Realizing innovation in services

Abstract

This article describes a number of innovation forms that are of special relevance to firms in the service industry. Not only technological innovations but also organizational innovations have been distinguished. In the service industry organizational innovations seem to play a significant role. The literature on innovations makes little mention of new organizational arrangements in services. Based on the service management literature a scheme with three forms of organizational innovation and one form of technological innovation is developed. This scheme is illustrated and elaborated in ten case studies of firms in various service industries. The case studies shed some light on innovations in multi-unit forms, combinations of services and co-operation with customers. On a basis of the service management literature and the case studies some of the main processes supporting the (organizational) innovations are analysed.

Introduction

Innovations have contributed to the growth in the number of service firms and to the scale of their operations, which in turn has increased their economic impact. The same applies to service activities in manufacturing firms. Innovations provide opportunities to increase the efficiency and quality of the service delivery process, both in the front and the back office, whilst also facilitating the introduction of new service concepts. To a large extent innovation theory has been developed by extending the research approach to innovation in the manufacturing industry to embrace innovations in services as well (Gallouj & Weinstein, 1997). The emphasis has been on technological innovations, and only a few studies have focussed on organizational innovations. In service firms, however, organizational innovations are important, as there is a strong emphasis on the development and implementation of organizational formulas (Gadrey, Gallouj, & Weinstein, 1995; Normann, 1984, 1991).

In the literature a number of different organizational innovations in services have been discussed, but it is difficult to compare the various forms. A broad concept such as modulization (Sundbo, 1994) is difficult to compare with process innovations as discussed in Gadrey et al. (1995). And the concept of modulization also goes beyond the concept of bundling, introduced by Normann (1984, 1991). The ideas behind the recombinative model (Gadrey et al., 1995; Gallouj & Weinstein, 1997) are different again, as they include some ideas about creating innovations, while the modulization concept has a strong emphasis on standardization as a key process in the realization of the innovation. The ambiguity surrounding the different forms of innovation in services is reinforced by the limited research that has been done on the processes for implementing innovations. Thus a systematic understanding of the key processes in realizing particular new organizational forms in services is lacking. The aim of this study is, first, to distinguish a number of particular organizational innovations in services and, secondly, to improve our understanding of the processes supporting each one of the organizational innovations singled out.

A better understanding of the processes and mechanisms underlying particular service innovations will help, for example, to explain the difficulty in imitating successful service innovators (Storey & Easingwood, 1998). Some of these innovative firms, like McDonalds and IKEA, appear easy to imitate, but somehow this is not the case. From other studies it has also been concluded that certain innovations appear very difficult to imitate (Barney (1991), Barney (1990); De Man, 1996). This difficulty is partly the result of a lack of understanding of the supporting processes of innovation. Some claim that the success of McDonalds is the result of a supreme mastery of the relevant logistics, while others refer to the strict adherence to the franchise formula (Love, 1995). In any case there is considerable ‘causal ambiguity’ (Reed & DeFilippi, 1990). More needs to be known about the supporting processes for developing and sustaining specific innovations in services.

In the next section we discuss the literature on innovations in services. In the following section on methodology we describe the explorative nature of our research and suggest that it can be seen as one of the first steps in theory building. In Section 4 on forms of innovations we present a scheme consisting of four such forms. The material drawn from 10 case studies is used to identify the main characteristics of innovations thus distinguished. Finally we focus on three organizational innovations and describe a number of key processes that underlie the implementation of these forms of innovation.