Service innovation
Encyclopedia
The concept of Service Innovation was first discussed in Miles (1993) and has been developed in the past 2 decades.
It is used to refer to many things. These include but not limited to:
Service Innovation is hard to define, one of the many helpful definitions comes from Finland
’s research agency, TEKES
:
One disagreement with this definition is that there are many cases of innovations whose benefit to the customer is somewhat dubious (e.g. overseas call centers). A comprehensive definition of service innovation was proposed by Van Ark et al. (2003) : Service Innovation can be defined as "a new or considerably changed service concept, client interaction channel, service delivery system or technological concept that individually, but most likely in combination, leads to one or more (re)new(ed) service functions that are new to the firm and do change the service/good offered on the market and do require structurally new technological, human or organizational capabilities of the service organization." This definition covers the notions of technological and non-technological innovation. Non-technological innovations in services mainly arise from investment in intangible inputs.
In practice, the majority of service innovations will almost certainly involve various combinations of these four dimensions. For instance:
An elaboration of this model to suggest six dimensions of innovation was developed in the course of work on creative sectors, by Green, Miles and Rutter. http://www.nesta.org.uk/assets/pdf/hidden_innovation_creative_sectors_working_paper_NESTA.pdf As well as Technology and Production process, four dimensions were specified whose linkages are very strong in creative sectors like videogames, advertising and design: Cultural Product, Cultural Concept, Delivery and User Interface.
The service innovation literature is surprisingly poorly related to the literature on new product development, which has spawned a line of study on new service development. This often focuses on the managerially important issue of what makes for successful service innovation. See for example Johne and Storey (1998), who reviewed numerous New Service Development studies.
After Miles (1993), numerous studies were made, one of the more recent studies that reaches similar conclusions was from a qualitative survey of service organizations by Candi (2007) .) Note that the “product” related innovations below have a lot in common with new service development as discussed above. In the following list, features of services are linked to innovation strategies by the symbol >>>.
Additionally, a number of more general tendencies in the innovation process in services have been noted. These include:
The European Commission
and the OECD has been particularly active in seeking to generate reflection on services innovation and its policy implications. This has resulted in studies such as the OECD’s reports into knowledge intensive services, and the European Commission Expert Group report on services innovation - the report of the group, "Fostering Innovation in Services" as well as various TrendChart studies. The European Commission has also launched a number of Knowledge Intensive Services Platforms designed to act as laboratories for new public policies for services innovation. Few economic development agencies at the member state level, and fewer still at the regional level, have translated this new thinking on services innovation into policy action. Finland is an exception, where knowledge intensive business services
have been a focus of much regional work (esp. the Uussima region).
Finland has been active in thinking about the policy implications of services innovation. This has seen TEKES – the Finnish Funding Agency for Technology and Innovation - launch the SERVE initiative, designed to support ‘Finnish companies and research organisations in the development of innovative service concepts that can be reproduced or replicated and where some technology or systematic method is applied .’ Germany
has also undertaken initiatives for services R&D, and Canada
and Norway
have programs as well.
Ireland has been considering a services-focused innovation policy, with Forfás – its national policy and advisory board for enterprise, trade, science, technology and innovation – having undertaken a review of Ireland’s existing policy and support measures for innovation, and outlined options for a new policy and framework environment in support of service innovation activity.
At the regional level, limited information is available on how Europe’s regions are responding to the challenges presented by service innovation. [CM International] has recently published a European survey on services innovation and regional policy responses. The results of this suggest that very few regions in France, the UK and Ireland have an explicit focus on services and innovation. Many do, however, express a desire to address this issue in the coming future.
It is used to refer to many things. These include but not limited to:
- InnovationInnovationInnovation is the creation of better or more effective products, processes, technologies, or ideas that are accepted by markets, governments, and society...
in services, in service products – new or improved service products (commodities or public services). Often this is contrasted with “technological innovation”, though service products can have technological elements. This sense of service innovation is closely related to Service designService designService design is the activity of planning and organizing people, infrastructure, communication and material components of a service in order to improve its quality and the interaction between service provider and customers....
and "new service development". - Innovation in service processes – new or improved ways of designing and producing services. This may include innovation in service delivery systems, though often this will be regarded instead as a service product innovation. Innovation of this sort may be technological, technique- or expertise-based,or a matter of work organization (e.g. restructuring work between professionals and paraprofessionals).
- Innovation in service firms, organizations, and industries – organizational innovations, as well as service product and process innovations, and the management of innovation processes, within service organizations.
