In terms of products, it refers to new or improvised service products in the form of commodities, or public services in hospitals, schools, hotels etc. This is in contrast to technological innovation which relies heavily on the technical R&D taking place within an organization. Of course, a service innovation could incorporate technological innovations but it is more broad-based. So a service product innovation could be a recreation or a re-engineering of the service design itself.

Innovation in service processes refers to new ways in designing and producing services including innovation in service delivery systems. The service itself wouldn’t be changed in this case, but the way it is delivered would. This could also involve technological innovation; it could be an expertise based re-structuring of the entire organization (that is service based) to relate to changing work environments.

Service innovation, in general, could also mean both service product and service process innovation together. Innovation taking place in any service firm, or a service industry and the management of innovation processes within these service based companies can also be called as service innovation.

According to TEKES, a research agency from Finland, a service innovation always includes replicable elements that can be identified and systematically reproduced from other environments. This could involve the service outcome or the service process itself or a part of them.  It improves the developer’s competitive edge against rivals by benefitting both, the service producer as well as customers. Many a times, the innovation could be in non-technical areas rather than relating to any new technological development.

Van Ark et al. (2003) have defined service innovation 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 includes both, technological and non-technological innovations (which arise from investment in intangible inputs).

The term business model innovation (BMI) is closely related to service innovation. BMI relates to new methods of doing business that would increase returns of companies, mitigate risks and also enhance customer value. Service innovation, in this sense, is not always easily conceivable and would depend on the context of application, localization being a major criterion even in a globalised world.

Firms would need to embrace service innovation in order to stay afloat in an increasingly more competitive business world. They would need to build a culture in themselves which is aimed at customer orientation and both top-down as well as bottom-up innovation.

Most of the times, innovations would be continual or step-by-step, rather than being radical. But these incremental innovations are required for better branding of products and refreshing people’s memories about the product.

Some typical characteristics of service innovation are as follows:-

1. By its very nature, a service could be bettered by incorporating ideas from several people. Hence co-creation is a core characteristic of service innovation.  Manufacturing industries are product based and innovation on products and processes would be their forte. Innovation in services through co-creation would be the stronghold of companies rendering services.

2. Service innovation would require continuous training, mentoring and guiding employees since it is knowledge based. A strong knowledge management is thus a prime necessity if we were to see employees being groomed to think out-of-the-box on a particular service being rendered.

3. A typical services companies would need to manage a growing eco-system of partners. It would need to assess the business implications from different points of view, and tailor distinct business models which would better suite the particular partnership. Here is where, with changing times, the company would need to re-innovate its business models with different clients.

4. Collaboration would be very important not just with external knowledge bodies (such as universities, or companies), but also within the company. The learning from different strategic business units would be an advantage applying mainly to service based organizations.

The IIRA has a strategic partnership with Innovaro Inc. Innovaro’s service innovation model is an application of their general innovation model. According to this model, any firm’s service innovation can be broadly classified as follows:  incremental, differentiated and game-changing (radical). Based on four different areas and several elements under these areas, the exact level of service innovation of a firm could be mapped according to the above three classifications. We highlight below these four areas and the various elements under them:-

Internal

There are three elements here viz. innovation processes, enabling structures and management processes. These elements illustrate the organisation’s structure specifically for innovation. Innovation processes look at how the firm identifies, selects and takes ideas from conception, followed by proof-of-concept, right up to the market. The “enabling structures” talks about how the company develops a supportive organizational climate for innovation culture which includes team dynamics, reward and recognition, internal communications, sources of power etc. Finally, there are the innovation management processes which include how innovation would be planned and budgeted.

Offer

This includes the core offer which is the main service being provided by the firm. Offer support and enhancement on the other hand deal s with how, beyond the core offer, customers are serviced and kept satisfied, supported and engaged.

Customer

This element deals with how the company engages with the customer. Routes to market deal with how the company makes the market aware of its offerings. Delivery channels site various options at the firm’s disposal to take the product to market. The internet is one key delivery channel today. And customer experience is about how the company manages the impression of the customer, for example, their website experience, feelings about their after sales and the support they receive etc.

Value Enhancement

This section deals with two key elements, which are value proposition and ecosystem management. The value proposition deals with the revenue flow of the company – where money is made and how this would link with the business model of the firm. The ecosystem management is about how the organization maintains relationships within and beyond its direct value chain – its value network in other words.

The above four areas are used by Innovaro in order to provide guidance to firms about their service innovation practices and how they could improve upon existing practices.

Service innovation is one which is continuously evolving.  Effective change and knowledge management would be crucial if the organization is to sustain itself in a dynamic business world. Adaptive business models would be necessary within the same service organization in order for it to effectively manage the varying nature of clients within their portfolio. Last, but not least, collaboration should be encouraged with many industries since that is the only way the company could learn and tweak it’s business models in order to enhance customer satisfaction.

