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The Routledge Handbook of Service Research Insights and Ideas
Eileen Bridges, Kendra Fowler
Typologies and frameworks in service innovation
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Christian Kowalkowski, Lars Witell
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Typologies and frameworks in service innovation
Christian Kowalkowski and Lars Witell
Introduction
Services are fundamental for competitiveness across firms and markets (Ostrom, Parasuraman, Bowen, Patricio, & Voss, 2015; Vandermerwe & Rada, 1988). Technological advances have had significant effects on the development of service innovations; as Rust (2004, p. 24) puts it, “the service revolution and the information revolution are two sides of the same coin.” Service innovation is increasingly regarded as a key source of differentiation and growth, not only in service firms but also in manufacturing firms (Kowalkowski, Gebauer, & Oliva, 2017). As Theodore Levitt (Levitt, 1972, p. 42) pointed out almost 50 years ago:
Everybody is in service. Often the less there seems, the more there is. The more techno- logically sophisticated the generic product (e.g., cars and computers), the more dependent are its sales on the quality and availability of its accompanying customer services (e.g., display rooms, delivery, repairs and maintenance, application aids, operator training, installation advice, warranty fulfillment). In this sense, General Motors is probably more service- intensive than manufacturing-intensive. Without its services its sales would shrivel.
As the importance of services for businesses and economies has increased, the body of schol- arly work on service innovation has grown. This topic is regarded as a strategic priority for ser- vice research (Ostrom et al., 2015) and the number of publications on the topic has grown considerably, especially in the past two decades (Carlborg, Kindström, & Kowalkowski, 2014; Witell, Snyder, Gustafsson, Fombelle, & Kristensson, 2016). Service innovation research has its roots in the analysis of technological innovation for manufacturing firms (Gallouj & Weinstein, 1997) and it has focused primarily on outputs and processes, as evidenced by the fact that it builds on the traditional distinction between product and process innovation (Abernathy & Townsend, 1975; Utterback & Abernathy, 1975). This view still dominates innovation research and policy making (e.g., Adner & Levinthal, 2001; Freel, 2003; Roper, Du, & Love, 2008), as seen in the OECD Oslo Manual (OECD, 2018, p. 21), which refers to the duality of innovation as a process and as an outcome. First published in 1992, the Oslo Manual has become an inter- national reference guide for policymakers and researchers for collecting and using data on innov- ation. Although mainstream innovation literature has long regarded service industries as having
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low innovation frequency (e.g., Barras, 1986; Baumol, 1967; Pavitt, 1984), this view has recently been challenged, and the expanding field of service innovation research has become more diver- sified in its approaches and theoretical foundations (Carlborg et al., 2014; Helkkula, Kowalk- owski, & Tronvoll, 2018; Toivonen & Tuominen, 2009).
This chapter synthesizes the extant research on service innovation; it discusses different per- spectives and views of service innovation focusing on characteristics, categories, models, and innovation modes. It brings together literatures that are typically treated separately, and identi- fies the shared and specific understandings of what service innovation is and what implications it has for theory and practice. It begins by providing synopses of four recent service innovation literature reviews. Second, it synthesizes prior research according to characteristics, core models, and innovation modes. Following this, the fivefold innovation framework by Miles (2016) is discussed; this framework builds on the influential works of Gallouj and Weinstein (1997) and Coombs and Miles (2000). Next, a typology of four theoretical service innovation archetypes is discussed and compared to prior empirical work. Finally, the chapter discusses why different perspectives, despite criticism, continue to exist in parallel and are likely to con- tinue to do so also in the future—in academic research as well as in practice.
State-of-the-art research on service innovation
A synopsis of four recent literature review articles covering the past 30 years in service innov- ation indicates this research takes place in a developing field, consisting of different perspec- tives, definitions, conceptualizations, and frameworks (Carlborg et al., 2014; Gallouj & Savona, 2009; Snyder, Witell, Gustafsson, Fombelle, & Kristensson, 2016; Witell et al., 2016). Most of these reviews use three critical perspectives from service innovation research (assimila- tion, demarcation, and synthesis) to describe and analyze the field (Coombs & Miles, 2000). Briefly, assimilation suggests that service innovation is based on technological innovations in manufacturing firms, demarcation differentiates innovation in the service sector from that in the manufacturing sector, and synthesis creates an integrative view broad enough to encompass innovation in both service and manufacturing (see also Ordanini & Parasuraman, 2011).
Gallouj and Savona (2009) reviewed the literature concerning innovation in services a decade ago, and framed the debate about what it was at that time as well as how it was conceptualized over the previous 20 years. They put forward the evolving concept of value and emphasized how service output is ill-defined and incorrectly measured. They attempted to reclassify literature based on whether it primarily assimilated to or differentiated from trad- itional conceptualizations of innovation in manufacturing sectors. Building on the assimila- tion, demarcation, and synthesis views of service innovation, they concluded that assimilation remained the dominant perspective in service innovation research. Furthermore, they observed that knowledge about the diffusion of service innovations was, at the time, primarily built on research in information technology (IT) and the reverse product cycle (Barras, 1986), which does not apply to most services.
Carlborg et al (2014) focused on the evolution of service innovation research and pro- vided an analysis of 128 articles published between 1986 and 2010. Their focus was on the progression of service innovation research, including both topicality and perspective. Their analysis revealed that this research could be grouped not only by topic, but also into three phases of evolution that characterized dominant views on service innovation: formation, maturity, and multidimensional.
