The forth industrial revolution and the impact of innovation on firm performance, a case study of appota
THE FORTH INDUSTRIAL REVOLUTION AND THE IMPACT OF INNOVATION ON FIRM
PERFORMANCE, A CASE STUDY OF APPOTA
1
2
Tran Minh Thu * -Phan Thi Tho**
ABSTRACT: Innovation in the mobile phone industry is by far the most important factor to ensure the
business success since it steers the firm into improvement and triggers customers’ curiosity. The aim of this
research is to discover the relationships between innovation i.e. function, design and customer satisfaction
in this company. To have a quantitative observation, questionnaires were designed and sent to customer of
Appota. The data attained from the surveys is analyzed by SPSS statistical package program. Analysis results
showed that the customer’s satisfaction regarding design and function does not depend on the gender, it
is affected by the age. Therefore, company should look for targeted customers’ group and focusing on their
demand when it comes to innovation changes.
Keywords: Innovation, Appota, function, design, age, gender, customer satisfaction, 4th industrial revolution
1. INTRODUCTION
According to a market research conducted byAppota, which is a gaming company, in 2017 (APPOTA,
2017), smartphone penetration in urban areas has risen from 20% in 2013 to 72% in 2016, which means
a 350% increase in three years. This may be considered a booming in smartphone usage. In addition,
the number of smartphone brands is added every year, including several big companies, such as Apple,
Samsung, and Google. In 2017, there are approximately 20 brands, if not included unnamed phones from
unknown manufacturers. The abundance of smartphone brand leads to the need to investigate the purchase
behavior of customers, in order for a brand to gain advantages over others. As stated in a book (Kemp et
al., 2003), firm performance is largely linked with innovation, this performance also includes the terms
customer satisfaction, which will be the main focus of this research. Customers are being seen as the
source of a company’s profitability (Hogan et al., 2002). This leads to an emphasis on the customer in the
development strategy of all operating companies. Along with brand loyalty, customer satisfaction is of great
importance to estimate a company’s success. Hence, enhancing customer satisfaction is a great challenge
for the smartphone industry in the recent decade. This factor, which is used to estimate how much a product
or service pleases its customers, is a crucial part of repurchase intent (Nemati, Khan and Iftikhar, 2010).
In another research by Anderson, Fornell, and Lehmann (1994), the results also showed that customer
satisfaction has a positive effect on market share and profitability. Creativity means making new product
while innovation means that creative product results in financial benefits. Innovation means to create a new
product or make and implement a new process; the main purpose of innovation is to gain the sustainable
competitive edge or improve the efficiency of the organization and to get customer satisfaction (Leonard‐
Barton, 1992). Its main objective is to raise the efficiency and competitiveness of the company. This factor
*
Foreign Trade University, 91 Chua Lang, Dong Da, Hanoi.
University of Science and Technology Hanoi, 18 Hoang Quoc Viet, Hanoi
**
HỘI THẢO KHOA HỌC QUỐC TẾ KHỞI NGHIỆP ĐỔI MỚI SÁNG TẠO QUỐC GIA
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leads to the level of satisfaction in the buyers (Han et al., 1998), especially in the smartphone market,
where each new product should be distinctive from other rivals in order to gain attraction from customers.
Customer satisfaction may be defined as the degree to which the product buyers are satisfied with the product
performance and their expectations are met. According to Oliver, Rust and Varki (1997), “satisfaction of the
customer in general words means customer response to the condition of fulfillment, and customer decision
of the statement of fulfillment”. The customer satisfaction is the source of customer loyalty, as Mittal et al.
(1998) described that the customer satisfaction accounts for customer loyalty. Therefore, any organizations
paying less attention to customer satisfaction will be out of the market. Since Vietnam is experiencing a rapid
growth in the number of smartphone owners, the smartphone industry is in need of research indicating the
factors affecting customers’ purchasing power, especially for the young generations. However, the number
of works related to this interest is limited or undisclosed because they are mainly under the ownership of
smartphone companies. Thus, this research provides an insight into the impact of smartphone innovation to
customer satisfaction in Vietnam, using data collected through a survey. It establishes a relationship between
product innovation and customer satisfaction in terms of smartphone manufacturing, pointing out to which
extent a buyer is willing to pay for new smartphones thanks to the innovations in their design and function.