1) “Fustest with the Mostest” -  First to market, first to market advantage; This deals with essentially creating something and creating the market for it;  Most of them end up being the product categories themselves. Ex : Digital watch,Xerox etc.

2) “Hit Them Where They Aint”  (Creative Entrepreneurship/Entrepreneureal Judo) : This is the strategy where you take an existing technology and better it for customers, ex IPOD;

3) Ecological Niche  (Toll-Gate, Speciality Skill, Speciality Market ): Practical Monopoly over small areas. Most come as opportunities due to large eco-systems and missing links; ex : Alcon a chemical company that develops one enzyme used in cataract surgery.

4) Changing Value and Characteristics : While the above strategies are about introducing innovation to market, this particular one is about innovation in the Entrepreneurial strategies. This deals with existing products but innovation in selling; Ex : EMI concept for agricultural equipment for a really expensive tool.

Again as in the previous post the question is what are the new ones which are not covered here !

http://www.sramanamitra.com/2009/11/12/leading-corporate-innovation-hp-labs-director-prith-banerjee-part-2/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+sramanamitra+%28Sramana+Mitra+on+Strategy%29

The Unexpected  – Emperical data

The incongruity  – Market reality and Market needs.

Innovation based on process need – Efficiency, time to market

Changes in industry structure and market structure – Monopoly, dupoly, niche;

Demographics – Age, distribution

Changes in perception – life style changes etc.

New Knowledge/Research

While most of us identify innovation with the last aspect, many of the path breaking innovations came from the other sources. Given that Peter Drucker wrote this couple of decades ago, is there any other source that one can think of ?

As the former head of XEROX PARK puts it (paraphrased from some other context), “The open innovation model shows the necessity of both letting ideas flow out of the corporation in order to find better sites for their monetization and also to flow into the corporation as new offerings and new business models. “

There are many ways of practically measuring and implementing open innovation model. An excellent case study of adoptation of this in Telecommunication Industry is prescribed here in paper titled ” Opening Up for Competitive Advantage – How Deutsche Telekom Creates an Open Innovation Ecosystem ” http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1472157 Its an excellent read ! Your comments are welcome.

Do we have the culture of pure research ? Do we focus more on beating (Creative Imitators) rather than fundamental research. Do we take pride in “invented here” aspect at all ? Does our education cultivate the innovation culture ? I beleive these questions need to be looked at deeply as well.

It is so relevant and pertinent to the topic; I will simply let you read through this.

http://economictimes.indiatimes.com/Interviews/Human-capital-building-is-the-responsibility-of-cos/articleshow/5087828.cms

However one particular point which needs to highlighted is Dr Mashelkar’s quote “What we haven’t done in India is not followed the path of science, technology, and innovation. In 1958, we had the science policy resolution, in 1983 we had technology policy statement, and in 2003 we had science and technology policy. What we really require is science, technology and innovation policy. Innovation is mind to market, concept to commercialization.”

Mr Narayana Murthy also concurs and says Indian Enterprises do not have a culture of innovation and urges Indian companies to innovate continuously.  It would be interesting to see how Indian enterprises and government evolve to meet this new avenue.

If we succeed, that would only be half the battle won. While inculcating innovation itself is one big challenge, how do you take it to the market is completely different and equally difficult challenge. Many big enterprises have built up engines to drive the business which is great for existing conditions. They are optimized for scale and efficiency and definitely not geared for start-up like selling.  Obviously in order to have an end to end innovation cycle to be successful, organization needs to build entrepreneurs inside the organizations.  Peter Drucker in his book on this subject has excellent insights (http://preview.tinyurl.com/n72lzo).   

How does one build a tangible process to address these two challenges?  Now that’s a million dollar question !

Innovation has always been used as a synonym with invention(more on this later) and perhaps the most immediate image that comes up is the Archimedes and the Eureka moment!  Whether the story actually happened is immaterial but what is important here is the mental state of Archimedes.  He was able to notice the water spilling out of the bath and relate it to the problem at hand because he was in that state of mind, where he was looking for an answer.  I believe the same applies to most organizations, countries or individuals; one needs to be constantly looking out of ideas and solutions!

Time and Again history has shown us that great companies can go down if they stop innovating be it from business or technology perspective. So innovation is a market need and a survival instinct. It is not a glorified afterthought as some people project it. But how does one know if they are innovative ? Can there be a standardized innovation quotient for companies?  What are the parameters for this innovation quotient? Is it number of patents filed? But then patents themselves are only decorative elements if they are not commercialized. Is there a way to map the revenues back to the innovations that happen at the ground level?   Such a measure could be of immense value to both investors and executive management of the company. Customers obviously benefit either in terms of better, cheaper or faster services/products. So there is not a single reason why organization shouldn’t invest money in such an initiative.

Of course the trick is also to choose the innovation model that is suitable and pertinent to a particular organization keeping in mind the organization culture, constraints and market needs.  But the first step definiely is to know where one stands. Keep watching this space for more info on this.