Updated: Jan 6, 2022
Innovation is such a hot buzzword these days and for good reason. In industry the idea of innovation prompts thoughts of the impact of locomotion on textiles and agriculture, as well as the exploits of Thomas Edison to those of us who see the world through a more scientific lens. However, innovation is more than just conceptualizing or the process of ideation, it has
a more practical application and a result, innovation can be very broad and deep.
For this post, the focus will be on two main themes within the realm of innovation; service innovation and innovation in services. The hope is to add some clarity to the topics and offer business leaders some practical approaches to enhancing their business practices. After all innovation has been found to the best way to improve business performance and enhance the likelihood of resilience in the face of adverse and competitive forces. While in a broad sense, innovation is a continuum of two extremes;
Incremental- which is new or enhanced ways of doing things that are currently done or the exploitation of current customers to find new opportunities, and
Radical- which is doing things that have never been done such that it changes the market or they way that organizations operate within the industry or exploration of opportunities to create new customers, markets and ultimately revenue streams.
With that being said, service innovation falls more on the radical end of the spectrum but overlaps with incremental tendencies as a function of innovation in general. Service innovation considers the attributes of services that shape it as a phenomenon. For example, services involve a high degree of interaction between the user and service provider (Gallouj, Windrum, 2009), which would lead one to believe that for an organization to develop a service innovation one would work closely with their customer to do so. In addition, services have some qualities that make it difficult to innovate without completely framing the process with these qualities. Called the IHIP (refer back to SERVICE DESIGN post for more) these attributes fundamentally contribute to how innovators derive customer facing and service delivery methods that are creative, new and game changing. These innovations tend to be more technology based, particularly given the age we currently live where technology driven processes are more prevalent and the coalescing of man and machine is becoming more and more a reality. These innovations can be both product or process oriented but are decidedly more external, having market impact and changing effects due to its novelty and significant shift from what everyone else is doing in the market.
Let's take a look a one such change; the conclusive change in customers’ expectations has driven providers of TV programming to push down the ability for customers to control not only what they watch but when they watch it. Consequently, the competition in this sector is fierce (see Netflix, YouTube, DirectTV, Comcast) to improve customer experience and service delivery, while maximizing brand loyalty through emotional ties. Further for B2B organizations, service innovation is a more intimate occurrence and will be more customized for each client. These are enhancements are less likely to be imitated or easily copied within the market when they are first launched but they market will catch up...they always eventually catch up.
INNOVATION IN SERVICE BUSINESSES
Innovation in service business is leaning more on the incremental side of the continuum and focused on the effectiveness and efficiency of operations as an indirect approach to meeting customer needs. These type of innovations may be derived from less input from customers if at all. Innovation in services tend to be characterized by their non-technical and information-based nature. Morrar (2014) highlighted the economic contribution of problem solving, new solutions, new methods and new organizational structures, which are the “invisible output” of innovation in service businesses. In practice, these types of innovations are more likely found in the back end of the business, functional areas like; marketing, financial planning & analysis, and project management. These type of organizational innovations can be procedural in nature, with the objective of the innovation being improved productivity, enhanced effectiveness and augmented efficiency.
An interesting note about innovation in service businesses, although it may be new to the organization it may not be new to the market. That doesn't mean its not an innovation... being on a continuum also means that organizations intersect with innovation at different points in time along the spectrum of innovation.
Digital transformation is at the top of most executives minds these days as they attempt to balance the advancements in technology with the need to do more with less. However, the process of digital transformation in consulting firms is a great example of an innovation within a service organization. Such an effort is management intensive, and requires adequate planning as well as feedback loops during execution to ensure the goals are accomplished. The management and execution of such an effort also represents a fertile area for innovation.
Driving any type of innovation through an organization is not an easy task and leaders need to understand what they're getting into. While the size of the organization plays a role there are a few fundamentals that will assist in the framing the innovation for every leader.
#1 - Innovation involves risk
This is a point that is missed on many leaders and not realized until its too late. Leaders must assess their comfort level when planning to undertake an innovation. Switching to a new accounting system may on the surface seem like a no-brainer but taking the time to understand the not-so-apparent risks in the effort will prevent surprises later.
#2 - There is no failure just learning
Once a leader is comfortable with the risks involved with the innovation, its important to make the shift in the mindset and perspective toward innovation in general. Particularly, in exploratory innovation, which is totally new, one has to take on a growth mindset that allows for everyone to understand that when the results don't align with expectations it doesn't mean its a negative... it really means that there are more questions to ask and more ways to look at the situation.
#3 - Be curious
Innovation is typically derived from a culture of inquiry. Leaders need to have the courage to question the norms of their industry and expect their people do the same within their organization. The potential for improvement is only limited to the depth of the questions asked.
Click here for a great article from Mckinsey on service innovation.
STRATASCENSION was founded on the notion that business is relational and growth is achieved through deepening of all the micro connections between people, process, tools, & performance. We want to help small businesses enhance these connections and leverage them for transformation.
Gallouj, F., & Windrum, P. (2009). Services and services innovation. Journal of Evolutionary Economics, 19, 141-148. doi:10.1007/s00191-008-0123-7
Morrar, R. (2014). Innovation in services: A literature review. Technology Innovation Management Review, 4(4). doi:10.22215/timreview/780