In addition, the relationship is compared between male and female customers, as well as among different
age groups. The information presented in this research is expected to help to reaffirm the strategy being
used by global smartphone manufacturers, proving the accuracy and potential of the innovationsatisfaction
relationship, as well as apply that strategy appropriately to Vietnam’s condition.
2. LITERATURE REVIEW
2.1 Innovation
Despite going through a long period of study, there is an absence of a unified global common explanation
for the term of Innovation (Lesakova et al., 2017). In general, innovation is considered the core of an organization
(Akram et al., 2017) determining its success and achievements. Whenever companies fail or refuse innovating,
they will soon disappear from the market. Moreover, innovation also brings and maintain several more benefits to
firms over their rivals (Atalay et al., 2013). According to De Meyer and Garg (2005), innovation is characterized
as a monetarily and socially effective presentation of another way or another fusion of existing methods in
transforming materials to an outcome that result in changes in the value and price relationship offered to the
clients. Another statement from Therrien et al. (2011) claimed that innovation represents a procedure identified
with changes in capacities and forms whereby business is attempting to secure and expand upon their unique
mechanical capability. In company level, innovation is the ability to adapt creativity to create a product evolution
and generate novel goods and services (Rubera and Kirca, 2012). Innovation could be illustrated as products
development, process advancements, development in business strategy, management structure, brand, marketing
tactic, administration frameworks, client administration, and experience (Davila et al., 2013). In the Oslo Manual
(OECD, 2005), innovation is classified into four categories which are product innovation, process innovation,
marketing innovation and organizational innovation. This study will take into account only the product innovation
which includes the presentation of products which is recently developed or remarkably enhanced (OECD, 2005)
regarding to their functions and designs.
2.2 Firm performance
Firm performance is specified as a multidimensional notion (Atalay et al., 2013) which is a measure of
the success of a company (Yeung et al., 2003). Additionally, it contains three success indicators: financial
INTERNATIONAL CONFERENCE STARTUP AND INNOVATION NATION
597
performance, operational performance and the quality of products (Lakhal et al., 2006). The performance of
an organization could be evaluated by two main methods which are objective and subjective measurements
(Atalay et al., 2013). In this study, the subjective method was employed to survey the customers’satisfaction
of recent smartphones’ innovations and subsequently determine the innovation–satisfaction relationship.
3. METHODOLOGY AND FINDING
The objective of this research is to establish a reliable relationship between 2 types of product
innovation of smartphones (design and function) and satisfaction of customers. In doing so, a questionnaire
was developed consisting 2 questions and 19 statements. The 2 questions were about the gender and age
of the respondents. Regarding the statements, the first one asks whether the respondent agree or disagree
that he/she satisfies with the recent innovation in design and function of smartphones, which acts as the
dependent variable in the regression model. The rest were 9 statements each about Design innovations and
Function innovations, all of which represent the independent variables. It is also of note that for each type
of innovation, 2 to 3 negative and positive statements were proposed for each specific innovation items (the
screen for Design, GPS for Function, etc.). The reason for that was to eliminate acquiescence bias, which is
the tendency of respondents to agree with the statements of a questionnaire regardless of their content (Hinz
et al., 2007). For the aforementioned statements, a 5-point Likert scale from Strongly Disagree to Strongly
Agree was utilized to scale the responses to the questionnaire. The questionnaire was used for surveying
by generating a google form and distributing it through social media to collect responses from netizens.
The collected data was used for statistical analysis, which consisted of 4 main stages. The first stage was
the reliability test and the factor analysis of the questionnaire. Then, the relationship between product
innovation and customer’s satisfaction was derived using multiple regression analysis. In the last 2 stages,
the satisfaction of innovation was compared between genders and different age groups.