Service Innovation is hard to define, one of the many helpful definitions comes from Finland
Finland
Finland , officially the Republic of Finland, is a Nordic country situated in the Fennoscandian region of Northern Europe. It is bordered by Sweden in the west, Norway in the north and Russia in the east, while Estonia lies to its south across the Gulf of Finland.Around 5.4 million people reside...
’s research agency, TEKES
Tekes
Tekes – the Finnish Funding Agency for Technology and Innovation, a part of Finnish Ministry of Employment and the Economy, is the most important public funding agency for research funding in Finland...
:
One disagreement with this definition is that there are many cases of innovations whose benefit to the customer is somewhat dubious (e.g. overseas call centers). A comprehensive definition of service innovation was proposed by Van Ark et al. (2003) : Service Innovation can be defined as "a new or considerably changed service concept, client interaction channel, service delivery system or technological concept that individually, but most likely in combination, leads to one or more (re)new(ed) service functions that are new to the firm and do change the service/good offered on the market and do require structurally new technological, human or organizational capabilities of the service organization." This definition covers the notions of technological and non-technological innovation. Non-technological innovations in services mainly arise from investment in intangible inputs.
Service Innovation Research
Much literatures on what makes for successful innovations of this kind comes from the New Service Development research field (e.g. Johne and Storey, 1998; Nijssen et al., 2006). Service design practitioners have also extensively discussed the features of effective service products and experiences. One of the key aspects of many service activities is the high involvement of the client/customer/user in the production of the final service. Without this coproduction (i.e. interactivity of service production), the service would often not be created. This coproduction, together with the intangibility of many service products, causes service innovation to often take forms rather different from those familiar through studies of innovation in manufacturing. Innovation researchers have, for this reason, stressed that much service innovation is hard to capture in traditional categories like product or process innovation. The coproduction process, and the interactions between service provider and client, can also form the focus of innovation.Areas of innovation - den Hertog's model
Thus den Hertog (2000) who identifies four “dimensions” of service innovation, takes quite a different direction to much standard innovation theorizing.- The Service Concept: refers to a service concept that is new to its particular market – a new service in effect, or in Edvardsson’s (1996, 1997) terminology, a “new value proposition”. Many service innovations involve fairly intangible characteristics of the service, and others involve new ways of organizing solutions to problems (be these new or familiar ones). Examples might include new types of bank account or information service. In some service sectors, such as retail, there is much talk about “formats”, such as the organization of shops in different ways (more or less specialized, more or less focused on quality or cost-saving, etc.).
- The Client Interface: refers to innovation in the interface between the service provider and its customers. Clients are often highly involved in service production, and changes in the way in which they play their roles and are related to suppliers can be major innovations for many services. Examples might include a greater amount of self-service for clients visiting service organizations. There is a French literature on service innovation that focuses especially on this type of innovation, identifying it as innovation in “servuction”.
- The Service Delivery System: also often relates to the linkage between the service provider and its client, since delivery does involve an interaction across this interface. However, there are also internal organizational arrangements that relate to the ways in which service workers perform their job so as to deliver the critical services. Much innovation concerns the electronic delivery of services, but we can also think of, for instance, transport and packaging innovations (e.g. pizza delivery!). An emerging concept of SDP is the idea of taking a "factory" approach to Service Innovation. A "service factory" approach is a standardized and industrialized environment for more effective service innovation, development and operations for the IP era.
- Technological Options: these most resemble familiar process innovation in manufacturing sectors. New information technology is especially important to services, since it allows for greater efficiency and effectiveness in the information-processing elements that are, as we have seen, prevalent to a great extent in services sectors. We also often see physical products accompanying services, such as customer loyalty cards and “smart” RFID cards for transactions, and a wide range of devices for communication services.
In practice, the majority of service innovations will almost certainly involve various combinations of these four dimensions. For instance:
- A new IT system (technology dimension) may be used to enable customer self-service (interface dimension) as in the case of a bank contacting its customers.
- The ability to track one’s order or the location of an item that one has posted or is expecting to receive.
- Services may be delivered electronically, as in the case of much online banking and cash withdrawals from ATMs.
- A new service allowing a client to examine various options and calculate what they would be paying with different types of accounts.
- A new service will often require a new service delivery system, and changes at the client interface.
