Abstract Purpose – This paper aims to discover the key elements for generating and protecting innovations based on the customer-supplier relationship in industrial sectors. Design/methodology/approach – This exploratory qualitative study was performed using semi-structured interviews with chief executive officers and innovation managers of 22 industrial firms and institutions from the machine-tool industry. Findings – Key forms of knowledge must be shared by the two agents. Producers have to obtain in-depth knowledge about customers’ needs and customers need knowledge on producer’s absorptive capacity. Producers distinguish between three types of customers: reference customers, necessary for innovations with greatest scope, clientes amigos or test users, required to test innovations currently being developed, and traditional customers, associated with incremental innovations. The traditional means of protecting innovations is a detailed contract between customer and supplier; and patents are used for innovations of greater technological scope, as a form of defense against third-party patents and as a signaling element of absorptive capacity. Originality/value – The paper draws on the direct experience of executives from companies whose innovation is based on a close relationship with customers to answer questions to which the literature has yet to provide definitive answers: What sort of information to be shared is relevant for the generation of innovations? Are all customers equal or are there profiles that contribute more effectively to the development of innovations? What attitude and mechanisms are most effective for protecting the knowledge and competitiveness generated through knowledge sharing?

1. Jon Charterina
Jon Landeta
Imanol Basterretxea
Link to the paper:
http://www.emeraldinsight.com/doi/full/10.1108/JBIM-02-2017-0052
Link to Open Access version of the paper:
https://addi.ehu.es/bitstream/handle/10810/21826/Repository_Collaborative_relationshi

2. INTRODUCTION  PROBLEM & AIMS QUAL. EMPIRICAL RESEARCH MAIN FINDINGS  CONCLUSIONS
Purpose:
Discover the key elements for generating and
protecting innovations based on the customer-
supplier relationship in industrial sectors

3. INTRODUCTION  PROBLEM & AIMS QUAL. EMPIRICAL RESEARCH MAIN FINDINGS  CONCLUSIONS
-In-depth interviews to CEOs and R&D managers in order to
get a deeper understanding of buyer-supplier relationship
(Knowledge exchange, Specific Investments, Trust,
Contracts,…) and innovation in the Machine Tool (M-T) sector.
METHODOLOGY:

4. INTRODUCTION  PROBLEM & AIMS QUAL. EMPIRICAL RESEARCH MAIN FINDINGS  CONCLUSIONS
22 In-depth interviews:
• Grupo Danobat
• Correa Anayak
• Etxe-Tar
• Fagor Arrasate
• Fagor Automation
• Goratu
• Goizper
• Ibarmia Innovatek
• IK4-IDEKO
• Juaristi
• Koniker
• Onapres
• Soraluce
• Zayer
• AFM
• Spirsin
• Intermaher (Yamazaki
Mazak)
• Shutton
• WNT Ibérica
• PASABAN
• Manager & Univ.
Professor of
Manufacturing
M-T Producers M-T Component producers Research bodies Other
Size in No. Workers:
From 20 to <1000
Avg.size in Spain: 50
Avg.size in Germany: 249

5. INTRODUCTION  PROBLEM & AIMS QUAL. EMPIRICAL RESEARCH MAIN FINDINGS  CONCLUSIONS
Source: Charterina et al. (2017), Charterina, J., Basterretxea, I., & Landeta, J. (2017). Collaborative relationships with customers: generation and
protection of innovations. Journal of Business & Industrial Marketing, 32(5) p. 736

6. INTRODUCTION  PROBLEM & AIMS QUAL. EMPIRICAL RESEARCH MAIN FINDINGS  CONCLUSIONS
Internationalization
Customization
Specialization
Main features of the Spanish & European M-T firms:
Long-lasting relationships

7. INTRODUCTION  PROBLEM & AIMS QUAL. EMPIRICAL RESEARCH MAIN FINDINGS  CONCLUSIONS
Customization
All interviewed firms produce highly-customised equipment:
“Our product is always a new machine, created “ex professo”. So when you say:
“what value do we bring?” [. . .] well, to start with, something that is ad hoc [. . .]
tailored for someone” [Ref. 21].
“Fortunately, our product is a relatively particularized product. It does not have
large series. By the time it’s in mass production, we’ll be dead “[Ref. 5]” [Ref. 5].
"Every project is an innovation project, as we do not offer machinery in
series“[Ref. 8].
“Where there is product volume and it’s not complicated, there you find the
emergent market producers. So we have to go to tailored and technology-
intensive products” [Ref. 11].
Source: Charterina et al. (2017), Charterina, J., Basterretxea, I., & Landeta, J. (2017). Collaborative relationships with customers: generation and
protection of innovations. Journal of Business & Industrial Marketing, 32(5) p. 736

8. INTRODUCTION  PROBLEM & AIMS QUAL. EMPIRICAL RESEARCH MAIN FINDINGS  CONCLUSIONS
Specialization
• Specialization results from the crossing ot three basic features: (1) the type of
machine, (2) size & other tailored features of machine, and (3) customer profile.
Customer
profile
Type of
machine
Out-of-
catalogue
features
Market
niche
• Producers focus on market niches. Two or three at the most. Most commonly
two or even just one.
• Two broad sub-sectors in the M-T industry: Metal cutting & Metal forming

