The Service Innovator—Tying It All Together
Simplicity is the innovation of our timeæinnovations that simplify human life and creates a better and happier world.
—The authors of this book
All products are services. All innovation is service innovation.
—The authors of this book
In this book, we have drawn on recent research on service innovation and marketing, as well as the authors’ experiences in observing, consulting, and leading service innovation, to provide a guide to this vital process. Research and experimentation by businesspeople, organizations, and academics are ongoing: We anticipate a need to update this project within a couple of years as more is learned. We believe that the previous six chapters contain useful information for (1) the innovator within a service firm, (2) the change agent in an organization that is undergoing service infusion, and (3) academics or consultants pursuing research in service innovation.
Major themes central to this project are briefly summarized in the following sections.
All Products Are Services
By traditional classifications, the GDP of most developed countries is 70 to 80 percent or more of services. This number would increase if the growing percentage of service sales by manufacturers (“service infusion” in traditional goods firms) is included. So even by traditional measures, “all products are services” is a reasonable generalization in Western economies. It is clearly absurd that most models and theories of new product development are based on producing goods.
In addition, the effort to be user centric and create a customer orientation in service and goods business drives the organization to focus on the “job” of the user—the value-creation process of the customer. From this perspective, the services, goods, knowledge, time, and other inputs are resources toward a service that a user needs: A drill aids in home decorating, a lawn mower aids in landscaping, and a car is a means for transportation. So it is not just the raw numbers: A theoretical approach also leads to “all products are service.”
Goods manufacturers from IBM to Volvo are engaged in service infusion—increasing the sales of services and creating new services. As noted, a customer orientation—getting closer to users—naturally leads to a service logic view of the organization. In addition, firms are attracted to service infusion due to the attraction of obtaining a higher “share of wallet,” as the initial price of a good is often a small percentage of the total cost of using it due to services such as training and education and maintenance. Finally, fear of commoditization and price competition with China and other developing nations drives firms to use services for differentiation.
For a more complete discussion of why all products are services, please review Chapter 1. For details about service infusion and service innovation within traditional goods manufacturing firms, reread Chapter 6.
Service Logic and Value Creation
Service logic and the resulting focus on the user value-creation process leads to an external focus for innovation. “Open Innovation” is not a novel concept to organizations driven by service logic; they seek to have outsiders, especially users and customers, involved in innovation of service.
Users and customers must be involved throughout the service innovation process. Since service innovation must be driven by the value-creation process, it is important to have input at the beginning of the effort. Investors must understand how customers currently use products, both goods and services, as part of their job and value creation and how improved products could make the process better. The only way to acquire this knowledge is to carefully observe and participate with customers and users while they employ the product and services in value creation.
Service logic inevitably leads to a more customer focus for new services. Fundamental changes or even new business models emerge from the service logic. Innovations can originate from ad hoc improvements for demanding customers. A discussion of innovation strategy contrasted streamlining or differentiating and problem solving or “experience.” Once again the user experience is part of the service: If it can be meaningful or enjoyable, the service is enriched. Six categories of service innovation emerge from these strategic choices: process innovation, brand innovation, experience enhancement, social innovation, business model innovation, and behavioral innovation.
(Review a full discussion in Chapter 2.)
Service Innovation Process
Service innovation is different from new product development for goods. Service innovation is highly iterative and less structured than NPD for goods. Service innovation is so iterative that a rigid phase-and-gate approach will not work. The spirit of scientific inquiry and true experimentation is built into a good service innovation process.
Due to the flexibility and iterative nature of service innovation, the development time for service is often shorter than that for product innovation for goods. However, the implementation time for a new service is often longer than that for a good because of the necessary training of both employees and users on the new service. Organizations will experiment with a service innovation process in the same manner in which they experiment with an individual service innovation. A good service process will be externally driven and will involve customer and users early and throughout the process.
The authors present a focus, innovate, and build model of service innovation based on observation of successful service innovators. Design thinking proposes a three-phase process: inspiration, ideation, and implementation. Both of these models include a deep understanding of the customers, thorough knowledge of the value creation by users, and involve users throughout the innovation process.
The service innovation process is discussed in detail in Chapter 4.
Understanding Customer Needs and Empowering User Innovation
A deep understanding of customer needs and the value-creation process can only be obtained through direct observation and participation. Important customer knowledge cannot easily be shared as some of the learned processes are second nature and become contextual, tacit, or sticky knowledge that is not communicated even within an organization.
In order to uncover contextual information, the observer must be part of the context: viewing or participating in the value creation where it occurs. A set of proactive user research methods are better suited for this than the typical market research tools of standard surveys or group brainstorming and focus groups. Proactive research methods include site observation, voice of the customer (in-depth interviews on site), lead user engagement, experimentation, and ethnography.
To use proactive methods effectively and succeed in service innovation, a firm should cultivate a customer orientation. A study cited in Chapter 3 indicates that a significant amount of the variation in service innovation success can be predicted by just two factors—the organization’s degree of customer orientation and use of proactive user research methods. To develop a customer orientation requires the dedication and persistence of senior management. A current research project also indicates that a type of leadership, authentic empowerment such as Servant Leadership, can lead to a customer orientation.
Customer ideas may be the best ones. Real experimental evidence is presented for the superiority of customer ideas. How does one solicit these ideas? Smart organizations search for innovations created by their users. Proactive tools that actively involve customers, including ethnography, lead users, experimentation, and—later in the process—market validation, are techniques to collect user input.
For more details on customer orientation and the variety of proactive user research methods, review Chapter 3. For a fuller explanation of the superiority of customer innovation and facilitating customer innovation go back to Chapter 5.
Go Forward and Innovate!
We believe that the preceding chapters present current ideas and practices of service innovation. We also believe that every employed reader of this book is in a service organization.
Apply these principles and ideas. Tailor processes and practices to your organization and its users’ needs. Be proactive in customer research; involve users in service innovation. Go forward and innovate!