Implications for new service development and innovation

The previous chapters have analyzed the nature of services, service industries, knowledge and knowledge-intensive business services. To understand their relations to new service development and innovation, some key aspects should be pointed out. First, the IHIP-characteristics (see e.g. Andreassen & Lanseng 2010, p. 213; Tronvoll et al.

2011, p. 562) mentioned have their effects on new service development (Cooper &

Edgett 1999, p. 19):

Technology developers Software developers

Software consulting Information management consulting (technology-driven)

Neo-PSFs

Information management consulting (management

driven)

Management consulting Strategic planning agencies

• Intangibility:

o makes idea imitation relatively easy o increases risk of new service proliferation

o increases risk of information overload with operations staff and clients o hinders development as no physical prototypes can be used

o creates a risk of conducting development processes too quickly o makes market research difficult

o makes marketing difficult and promotes image-related factors

o makes measuring costs, revenues – and thus success or failure extremely difficult

• Heterogeneity:

o lack of standardized service delivery systems o quality control becomes an issue

o the right level of standardization is required o need for control and management systems

• Inseparability:

o need for increased organizational involvement o increased importance of service delivery systems o difficulties allocating costs

o requires high levels of customer input and involvement

• Perishability:

o difficulties managing supply and demand

o need for interaction across departments and functions o need to mix people and technology

(Cooper & Edgett 1999, p. 19).

Second, as service research is highly derived from the marketing perspective (see e.g.

Brax 2007, pp. 14-15), marketing should be treated as an important perspective in new service development as well. As the service-centered view is now a cornerstone in marketing (Vargo & Lusch 2004a, p. 4), it can be argued that new service development should be linked to this paradigm. One way of doing this is to analyze the foundational premises of the service-dominant logic, since it provides an organizing framework for understanding the economic phenomena in the service-centered view of marketing (Maglio & Spohrer 2008, p. 19; Lusch & Vargo 2011, p. 1303). Therefore, invoking the foundational premises of the service-dominant logic to new service development is therefore essential for conducting insightful research. Table 4 links these premises to service innovation.

Table 4: The foundational premises and links to service innovation (adapted from Ordanini & category of products in innovation management (Ordanini & Parasuraman 2012)

Goods, among other facilitating and

‘masking’ elements are only parts of service innovation, not vice-versa (Sole et al. 2009).

Goods and other distribution mechanisms are necessary for creating the pre-requisites for the service, and thus service innovation

Knowledge interfaces between operand and operant resources is vital for service development as a competitiveness driver, our current understanding of it is significantly inadequate (Menor et al. 2002).

FP6 The customer is increase the volume of innovation (Ordanini

& Parasuraman 2012)

Customer orientation is a form of innovative behavior, but service innovation usually sees

Business partner collaboration, open innovation and service network collaboration will increase innovation capability by increasing the radicalness of service innovation (Ordanini & Parasuraman 2012).

FP10 Value is always determined by the beneficiary

Value is contextual, beneficiary-viewed and only determined by the consumer or beneficiary within a specific context and situation

New service development should be concerned with value facilitation (Njissen et al. 2006; Edvardsson 1997). New services should enable independent, customer-based value creation (Grönroos 2011).

Third, knowledge-intensity and the notion of business services give additional characteristics to new service development. Knowledge itself is an ambiguous concept and relatively difficult to develop to a service or product (Alvesson 2004, p. 98).

Knowledge-intensity in the workforce, on the other hand, is grounded on employees that have a high degree of autonomy and that are usually experts and professionals of all types (Alvesson 2004, p. 21; Miles et al. 1995, p. 28), making new service development procedures and systematic processes difficult to implement as the employees are not specifically fond of hierarchy and formalization.

Furthermore, knowledge-intensive organizations are suspect to criticism and debate on their output, as the quality of the services provided is difficult to communicate and convince (Clark 1995, p. 53). This invokes the need for managing client expectations in order to control the perceived quality of the final output (O’Farrell & Moffat 1995, p.

120; Løwendahl 1997, pp. 33-34). Quality control is therefore the key issue for new service developers in a knowledge-intensive organization, since the workforce does not adapt to rigid processes that well and the quality of the produced service, i.e. knowledge itself, is difficult to express (von Nordenflycht 2010, p. 160). Therefore, one essential factor in new service development in a knowledge-intensive context is the management of interaction which leads to perceived quality, as traditional marketing efforts seldom produce good results (Alvesson 2004, pp. 108-109).

Another characteristic affecting new service development in knowledge-intensive business services is the customization level and the amount of tailored services offered to customers (e.g. Silvestro et al. 1999, p. 401; Lovelock 1992, p. 39), which leads to the custom-tailored –paradox: efficiency and workforce productivity requires the right amount of standardization within the firm, but customer needs are only fulfilled with tailored services. Hence knowledge-intensive business services may have multifaceted problems (problems with resourcing, low profits, low efficiency etc.) when creating a

‘new’, tailored service for each customer but may also experience a negative market effect when creating a new standardized service for all of the customers (Muller &

Doloreux 2009, p. 69). In short, new service development should treat these characteristics in a way that creates competitive advantage at a fair price. This will be analyzed next.