9. INTRODUCTION  PROBLEM & AIMS QUAL. EMPIRICAL RESEARCH MAIN FINDINGS  CONCLUSIONS
Specialization
These market niches tend to be small:
In fact, in [very large] hydraulic presses, the latest data that I have
is that the market is between 500 million and 1 billion euro, which
is a ridiculous figure…and there will be about ten competitors
worldwide [Ref. 21].
High specialization leads sometimes even to reject bids:
They needs this. Can we make it? Then, we have a committee of
bid acceptance..., customer bids are tracked…this one wants this
head…or… wants a machine of this size, then that is accepted or
rejected [Ref. 10].

10. INTRODUCTION  PROBLEM & AIMS QUAL. EMPIRICAL RESEARCH MAIN FINDINGS  CONCLUSIONS
Internationalization
Due to:
1. Stagnation in home markets
2. Oursourcing of traditional customers (very especially automakers and
car part producers) to East Europe and Asia and
3. Growth in emerging markets (esp. the Americas and Asia),
…producers export nearly all if not all of their production

11. INTRODUCTION  PROBLEM & AIMS QUAL. EMPIRICAL RESEARCH MAIN FINDINGS  CONCLUSIONS
Long-lasting relationships
Duration of relationships: in most of the cases, long-lasting
relationships of more than 10 years. Happy customers do repeat
The ratio of new to total of customers is misleading in this
industry
(Inter)Dependency has not been acnowledged by respondents,

12. INTRODUCTION  PROBLEM & AIMS QUAL. EMPIRICAL RESEARCH MAIN FINDINGS  CONCLUSIONS
1 Understanding customers’ needs for improving innovative
capacity
Main findings:

13. INTRODUCTION  PROBLEM & AIMS QUAL. EMPIRICAL RESEARCH MAIN FINDINGS  CONCLUSIONS
Interaction from customers turns out to be the main source of innovations:
As for innovations in the short run, the contribution made by the customer is vital [.
. .] [Ref. 8].
The customer comes, he has a need and is willing to pay for it. Of course, that is a
source, yes indeed, for new product development. I would say it is the most
important one [Ref. 9].
I would say that 75 per cent of our innovation comes thanks to our customers.
Another 15 per cent comes from what we see among our competitors. That leaves
10 per cent, from which I would say 5 per cent comes from suppliers, and of the
other 5 per cent, 3 per cent is made in-house, and 2 per cent from our
technological network [Ref. 11]
Source: Charterina et al. (2017), Charterina, J., Basterretxea, I., & Landeta, J. (2017). Collaborative relationships with customers:
generation and protection of innovations. Journal of Business & Industrial Marketing, 32(5) p. 737
1 Understanding customers’ needs for improving innovative
capacity

14. INTRODUCTION  PROBLEM & AIMS QUAL. EMPIRICAL RESEARCH MAIN FINDINGS  CONCLUSIONS
The strongest point comes from the customer, when he confronts you with his
need [Ref.19]
The customer compares you with its needs, but for that to happen to you, you
must have done something before with this customer to make it come to you,
to present you with their idea, and for it to see you as capable of achieving that
development [Ref.10]
2 Signaling knowledge absorptive capacity to industrial buyers
Source: Charterina et al. (2017), Charterina, J., Basterretxea, I., & Landeta, J. (2017). Collaborative relationships with customers:
generation and protection of innovations. Journal of Business & Industrial Marketing, 32(5) p. 737

15. INTRODUCTION  PROBLEM & AIMS QUAL. EMPIRICAL RESEARCH MAIN FINDINGS  CONCLUSIONS
• 3 Role of reference customers in the generation of suppliers’
innovations
Main findings:

16. INTRODUCTION  PROBLEM & AIMS QUAL. EMPIRICAL RESEARCH MAIN FINDINGS  CONCLUSIONS
3 Role of reference customers in the generation of suppliers’
innovations
Reference customers are capital for the generation of innovations or for gaining
a preferent position in new business sectors :
It is the customer the one setting you the level. We work in areonautics for Rolls Royce,
Airbus and Boeing; in wind energy for LM, world leader in production of blades [for wind
genetators], in trains for Lucchini, Siemens, Alsthom or Scania, Renault or Fiat in the car
industry, and some Tier 1 producers such as Fagor Ederlan, EPC or Maier[…]There are
very few playing in this league[Ref.11]
There are customers whose engineering department is bigger than us, such as Audi [. . .]
and they know very well what they want and how they want it [Ref. 11]
The most important changes and innovations have come with customers that I call
“reference customers”, whom I don’t know whether to call “amigos” or not [Ref. 9]..
Source: Charterina et al. (2017), Charterina, J., Basterretxea, I., & Landeta, J. (2017). Collaborative relationships with customers:
generation and protection of innovations. Journal of Business & Industrial Marketing, 32(5) p. 737

