What Is Service Innovation?

‘Services’ encompasses diverse activities – examples include accountancy, retail, financial services, waste management and transport.

Some services can be classed as ‘experiential’ – this would include theme parks, cruising and increasingly, retail.

Key characteristics of services are:-

  • Services are intangible – there is no physical product and they cannot be stored.
  • Managing quality of services is an on-going challenge for service providers.

These factors have implications for innovation in services.

There are two main types of innovation in services:-

  1. New Technology-led Service Innovation

    When new technology becomes available, an organisation may choose to introduce the technology and innovate in their service. This can help to reduce costs, to improve customer service or both. Examples include computerising a front or back office function or introducing self-scanning tills at the retail checkout.

    Often when new technology is introduced there is a need for some type of organisational change programme.

  2. Customer Insight-led Service Innovation

    Through undertaking customer research and an insight process, an organisation may identify opportunities to introduce new service innovations that can satisfy customer needs better.

The insights may also enable the organisation to target new customers with service innovations.

Making Service Innovation Happen

More research has been done into how to innovate successfully in manufacturing industries than has been done into how to innovate successfully in service industries. This raises the question as to whether best practice can be translated from innovating in products to innovating in services?

The answer is some of it can.

Innovation in manufacturing is often tightly controlled through innovation processes. Many large organisations use a ‘Stage Gate’ process – or their own evolution of it, to help them develop new products.

Such processes can be used sometimes for innovation in services. However, a key aspect of a ‘Stage Gate’ process is how it filters out ideas and concepts on a step by step basis. Only one or two ideas will survive to the later stages. This is appropriate when there is only a single capital investment to be made in manufacturing equipment and a fixed allocation of factory space.

However, for innovation in services it can be more helpful to remain open-minded for longer about a range of ideas.

A key difference between innovation in products and innovation in services is that in manufacturing environments, the product specification – what the customer will receive in return for their money – has to be fixed at a point. After this point it cannot be changed until further product development is initiated. This is so that product quality, packaging and other aspects can be managed.

When it comes to innovation in services, it often helps to have more flexible development processes. This is because the service is intangible, and service propositions can be developed or continuously improved over time.  However, customer contracts and quality issues still have to be managed.

In general though, the best way to innovate in services is to create a detailed design for the service, and then optimise it through pilot testing. If the budget allows, the organisation may choose to run pilot trials of several different service propositions. These can then all be evaluated.

Business Benefits Of Service Innovation.

  • Price premiums

If your service innovation meets customers’ needs better than existing services or better than competitors’ services do, then you may be able to charge a price premium.

  • Cost savings
  • Differentiated services can improve customer loyalty.
  • Successful service innovation can enhance the reputation of an organisation and its brands.
  • Successful service innovations can enable improvements in ‘job design’ which may raise staff morale and increase staff retention.

Why Choose Anatellô To Help You Innovate in Services?

Anatellô consultants can help with all stages of the service innovation process.

  • Ahead of service innovation we can help you develop an innovation strategy. which can prioritise your innovation efforts and help you allocate innovation resources effectively. 
  • We have expertise in undertaking research for services and discovering what customers want. In order to be effective, methodologies for researching new services often need to be different from research methodologies for new products. Our research approaches for services means we can help you ensure that when your service launches there is a customer need for it.
  • Service innovation requires different innovation processes than product innovation. Service innovation is often closely aligned with process innovation and business model innovation. Anatellô’s expertise in these areas will ensure that your service innovation is optimised for the needs of all stakeholders.
  • Innovating in experiential services requires a complex range of inputs; understanding market trends – sometimes long term, customer insights, generating large numbers of high quality ideas, designing and managing a detailed ‘touchpoint strategy’. Anatellô consultants can coach you in this innovation process and ensure that you create a distinctive, groundbreaking and appealing experiential service with a strong chance of delivering good financial returns.
  • Help with innovation management, to ensure that you are able to overcome development obstacles that may arise for your great service concepts and that they progress to successful launch.
  • Anatellô can help you with the organisational change necessary to support the innovation in your services. This ensures that your teams deliver the new service to a high standard which ultimately should lead to increased customer satisfaction.