Innovation dimensions and development stages

In product development, separating product and process innovations is a commonly applied dichotomy, which is sometimes also applied to service development (see, Droege, et al., 2009; Snyder, et al., 2016). In the service context, however, the delineation of process and product components is not straightforward, and alternative frameworks have been proposed that take the characteristics of services better into account (see, Droege, et al., 2009; Gallouj and Savona, 2009; Snyder, et al., 2016). For example, prior research has demonstrated that the development or invention of something new can be related to changes in different service innovation dimensions (Droege, et al., 2009; Jong and Vermeulen, 2003).

Change in the service concept (i.e., in the characteristics of the service itself) is the most widely recognized dimension (Jong and Vermeulen, 2003). Service concept is the description of what is to be delivered to the customer and how it is to be achieved (Edvardsson and Olsson, 1996). It is essentially a communication construct that describes the key characteristics of a service, including the value for the customers, the overall shape of the service, customer experience, and the outcomes for the customer and organization (Clark, et al., 2000). However, development of a service concept usually refers to individual services and not to the firm portfolio as a whole.

Development of novel services can take place through other dimensions as well, and these may be more relevant to the portfolio-level. For example, den Hertog (2000) has suggested a four-dimensional model that includes service concept, client interface, service delivery system, and technology dimensions. Here, the client interface refers to the part of service delivery that takes place in the interface between the service providers and its customers, and it emphasizes both customer specific aspects as well as the co-production of the service (den Hertog, 2000). Changes in the service delivery system relate to internal work processes and arrangements and include the skills and capabilities of the service employees (Jong and Vermeulen, 2003). Technology is also addressed as a distinct dimension. Although technology is not a prerequisite for a service innovation, in practice, there are a number of relationships between the two, and technology often plays a facilitating or enabling role in service development (den Hertog, 2000; Jong and Vermeulen, 2003).

Service development can also deal with customer service elements (Johne and Storey, 1998). Unlike products, services cannot usually be delivered without customer service and close interaction with customers (Johne and Storey, 1998;

Storey, et al., 2016). Consequently, the concept of augmented service offering is

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sometimes applied in service marketing to refer to the combination of the core service attributes (i.e., core service product) and related customer service elements that are necessary in delivering the service (Grönroos, 1990; Ozment and Morash, 1994; Storey and Easingwood, 1998). Augmented service offering emphasizes that in developing services, concentrating on the core service attributes alone is not meaningful and the customer service elements must also be considered (Johne and Storey, 1998). Customer service elements and interactions with customers are typically not restricted to particular services but cover a collection of services or the entire firm service portfolio. Therefore, it is meaningful to consider it in portfolio development. Changes in the customer service elements are parallel, particularly to the client interface dimension discussed above (see, den Hertog, 2000).

Services can also be developed through service architecture and modularity (Brax, et al., 2017; Dörbecker and Böhmann, 2013; Iman, 2016; Voss and Hsuan, 2009).

On the one hand, modular services can be developed to improve the efficiency of the service production (Brax, et al., 2017). For example, service companies can standardize processes, break them down into standardized sub-processes, and reuse standardized elements to compose modular services (Carlborg and Kindström, 2014). In this way, service modularity comes close to productization of services (Iman, 2016). On the other hand, modularization can be applied to guarantee a certain level of customization through a variety of standard components and processes, for example, through mass-customization approaches (Bask, et al., 2011;

Dausch and Hsu, 2006; Da Silveira, et al., 2001). Still, unmodularized services may be able to accommodate customer requests more flexibly (Brax, et al., 2017).

Therefore, developing service modularity and standardization requires a consideration of a possible trade-off between efficiency in service production and fulfilling heterogeneous customer needs. As for customer involvement, there are differing views of whether service modularity and standardization should be visible to customers. In other words, the views differ on whether modularity is an integral part of the offering in the customers’ eyes or should it stay as a hidden property of a service system (see, Iman, 2016; Pekkarinen and Ulkuniemi, 2008).

In addition, other typologies to describe different service development dimensions exist. For instance, companies can develop new or improved services, service processes, or service business models (Ostrom, et al., 2010). Another way is to break down the service development into three activities: service concept development, service system development, and service process development (Edvardsson and Olsson, 1996). It is also possible to combine services to form

“service packages” and thus introduce new combinatory services (Djellal and

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Gallouj, 2005). In fact, such combinations may come close to solutions, particularly if they comprise complex combinations of services, products, and knowledge elements and are combined to solve specific customer problems (see, 2.2.3). To conclude, service development can take place in any of the above-mentioned dimensions, and an introduction of new services usually requires a combination of changes in several dimensions (den Hertog, 2000).

Stages of service development and the overall NSD process have been some of the most studied issues in the prior NSD research (Menor, et al., 2002;

Papastathopoulou and Hultink, 2012). However, there is no consistent view of either the nature of the NSD process or the involved stages. The discussion is also centered on individual services instead on service portfolio development stages (cf.

Kindström and Kowalkowski, 2009). Some authors have followed the sequential development processes often applied in product development (see, Booz, et al., 1982). For example, stages such as strategy, idea generation, screening and evaluation, business analysis, development, testing, and commercialization have been proposed for NSD (Voss, 1992).

More service-specific models have also been proposed. For example, Scheuing &

Johnson (1989) and Alam & Perry (2002) have formulated comprehensive process models that cover 10–15 different NSD stages. The sequential nature of NSD processes has also been questioned in the literature (see, Johnson, et al., 2000; Menor, et al., 2002), and some authors have suggested cyclical process models (e.g., Johnson, et al., 2000; Kindström and Kowalkowski, 2009). Moreover, there is a disagreement whether service development should follow formal or informal processes and to what extent (see, de Brentani, 1995; Martin and Horne, 1993; Menor, et al., 2002).

Although there is no consensus of the NSD process and the respective stages, it is generally acknowledged that development of services is often a non-linear and highly iterative process (Menor, et al., 2002). Most of the process models in the field of NSD cover three generic activities or stages, including idea generation (i.e., early stages), planning/development (i.e., mid stages), and execution (i.e., late stages), which are then sometimes broken down into more detailed stages (cf. Alam, 2006;

Johnson, et al., 2000; Kindström and Kowalkowski, 2009; Menor, et al., 2002). These kinds of generic stages have also been proposed for industrial service providers in extending their product offerings with services (Kindström and Kowalkowski, 2009).

This type of broad classification of development stages is followed in many customer involvement studies (e.g., Alam and Perry, 2002; Chang and Taylor, 2016; Gruner and Homburg, 2000; Witell, et al., 2014), where empirical evidence generally suggests that development stages have an effect on customer involvement (see, 2.4.5).

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Moreover, in the industrial services context, the importance of the late stages, sales and delivery of novel services, has been especially highlighted (Kindström and Kowalkowski, 2009).