An elaboration of this model to suggest six dimensions of innovation was developed in the course of work on creative sectors, by Green, Miles and Rutter. http://www.nesta.org.uk/assets/pdf/hidden_innovation_creative_sectors_working_paper_NESTA.pdf As well as Technology and Production process, four dimensions were specified whose linkages are very strong in creative sectors like videogames, advertising and design: Cultural Product, Cultural Concept, Delivery and User Interface.
The service innovation literature is surprisingly poorly related to the literature on new product development, which has spawned a line of study on new service development. This often focuses on the managerially important issue of what makes for successful service innovation. See for example Johne and Storey (1998), who reviewed numerous New Service Development studies.
Services Features and Innovation Potential: Miles (1993) influential article on 'Service Innovation'
It is commonplace to note that many service firms and processes have characteristics different from manufacturing and manufacturers. Professor Ian Miles of the Manchester Institute of Innovation Research (MIoIR), The University of Manchester, is one of the internationally recognized scholars on the study of 'Service Innovation'. He coined the term in his 1993 article in the journal FUTURES, (Vol. 25, No. 6, pp. 653–672,) http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V65-45P15VV-7C&_user=494590&_coverDate=08%2F31%2F1993&_fmt=abstract&_orig=search&_cdi=5805&view=c&_acct=C000024058&_version=1&_urlVersion=0&_userid=494590&md5=8c83cb9d00e681e9af5eb61b70d80682&ref=full. He listed a series of characteristic features of services, and associated these with particular types of innovation. Such innovations are often aimed at overcoming problems associated with service characteristics like the difficulty in demonstrating the service to the client, or the problems in storing and building up stocks of the service.After Miles (1993), numerous studies were made, one of the more recent studies that reaches similar conclusions was from a qualitative survey of service organizations by Candi (2007) .) Note that the “product” related innovations below have a lot in common with new service development as discussed above. In the following list, features of services are linked to innovation strategies by the symbol >>>.
- Features of services associated with service production
- Technology and Plant (Low levels of capital equipment; heavy investment in buildings.>>> Reduce costs of buildings by use of teleservices, toll-free phone numbers, etc.)
- Labor (Some services highly professional, esp. requiring interpersonal skills); others relatively unskilled, often involving casual or part-time labor. Specialist knowledge may be important, but rarely technological skills (other than Information Technology). >>> Reduce reliance on expensive and scarce skills by use of expert systems and related innovations; Relocation of key operations to areas of low labor costs (using telecommunications to maintain coordination).
- Organization of Labor Process (Workforce often engaged in craft-like production with limited management control of details of work. >>> Use IT to monitor workforce (e.g. tachometers and mobile communications for transport staff; Aim for 'flatter' organizational structures, with data from field and front-office workers directly entering databases and thence Management Information Systems.)
- Features of Production (Production is often non-continuous and economies of scale are limited.>>> Standardize production (e.g. 'fast-food' chains), reorganize in more assembly-line-like feature with more standard components and higher division of labor.)
- Organization of Industry (Some services state-run public services; Others often small-scale with high preponderance of family firms and self-employed. >>> Externalization and privatization of public services; combination of small firms using network technologies; IT-based service management systems.)
- Features of services associated with service product
- Nature of Product (Immaterial, often information-intensive; Hard to store or transport; Process and product hard to distinguish. >>> Add material components (e.g. client cards, membership cards). Use telematics for ordering, reservation, and if possible - delivery. Maintain elements of familiar 'user-interfaces'.)
- Features of Product (Often customized to consumer requirements.>>> Use of Electronic Data Interchange or Internet for remote input of client details; use software to record client requirements and match to service product.
- Features of services associated with services consumption
- Delivery of Product (Production and consumption coterminous in time and space; often client or supplier has to move to meet the other party. >>> Telematics; Automated Teller Machines and equivalent information services.)
- Role of Consumer (Services are consumer-intensive, requiring inputs from consumer into design/production process. >>> Consumer use of standardized menus and new modes of delivering orders.)
- Organization of Consumption (Often hard to separate production from consumption; Self-service in formal and informal economies commonplace.>>> Increased use of self-service, utilizing existing consumer (or intermediate producer) technology - e.g. telephones, PCs - and user-friendly software interfaces.)
- Features of services associated with services markets
- Organization of Markets (Some services delivered via public sector bureaucratic provision; Some costs are invisibly bundled with goods (e.g. retail sector).>>> Introduction of quasi-markets and/or privatization of services; New modes of charging (pay per society), new reservation systems; more volatility in pricing using features of EPOS and related systems.)
