romain Environmental Innovation and Ecodesign: Certainties and Controversies (Smart Innovation Set – Volume 17) DOMINGUEZ Noémie SME Internationalization Strategies: Innovation to Conquer New Markets

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2014 DUBÉ Jean, LEGROS Diègo Spatial Econometrics Using Microdata LESCA Humbert, LESCA Nicolas Strategic Decisions and Weak Signals

2013 HABART-CORLOSQUET Marine, JANSSEN Jacques, MANCA Raimondo VaR Methodology for Non-Gaussian Finance

2012 DAL PONT Jean-Pierre Process Engineering and Industrial Management MAILLARD Pierre Competitive Quality Strategies POMEROL Jean-Charles Decision-Making and Action SZYLAR Christian UCITS Handbook

2011 LESCA Nicolas Environmental Scanning and Sustainable Development LESCA Nicolas, LESCA Humbert Weak Signals for Strategic Intelligence: Anticipation Tool for Managers MERCIER-LAURENT Eunika Innovation Ecosystems

2010 SZYLAR Christian Risk Management under UCITS III/IV

2009 COHEN Corine Business Intelligence ZANINETTI Jean-Marc Sustainable Development in the USA

2008 CORSI Patrick, DULIEU Mike The Marketing of Technology Intensive Products and Services DZEVER Sam, JAUSSAUD Jacques, ANDREOSSO Bernadette Evolving Corporate Structures and Cultures in Asia: Impact of Globalization

2007 AMMI Chantal Global Consumer Behavior

2006 BOUGHZALA Imed, ERMINE Jean-Louis Trends in Enterprise Knowledge Management CORSI Patrick et al. Innovation Engineering: the Power of Intangible Networks

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