A Model for Service Innovation
Updated: Jul 1, 2021
I have been responsible for encouraging and driving innovation in our firm for many years.
A constant question that I have is for the nature of the firm, that is, technology service and consulting. Are we innovating in areas that make sense and potentially have a return, financial or otherwise?
We continuously compare ourselves to Apple, Microsoft, Uber, Airbnb and others in terms of innovation. There are a few differences between a services firm and the companies mentioned above.
The first is that they tend to be business to consumer-related for services or manufacturers of products, whether physical or virtual. In technology services and consulting, firms tend to focus on business to business and largely bespoke services.
Pim den Hertog developed a model to help service firms to innovate. This model has various dimensions that need to be considered and combined to create an innovative service.
The dimensions that need to be considered when innovating are:
New service concept
New customer interaction
New business partner
New revenue model
New internal delivery system
New technological delivery system
There are capabilities that a firm requires when innovating and combining the above dimensions:
co-producing and orchestrating
scaling and stretching
learning and adapting
Combining a firm's capabilities with the dimensions of innovation will allow a firm to innovate effectively.
New service concept – this is highly reliant on conceptualising a unique offering to a client based on the capabilities that exist in the firm or that can be acquired by the firm.
New customer interaction – this area relies on bundling together or unbundling services that a firm performs. An example could be splitting dashboard visualisation of data from the machine learning models that forecast behaviours or alternatively combining these capabilities if they exist.
New business partner – this is where the firm goes about orchestrating services and delivery across the firm's boundaries by combining the services and capabilities of other companies through co-production. An example is working with a company that provides disaster recovery if the firm you are in implements infrastructure or bringing on a new software vendor partnership to enhance your offerings.
New revenue model is how do you consider scaling and stretching the firm's operations, and are there new revenue models that can be adopted. An example is to move from one-off services to a managed service or subscription-based model.
New internal delivery system – the innovation in this area is more about internal operational efficiencies that rely on learning and adapting to the clients' needs. This includes service experimentation. An example is optimising internal processes and systems to create an impact on a client's experiences.
New technological delivery system – is where a firm identifies the signals of technology changes and user needs. It could include changes in trends, and the firm adopts an appropriate technology to extend, enhance or create new services for their clients. An example is where a firm may identify an AI use that will enhance a client experience.
I have found this model particularly useful when considering practical innovation in our service offering for our clients. I hope you do too.
den Hertog, P., van der Aa, W. and Jong, M.W. de (2010) 'Capabilities for managing service innovation: towards a conceptual framework', Journal of Service Management, 21(4), http://www.iot.ntnu.no/innovation/norsi-pims-courses/Service-Innovation-Pedersen-Kristensson/den%20Hertog,%20van%20der%20Aa%20&%20de%20Jong%20(2010).pdf