4.RESULT AND DISCUSSION
4.1 Reliability test and factor analysis
Cronbach’s Alpha is the test for internal consistency of a set of items, which are the statements in this
research, and it is also regarded as a test for scale’s reliability (Bruin, 2006). For all items, a value higher
than 0.6 is considered acceptable, while for each individual item, their Corrected Item-Total Correlation
must be higher than 0.3 to be retained. The full result of the reliability test is listed in APPENDIX A and key
features are summarized in Table 1. From the table, it is obvious that all items of Design and the variable
itself satisfied the above conditions and were hence kept for further analysis. On the other hand, even
though the Cronbach’s alpha of Function variable was higher than 0.6, the Corrected Item-Total Correlation
values of statement 2 and 6 (denoted as FQ2 and FQ6) were lower than 0.3 and therefore must be deleted.
The reliability test was then rerun for modified Function’s items and summarized in Function (new) column
of Table 1. The revised items all had Corrected ItemTotal Correlation higher than 0.3 and the Cronbach’s
alpha for Function increased to 0.864.
HỘI THẢO KHOA HỌC QUỐC TẾ KHỞI NGHIỆP ĐỔI MỚI SÁNG TẠO QUỐC GIA
Table 1: Result of reliability test for Design and Function variables.
598
Design
Cronbach’s Corrected Item Cronbach’s
Alpha if Item Item-Total Alpha if
Item Deleted Correlation
Function (old)
Corrected
Item-Total
Function (new)
Item Cronbach’s Corrected
Alpha if Item Item-Total
Item
Deleted
Correlation
Deleted
Correlation
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
DQ1
DQ2
DQ3
DQ4
DQ5
DQ6
DQ7
DQ8
DQ9
0.873
0.894
0.900
0.883
0.880
0.888
0.871
0.878
0.870
0.78
0.49
0.44
0.64
0.69
0.58
0.79
0.70
0.80
FQ1 0.794
FQ2 0.839
FQ3 0.815
FQ4 0.802
FQ5 0.795
FQ6 0.844
FQ7 0.793
FQ8 0.805
FQ9 0.822
0.69
0.28
0.53
0.65
0.68
0.216
0.70
0.61
0.46
FQ1 0.823
FQ3 0.862
FQ4 0.853
FQ5 0.834
FQ7 0.825
FQ8 0.837
FQ9 0.861
0.78
0.50
0.58
0.71
0.77
0.69
0.43
Cronbach’s Alpha = 0.894
Cronbach’s Alpha = 0.831
Cronbach’s Alpha = 0.864
After the reliability test and the revision of Function’s items, factor analysis (Exploratory Factor
Analysis or EFA) was carried out on each variable to regroup the items. The result is given in detail in
APPENDIX B and summarized in Table 2. From the table, the Design variable was divided into 2 groups
named DS1 and DS2 and for Function they were FC1 and FC2. In the end, from the initial 2 variables, the
items were regrouped into 4 news variables that could affect the satisfaction. The new variables with their
corresponding items are included in Table 3.
Table 2: Result of EFA
Rotated Component Matrixa Component
1
2
3
4
DQ2
DQ5
DQ6
DQ1
DQ9
DQ7
DQ3
DQ8
DQ4
0.814
0.778
0.771
0.731
0.727
0.579
FQ4
FQ8
FQ1
FQ6
FQ9
FQ5
FQ3
0.867
0.864
0.845
0.752
0.85
0.773
0.726
0.808
0.76
0.582
DS2
DS1
FC1
FC2
INTERNATIONAL CONFERENCE STARTUP AND INNOVATION NATION
Table 3: New variables after regrouping.
599
Group Item
Description
1.The super large touch screen introduced in the first Samsung Galaxy Note would be very
satisfying to type and read on.
DQ2
2. The large screen of new generation smartphones makes them hard to hold or keep in your
pocket, and making it prone to robbery
DQ5
5. A stylus pen like the S-pen of Galaxy Note 5 provide a satisfying writing and drawing
experience.
DS1
DQ6
DQ1 6. Full aluminium body gives a luxury feeling when holding a smartphone
DQ9 7. 2-sided glass body makes a phone more charming than an aluminium body
DQ7 9. The thinner and lighter body of new generation smartphones are more convenient to hold and use.
