Innovation-based competition and the dynamics of design in upstream suppliers

Abstract

Although the evolution of the design process in car manufacturers and their first-tier suppliers has been studied extensively, the situation is different for upstream industries, usually chemical and steel firms. This article focuses on such an upstream supplier situation based on interactive research with a major European steel-making group, Usinor. In the first part, we demonstrate that innovation-based competition is a significant issue for companies situated upstream from end-product manufacturers. The accelerating pace of the (re)design of end products downstream provides increasing opportunities for the substitution of raw materials. The importance of this issue is obscured, however, by considerable inertia in the spread of innovations through the sector. Next, the article characterises the specificities of implementing an innovative design strategy due to the activity and position of the firm in the industrial chain. The conclusions will make it clear that design models developed for car manufacturers and first tier suppliers are in many ways unsuitable for this different context. We finally propose five principles to evaluate and define an innovation management system in upstream suppliers.

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