Successful Service Innovation
In
In this article in Businessweek, Jeananne Rae analyses what makes leaders in service innovation successful. Her consultancy carried out detailed studies of 12 leading US service companies to see what common patterns emerged. There is a detailed report.
‘Key findings of the report included the Internet emerging as an important distribution channel in almost every case. The services era has ushered in service availability whenever and wherever you like. Although the majority of these companies were not dot-coms per se, investments in cultivating online business were the norm for this group of innovators.
In a larger context, information technology has become the new factory for service businesses in that automation helps to “productize” (i.e., make more repeatable) innovative concepts. IT also helps scale services. We saw relatively small investments in the development of IT engines beget enormous returns because of the potential to add new customers and transactions globally at very low cost.
One other key finding is a pattern in which the customer replaces the direct competitor as the dominant reference point for strategy and innovation. There are three underlying reasons for this shift.
First, competition is coming from new and unexpected sources, so disruption from someplace—and not necessarily a place you’d expect—is a given.
Second, customers are more sophisticated and demanding than ever before. Expectations are regularly informed by outside benchmarks such as how fast you can order tickets online or how easy your iPod is to use, not necessarily accepted industry standards. (For example, as financial-services firms have introduced Web services, they’ve realized their customers demand a level of service set by Amazon (AMZN) and Google (GOOG)—not by their industry peers.)
Finally, the proliferation of systems allows for information-driven business models that can provide a user with much more control, and control is a big deal these days given our hectic lifestyles. For the businesses we studied, the main source of insight in developing control points was referencing the needs of end users, not the competition’s offer. ‘
Paul Sloane