3. When large screen smartphone appears on advertisements, it made you immediately want to
own one
DQ3
4. iPhone 8 makes a high impression a truly wireless device, free from charging cables and
headphone cords, freeing you from tangled cables
DS2
DQ8
8. Replacing most physical buttons with digital button on smartphones makes them more
comfortable and easier to use
DQ4
1. Water resistance, which was first introduced in Xperia (Sony), was one of the most important
features ever appeared in a smartphone. You will never have to worry if you dropped your phone
into water
FQ4
6. You were super amazed when Apple introduced multi-point touchscreen smartphone. Once
you had a smartphone with touchscreen, you were very satisfied and never switch back to
physical keyboard phones
4. Touch ID allow users of the phone to unlock their iPhone quickly and confirm purchases from
the iTunes and Appstore with ease. Super convenient!
8. Thank to free Global Positioning System (GPS) on smartphones, you can travel without
getting lost and use helpful applications like Grabtaxi, Uber, etc...
3. Since water resisting appeared on smartphones, you would not buy one without that feature
FQ8
FQ1
FC1
FC2
FQ6
FQ9
FQ5
FQ3
5. Fingerprints can be lifted from anywhere and that makes it easier for hackers to get into
someone’s phone. Plus, you cannot change them once they are stolen.
9. GPS drained your battery too fast you rarely use it
4.2. The correlation between product innovation and customer’s satisfaction.
4.2.1 Pearson correlation coefficient
Pearson correlation coefficient is the measure of the correlation between two variables X and Y. It has
a value between +1 and −1, where 1 is total positive correlation, 0 is no correlation, and −1 is total negative
correlation. The Pearson correlation result is summarized in Table 4.
Table 4: Pearson Coefficient of variables
Correlations
S
DS1
DS2
FC1
FC2
.813**
.664**
.767**
.636**
S
Pearson Correlation
Sig. (2-tailed)
N
Pearson Correlation
Sig. (2-tailed)
N
Pearson Correlation
Sig. (2-tailed)
Pearson Correlation
Sig. (2-tailed)
Pearson Correlation
Sig. (2-tailed)
1
.000
85
1
.000
85
.651**
.000
85
.000
85
.000
85
.571**
.000
85
.495**
.000
.562**
.000
1
85
.813**
.000
85
.818**
.000
85
DS1
85
.664**
.000
.767**
.000
.636**
.000
.651**
.000
1
.587**
.000
1
DS2
FC1
FC2
.818**
.000
.587**
.000
.495**
.000
.571**
.000
.562**
.000
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The Pearson correlation coefficients range from 0.495 to 0.813 in the data sample with a note that all
of the correlations are positive. In addition, 100% of significant tests prove the existence of relationships
between the factors in overall. As such, the data are totally fit with linear models.
4.2.2 Multiple regression analysis.
Multiple regression model determines the relationship between a dependent variable, which is the
satisfaction of customers (S), and independent variables (DS1, DS2, FC1, and FC3). Adjusted R Square
equals 0.727 indicates that 72.7% of the variances in term of the customer’s satisfaction. The F value
is 57.071 at 95 % confidence level with sig value equal 0,000. The Durbin Watson Test is a measure of
autocorrelation, also called serial correlation, in residuals from regression analysis. In this test, Durbin
Watson statistic is 1.959. it means that models are not violated when using multiple linear regression.
The maximum value of VIF (Variance Inflation Factor), 3.58, explains no multicollinearity between the
independent variables, hence, the model is acceptable.
Table 5: Result of multiple linear regression model
Model
Unstandardized
Coefficients
Standardized
Coefficients
t
Sig.
Collinearity Statistics
VIF
B
Tolerance
Std. Error
Beta
1
(Constant) .645
.195
.090
3.314
3.788
.001
DS1
DS2
FC1
FC2
.341
.151
.162
.195
.408
.000
.028
.030
.009
.279
.549
.316
.626
3.580
1.820
3.170
1.597
.067
.074
.073
.172
.224
.192
2.239
2.205
2.673
R Square = 0.740; Adjusted R Square = 0.727; Sig = 0,000 Finally, the research found out the Linear
multiple regression of the relationship between customer’s satisfaction and four factors of innovation of
Design and Function of Smartphone as followed:
S=0.645 + 0.341*DS1 + 0.151*DS1 + 0.162*FC1 + 0.195*FC2.