17. INTRODUCTION  PROBLEM & AIMS QUAL. EMPIRICAL RESEARCH MAIN FINDINGS  CONCLUSIONS
4 Role of traditional customers in the generation of
suppliers’ innovations
-Traditional customers lead to innovations of smaller scope and of an
incremental type.
-“CLIENTE AMIGO”: Some producers have customers with whom they have a
special relationship (ie, cliente amigo or test users) allowing them to test
improvements. These are not necessarily reference customers:
Machine testers are somewhat more present in incremental innovations and in
product improvements incorporating a new technology, but basically in a
product range of a more or less standardized kind[…][Ref.11]

18. INTRODUCTION  PROBLEM & AIMS QUAL. EMPIRICAL RESEARCH MAIN FINDINGS  CONCLUSIONS
“The customer participates to a great extent in the design phases; in other
words, they don’t just buy the machine and wash their hands of it until it’s
finished. They have to be convinced by the concept of the machine you make.
Customers contribute things, because they know the process and the specific
everyday needs. The fact that they contribute that gives you a lot of guidance on
how you make those things. And that really does require quite a lot of
relationship with the customer [Ref. 9].
I think co-engineering is great. [. . .], each of you knows something. We both
contribute something; [. . .] the customer knows one part, they know about the
product, they know about the use, they know about productivity. And we know
about the machine, so that collaboration works [. . .][Ref. 11].
5.- Importance of embedded buyer-supplier ties for
knowledge exchange and innovation
Source: Charterina et al. (2017), Charterina, J., Basterretxea, I., & Landeta, J. (2017). Collaborative relationships with customers:
generation and protection of innovations. Journal of Business & Industrial Marketing, 32(5) p. 737

19. INTRODUCTION  PROBLEM & AIMS QUAL. EMPIRICAL RESEARCH MAIN FINDINGS  CONCLUSIONS
•Intervieweed firms base the selling process on exhaustive
up-to-date contracts
• Information about a highly innovative improvement is most
of the times carefully safeguarded by means of contracts
A few days ago we were working on the 5th draft of our
contract, but today we are in the 17th…Because both of us are
innovating, and many things are changing, so the contracts
also have to change [Ref.11].
6. Role of patents and contracts to protect innovations
based on buyer-supplier collaboration

20. INTRODUCTION  PROBLEM & AIMS QUAL. EMPIRICAL RESEARCH MAIN FINDINGS  CONCLUSIONS
•For the majority of the interviewed firms, patents tend to be a non-practical
means for the protection of innovations
•Other purposes recognized in the use of patents: reputation, defence against
legal actions
• Oftentimes, keeping trade secrets tends to be recognized as a more practical
means:
“There are some innovations where the best – or only– way of protecting them is
industrial secrecy. Because the other way of doing it, which is to patent them [. .
.] means going public and once I go public, my competitors are going to know
about my innovation and it’s going to be easier for them to understand our
secret, or at least to know what our competitive advantages in our latest
projects are based on “[Ref. 8].
6. Role of patents and contracts to protect innovations
based on buyer-supplier collaboration
Source: Charterina et al. (2017), Charterina, J., Basterretxea, I., & Landeta, J. (2017). Collaborative relationships with customers:
generation and protection of innovations. Journal of Business & Industrial Marketing, 32(5) p. 738

21. INTRODUCTION  PROBLEM & AIMS QUAL. EMPIRICAL RESEARCH MAIN FINDINGS  CONCLUSIONS
•The need that is transmitted from customers becomes the most valuable information
for generating innovations
•Also, the selling firm has to succeed in signaling to the buyer its knowledge
absorptive capacity
•There are more chances of a successful innovation when the need comes from a
reference customer (leading companies in the automobile, aeronautical and
technological industries) and/or the selling firm has machine testers (ie, clientes
amigos) willing to test innovations
•Selling companies do differ with respect to attitudes towards the risk of knowledge
spill-overs. It seems that the most innovative tend to be more reliant on their dyamic
capabilities and show less fear
•In the M-T industry, where innovations are most of the times incremental,
safeguarding measures by means of contracts or trade secrets seem to be more
frequent than the use of patents for the protection of innovations
•Companies leading their niches are the most inclined to recognize the value of
patents and have a greater number of patents. They use patents not only as an
appropriability mechanism, but also as a defensive one and as a signal of their
technological and knowledge absorptive capacity.
CONCLUSIONS

22. This is a slideshare presentation of a research published in the Journal of
Business and Industrial Marketing.
Charterina et al. (2017), Charterina, J., Basterretxea, I., & Landeta, J.
(2017). Collaborative relationships with customers: generation and
protection of innovations. Journal of Business & Industrial Marketing,
32(5) 733-741
You can access the paper in the site of the JBIM:
http://www.emeraldinsight.com/doi/full/10.1108/JBIM-02-2017-0052
And also an Open Access version of the paper in:
https://addi.ehu.es/bitstream/handle/10810/21826/Repository_Collaborative_rel
ationships_JBIM%202017.pdf?sequence=1&isAllowed=y