- Regulation (Professional regulation common in some services. >>> Use of databases by regulatory institutions and service providers to supply and examine performance indicators and diagnostic evidence.)
- Marketing (Difficult to demonstrate products in advance.>>> Guarantees; demonstration packages (e.g. demo software, shareware, trial periods of use).)
Additionally, a number of more general tendencies in the innovation process in services have been noted. These include:
- The industrialization of services, involving efforts to standardize services, to yield service products of predictable characteristics and quality, with economies of scale and improved delivery times. This typically involves the introduction of high levels of division of labor, with the use of pre-packaged and automated elements (such as pre-prepared meals, word processed templates for form letters, and the like). Standardization of the service products has become a competitive strategy for many firms.
- Organizational is innovation. Survey data suggest that services place particular emphasis on organizational change. Many important innovations in services involve combinations of specific new technologies together with organization change. The role of organizational innovations in services is very apparent - developments such as supermarkets and other self-service facilities are extremely significant in the development of modern service industries. Such organizational innovations will often have a technological dimension, whether this be very basic (e.g. shopping trolleys), or relatively high-tech (EPOS - electronic point of sale - equipment or ATMs linked into networks).
- An important trajectory of organizational change has been towards self-servicing, without necessarily following this development all the way toward the vision of the client sitting at home interacting with the service provider via a remote terminal. Instead, reorganization of the facilities of the service provider permits customer self-service in the service establishment, saving on labor costs and often increasing user satisfaction as it is possible to make decisions anonymously and at one's own pace.
- Beyond self-servicing, the involvement of clients as coproducers is particularly important for knowledge-intensive business services, with the emphasis being laid upon clients' role in advancing the expertise of service suppliers, and identifying new avenues for its application. Web2.0 has brought “user innovation” to the fore in electronic services.
Service innovation and public policy
In recent years policy makers have begun to consider the potential for promoting services innovation as part of their economic development strategies. Such consideration has, in part, been driven by the growing contribution that services activities make to national and regional economies. It also reflects the emerging recognition that traditional policy measures such as R&D grants and technology transfer supports have been developed from a manufacturing perspective of the innovation process.The European Commission
European Commission
The European Commission is the executive body of the European Union. The body is responsible for proposing legislation, implementing decisions, upholding the Union's treaties and the general day-to-day running of the Union....
and the OECD has been particularly active in seeking to generate reflection on services innovation and its policy implications. This has resulted in studies such as the OECD’s reports into knowledge intensive services, and the European Commission Expert Group report on services innovation - the report of the group, "Fostering Innovation in Services" as well as various TrendChart studies. The European Commission has also launched a number of Knowledge Intensive Services Platforms designed to act as laboratories for new public policies for services innovation. Few economic development agencies at the member state level, and fewer still at the regional level, have translated this new thinking on services innovation into policy action. Finland is an exception, where knowledge intensive business services
Knowledge intensive business services
Knowledge Intensive Business Services are services and business operations heavily reliant on professional knowledge. They are mainly concerned with providing knowledge-intensive support for the business processes of other organizations. As a result, their employment structures are heavily...
have been a focus of much regional work (esp. the Uussima region).
Finland has been active in thinking about the policy implications of services innovation. This has seen TEKES – the Finnish Funding Agency for Technology and Innovation - launch the SERVE initiative, designed to support ‘Finnish companies and research organisations in the development of innovative service concepts that can be reproduced or replicated and where some technology or systematic method is applied .’ Germany
Germany
Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...
has also undertaken initiatives for services R&D, and Canada
Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...
and Norway
Norway
Norway , officially the Kingdom of Norway, is a Nordic unitary constitutional monarchy whose territory comprises the western portion of the Scandinavian Peninsula, Jan Mayen, and the Arctic archipelago of Svalbard and Bouvet Island. Norway has a total area of and a population of about 4.9 million...
have programs as well.
Ireland has been considering a services-focused innovation policy, with Forfás – its national policy and advisory board for enterprise, trade, science, technology and innovation – having undertaken a review of Ireland’s existing policy and support measures for innovation, and outlined options for a new policy and framework environment in support of service innovation activity.
At the regional level, limited information is available on how Europe’s regions are responding to the challenges presented by service innovation. [CM International] has recently published a European survey on services innovation and regional policy responses. The results of this suggest that very few regions in France, the UK and Ireland have an explicit focus on services and innovation. Many do, however, express a desire to address this issue in the coming future.