Where:
• S: customer’s satisfaction.
• DS1: group1 of phone design innovations.
• DS2: group2 of phone design innovations.
• FC1: group1 of phone function innovations.
• FC2: group 2 of phone function innovations.
4.3 Comparison of the relationship between satisfaction and product innovation between genders and age groups.
4.3.1 The difference between genders
The ANOVA and Levene test’s result comparing the satisfaction to smartphone’s innovations between
male and female respondents is presented in Table 6. The sig. value of Levene test was 0.801 (>0.05) at
95% confidence level indicating that the variances of males and females’ satisfaction were not significantly
different. Moreover, the sig. value ofANOVAtest was higher than 0.05 at 0.737, which could be understood
that the mean satisfaction of two sexes were not significantly different either. Nevertheless, the mean
satisfactions were around 3.33.4, i.e. the satisfaction of customer only was merely the neutral and the
customers do not really satisfy with these innovations of smartphones.
INTERNATIONAL CONFERENCE STARTUP AND INNOVATION NATION
Table 6: The difference between genders
601
Sig
N
Mean
Levene ANOVA
Male
42
43
85
3.3095
3.3721
3.3412
.801
.737
Female
Total
4.3.2 The difference between age groups.
Unlike genders, the means and variances of different age groups showed a clear difference, as evidenced
by the sig. values of both Levene and ANOVA test (see Table 7). Therefore, Duncan analysis was carried
out to determine which age groups had similar responses. The result shows that the groups who are younger
than 30 shared a similar neutral satisfaction (around 3.4), whereas those who are older than 30 expressed
slightly negative satisfaction toward smartphones’ innovations. However, since the sample populations of
different age groups were not comparable (64 responses from the 18-23 age group compared to only 3 from
over 30 respondent), hence, more responses from each age groups should be collected in the future.
Table 7: The difference between age groups.
Sig
Duncan
Subset for alpha = 0.05
Age
N
Mean
Levene
0.100
ANOVA
1
2
<18
5
3.4000
3.3906
3.3846
2.0000
3.3412
0.050
3.400
3.391
3.385
18-23
23-30
30-40
Total
64
13
3
2.000
1.000
85
.975
4.4. Proposal to smartphone companies
The research result shows that most customers are neutral with the innovations of smartphones and
there is no difference in satisfaction between the sexes. The age groups, on the other hand, showed a
significant difference among them and should be the main focus of companies’ innovation plan. For the
purpose of proposing solutions, the satisfaction scores of the groups according to four product innovation
variables are summarized in Table 8.
Table 8: The satisfaction of age groups to 4 innovative variable
Age
<18
satisfaction
3.40
DS1
3.20
3.41
3.36
DS2
2.93
2.89
3.10
FC1
3.40
3.40
3.63
FC2
3.53
2.89
3.00
18-23
23-30
3.39
3.38
30-40
2.00
2.17
2.00
2.08
2.11
From this, there are two proposals to the companies:
• The 30 - 40 age group: this group of customers is critical, all of these new and improved innovations
are not satisfy them. Therefore, the company needs time to improve their own lines, or can introduce new
products specifically for this group.
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• Younger than 30 age groups: people in this group like these innovations about the function than
that of design. The highest mean level of satisfaction only reached 3.63 that means the acceptable level.
Therefore, the company should have the new innovations to satisfy the market.
5. CONCLUSION
This study gave a description of the relationship between customer’s satisfaction and the innovations
of Smartphone under a linear multiple regression of four factors about Design and Function. The data are
collected through a number of questionnaires answering by various of people in different age groups. After
analyzing the data, it can be noted that the customer’s satisfaction does not depend on the gender, it is
affected by the age. To be more specific, the younger people, less than 30 years old, prefer these innovations
of Smartphone than the older people. However, the customers’satisfaction level is only in neutral level, not
really high. Therefore, the company should conduct the new strategies to respond the demand of customers,
especially suitable for different age groups to achieve the increase in sales.
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