Book Review: Service Innovation: Organizational Responses to Technological Opportunities & Market Im

    By: PDMA Headquarters on Oct 01, 2013

    Book Review: Service Innovation: Organizational Responses to Technological Opportunities & Market Imperatives  

    By: Joe Tidd and Frank M. Hull (eds.). London, UK: Imperial College Press , 2003. 437+ix pages
    Review by: John C. Crawford

    Service InnovationThis is the ninth volume in this publisher's “Series on Technology Management.” Previous volumes have dealt with a wide range of topics such as Japanese cost management, research and development (R&D) strategy, and digital innovation. Given that services now constitute over 80 percent of the U.S. gross national product and approach this figure in most of the developed countries, this text is a worthwhile read both for businesspeople involved in the creation of services and for researchers interested in new techniques in this increasingly important area of business.

    Service Innovation is a series of readings—each one a chapter—bringing together, the editors say, “the latest academic research and management practice on innovation in services” (p. ix). The result is an interesting mix of theoretical frameworks and practical approaches to developing innovation strategies in services. Although the majority of the 14 chapters are primarily academic in their orientation, there is still worthwhile content for the practitioner.

    The book comprises three parts, roughly equal in length. Part I includes five chapters dealing with conceptual and analytical frameworks. Part II's seven chapters describe the experiences of firms introducing innovations into various service segments such as healthcare, banking, and project management. It is in this part that practitioners will find the greatest value. Part III provides two long chapters on the application of the best innovation techniques to services. All of the contributors to the book are European based and European in outlook, with one exception (Frank Hull of New York's Fordham University). Whether their experiences with European firms can be generalized to other regions is open to conjecture. Although, given the fragmented nature of the service industry where a firm's size is not such a critical factor as it is in manufacturing, the European experience with innovations well might be applicable in some service sectors such as banking and healthcare where customers' needs are likely similar across continents.

    The underlying theme of this text is that manufacturing innovation has been the basis of much of the innovation that has taken place in services to date. Good management practices in manufacturing also may work well in services, but there is still a need to develop a set of “best management practices” unique to services. If one adopts the view that manufacturing of products is radically different from the creation of services, then a unique set of rules needs to be developed for innovation in services. This requires the identification of good management practices already extant in service-providing organizations, the typology of these practices, and the creation of models to test and further refine these practices.

    A secondary theme relates to the disappointing results of information technology as applied in the services arena. There has been, it is claimed, an overemphasis on information technology (IT) alone as a solution to services problems. The editors are of the view that innovation can be achieved best by a combination of organization and technology tailored to specific market environments. Thus, designing an efficient organizational structure [“good project management” (p. 52)] before applying IT is a necessary condition for success.

    Part I, with the exception of chapter 1 (which reports the results of two similar research studies in the United Kingdom and in the United States) is devoted to organizational and conceptual issues in services innovation. Chapter 2 makes the point that the process of new service development is only a slightly different form than that of new product development in the financial field. While admitting that knowledge of the process itself is very limited, the authors go on to prescribe two organizational innovations they recommend for the financial industry. One, “replication,” is an organizational structure that balances control and learning, emphasizes mutual learning between chain-type organizations and independent entrepreneurs, and is based upon a team approach to setting up new sites and to diffusing the learning experience. The second, “new customer roles,” advocates customer involvement in the innovation process and a genuine commitment by demanding customers toward fostering strong organizational arrangements. Regrettably, as in several later chapters, although the firms involved are named (Rank-Xerox, for one), no mention is made of how they contributed.

    The remaining chapters in this part offer further prescriptions for success in innovation, including an interesting two-track approach by Sandra Vanderwerwe. One track involves enhancement of the core service by service or product improvements (e.g., cobranding by British Airways and American Express). This is usually a short-term fix, which is adopted easily by competitors if successful. The other track (recommended) requires the firm to find “new ways of doing things for and with customers” (p. 58). An example is a Danish health insurer that finds innovative ways to help people to manage their wellness as opposed to just being reimbursed for medical claims.

    Part II of the book has the most to offer the practitioner. Although several of the articles report the results of academic studies, they are written well, and the implications for service providers are stated clearly. Those interested in the methodology of services research can learn a great deal from these studies. Those more interested in the findings can read the introductions and the conclusions without great loss of understanding. The topic areas covered are healthcare, financial services, banking, and consulting. Two chapters in particular are worth reading. Chapter 6 compares the organization of new service development in the United Kingdom and the United States (where there is greater emphasis on speed). We appear to be two nations separated not only by a common language but also by sense of urgency. Chapter 7 deals with innovation in standardized, customized, and bespoke services in Germany, all of which are applicable to other countries.

    The two, substantial, final chapters that make up Part III offer both a framework for product development in services and case studies of successful innovators in services. While the conclusions in chapter 3 are based on small samples, which are difficult to generalize from, the authors do make some worthwhile observations. One is that tools and technology play a weaker role in services innovation than in product innovation. Another more obvious one is that continuous innovation is more likely in services due to their intangible nature.

    Chapter 14 describes the outcomes of case studies involving large financial institutions in the United States in their attempts to introduce new “products,” as they now appear to be redefining their offerings rather than as services. The outcomes seem to support the proposition that product offerings in services are very much like those in manufactured products. There is a considerable overlap particularly where the services involve repeatable actions, recurrent transactions, and the like. So there is no need to reinvent the wheel of innovation in services completely. Basic methods developed in product innovation appear to work well in services, with appropriate modifications.

    To summarize, while this text is most valuable to the academician, it also should be of interest to those in service industries responsible for new product development. Several of the readings highlight the difficulty of doing research in services. It is a very fragmented industry, covers an infinite variety of businesses, and comprises mainly small firms. Data collected by researchers thus often is not generalizable due to the small sample sizes. Nevertheless, this book makes a worthwhile contribution to the academic literature as well as catering to the needs of business professionals.

    Released: October 1, 2013, 11:34 am | Updated: November 20, 2013, 12:20 pm
    Keywords: PDMA Blog

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