Service Innovation Categories- Valutrics

An important decision regarding the service product of a provider is to invent new services. Why are successful service providers looking for innovations on a regular basis?

One typology which is derived from an empirical study distinguishes ten types of service innovations according to five differentiating factors:

New-to-the-market versus new-to-the-company innovations. Regarding the perspective of the innovation new-to-the-market innovations are substantive innovations which are not yet offered by any provider. For example, eBay’s invention was a new-to- the-market innovation because eBay was the first provider to offer an online auction service. Consequently, from the perspective of eBay’s competitors, their market entry was involved with new-to-the-company innovations. Introducing new-to-the market innovations, i.e. being first in the market, can help to assure a long-term position in the market. However, new-to-the-company innovations are less risky because the provider can learn from the experience of the inventor.

New service product versus new service processes. Service innovations do not have to concern only the service product, as there are also process innovations possible. For example, the services of amazon.com are process innovations because the genuine service of delivering books to the consumer is an old service in itself. However, giving the customer the chance to order books on the internet and delivering them to their home was an innovation of the ordering and delivery process. Of course, sometimes there is a smooth transition between new service products versus new service processes. Next to the services of amazon.com, the invention of e-universities or eBay are strictly electronic forms of existing services but are often perceived as new service concepts because they were not used by the target groups of the new services before.

Service line innovations versus service line extensions. Service innovations can differ regarding the innovativeness of the service line in focus. For example the offer of insurances by banks in order to realise a holistic finance strategy for their customers, represents a service line innovation because the insurances are a new service category for the bank. In contrast, the offering of a new fund, for example, represents a service line extension. The service line ‘funds’ is extended by the new service.

Technology-push versus market-pull innovations. What is the cause of the innovation? Is the innovation more technology-driven, i.e. a technology-push innovation? Or is it a market-pull innovation, where consumers long for the new service actively? Atypical example of a technology-push innovation are the offers of internet providers. These services supported the dispersion of the internet as a mass communication channel. Other examples are online ordering systems in industrial markets as well as online shipment status checking services offered by package delivery companies. On the other hand, in several industries of the con- sumer durables sector, such as electronics, cars, white goods, a trend recently observed is to offer financing instruments to their customers: a service which has developed due to the increasing financial long-term planning needs of the cus- tomers and their willingness to take out loans.

Service inventions versus service modifications. Finally, many innovations are more service modifications than real service inventions. For example the offer of internet access by airlines during flights  is a typical service modification by means of a value-added service.

 

For systematic service innovations, service companies organize their innovation activities according to an innovation process. This process depicts several steps which help assure the success of service innovations.

The main service innovations success drivers for service innovations are:

• Relation to the core service. New services which have a close relation to the core service, e.g. service modifications or service line extensions, are more likely to be successful. Of course the greatest innovations are new-to-the-market innovations, but for those there is also a high failure rate. In contrast, for new services with relations to the core service, internally there are fewer investments in new facilities and competencies necessary, and, externally the customer knows the competencies of the provider and trusts in the transfer of the provider’s knowledge to the new services.

• Degree of formality. This factor concerns the methods used when planning an innovation. Is there a systematic approach regarding the development of new services? Unsurprisingly, a high degree of formalization results in more successful innovations. However, on the other end of the scale, no formalization at all also leads to successful new services. This can be interpreted in two ways: first, the reason for the success might be the creativity of the service inventors which is not affected by rules and processes. Secondly, with no formalization there are probably no assessments of the success of the new services. Consequently, the subjective view of the respondents might be a wrong self-assessment.