In the formation phase (1986–2000), scholars developed rationales for service innovation that relied on theories and models different from those applied to traditional goods innovation,
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and many publications adopted a clear demarcation between the two. The service offering itself was the primary focus of these studies. The research stream then moved on to involve customers (e.g., Alam, 2002) and describe ways to organize new service development (NSD) projects in the maturity phase (2001–2005). It also saw more attempts to contribute to the elaboration of an integrative, synthetist approach. In the multidimensional phase (2006–), service innovation research became more diversified and fragmented, emphasizing linkages between innovation and business strategy. Scholars like Karniouchina, Victorino, and Verma (2006) called for more multidisciplinary research, reflecting the evolving view of service innovation as a multidimensional concept along the lines of Coombs and Miles’ (2000) synthe- sizing approach as well as the emphasis of service-dominant logic (S-D logic) on service as the common denominator of the exchange process. Rather than using the plural ‘services,’ which implies units of output, S-D logic uses the singular term ‘service’ to refer to the “application of specialized competences (... knowledge and skills), through deeds, processes, and performances for the benefit of another entity or the entity itself” (Vargo & Lusch, 2008, p. 26).
As the field continues to diversify, Carlborg et al. (2014, p. 385) argued that “the service innovation concept becomes all-encompassing, [and] identifying the exact loci of service innovation research becomes more difficult.” These authors suggested that the dominant research perspective has shifted among the three phases from assimilation toward demarcation and, more recently, to a synthesis view of service innovation.
Witell et al. (2016) reviewed 1,301 service innovation articles in academic journals between 1979 and 2014, covering a wide range of research disciplines, including marketing, management, and operations research. They identified key characteristics of 84 definitions of service innovation, according to different perspectives (assimilation, demarcation, synthesis) and concluded that although “the concept is widely used, few research papers have explicitly defined service innovation” (Witell et al., 2016, p. 2863). The use of perspectives beyond assimilation has introduced new aspects, such as change, customers, and value, into defin- itions of service innovation. For example, the business model concept found its way into definitions of service innovation (Enz, 2012), but the definitions still do not focus on value capture for multiple actors. In addition, the authors suggested that claims of the prevalence of the synthesis perspective are not definitive; research using all perspectives is still published.
Breaking from the focus on alternative research perspectives, the same set of authors pro- vided an extensive review of 1,046 articles and used it as a platform for analyzing how cat- egories can help clarify the concept of service innovation (Snyder et al., 2016). Service innovation outcomes are captured with a range of categories and comprise four main types: (1) degree of change, (2) type of change, (3) newness, and (4) means of provision. First, a service innovation can be based on completely new core characteristics or improvements to existing core characteristics (Gallouj & Weinstein, 1997). Second, referring to the duality of innovation as a process and as an outcome, a service innovation can be based on changes in the core characteristics related to the output or service provision. Third, newness is emphasized through the use of newness as a basis for the categorization of service innov- ations. Traditionally, newness to the market has been a key to defining service innovation, but the business press and policymakers have changed the focus to being new to the firm (Toivonen & Tuominen, 2009). Finally, a service innovation can be provided in a new way through technology or new organizational arrangements (van der Aa & Elfring, 2002).
In summary, literature reviews show that service innovation is often treated as an empirical phenomenon with little theoretical conceptualization to capture its essence. Witell et al. (2016, p. 2863) concurred, arguing that the wide “variety in definitions limits and hinders knowledge development of service innovation.” Carlborg, Kindström, and Kowalkowski (2014, p. 386)
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further emphasized that most of the existing literature focused on development processes, so “add- itional studies ... should broaden the focus from a narrow focus on the innovation process only to gain a better understanding of interactions with the customer as well as other stakeholders in the organization’s service ecosystem.”
Understanding service innovation
This section synthesizes the extant research on service innovation. It outlines different per- spectives and their views of service innovation, focusing on characteristics, models, and modes of service innovation, and discusses how these can be used in describing different per- spectives on service innovation.
Characteristics
Prior studies explain and define the concept ‘service innovation’ in different ways. Some stud- ies use a general definition, whereas others use dimensions or categories to define the concept (Gallouj & Weinstein, 1997). A general definition explains service innovation by describing the innovation’s core characteristics (e.g., Ostrom et al., 2010). For example, the Organisation for Economic Co-operation and Development (OECD) (2018) defines innovation as a new or improved product (good or service) and/or process that differs significantly from what has pre- viously been made available to potential users (i.e., product) or brought into use (i.e., process). Menor and Roth (2007) suggest that service innovation—either an addition to current services or a change in the delivery process—is an offering not previously available to customers that requires changes in the competencies applied by service providers and customers.
A service innovation may involve changes in several dimensions of an existing service (Carlborg et al., 2014). This follows a view in which a product is defined as a set of charac- teristics. Hence, a service is based on the provider’s characteristics, client competencies, tech- nical characteristics, and final users’ service characteristics (Gallouj & Weinstein, 1997; Saviotti & Metcalfe, 1984). This multidimensional view is more prominent in more recent research (e.g., Amara, Landry, & Doloreux, 2009; Helkkula et al., 2018; Rubalcaba, Michel, Sundbo, Brown, & Reynoso, 2012). When dimensions are changed to define service innov- ation, there may be multiple changes to an existing offering. The plethora of dimensions available suggests that service innovation is becoming a broader concept and that firms have increasing potential for innovation.
Core models
The theoretical underpinnings of existing core models for service innovation are quite varied. Three theoretical foundations used in core models of service innovation are “Lancasterian rep- resentation” (the product defined as a set of service characteristics) (Lancaster, 1966), “dynamic capabilities” (a firm’s ability to integrate, build, and reconfigure resources) (Teece, Pisano, & Shuen, 1997), and “S-D logic” (the application of knowledge and skills for the benefit of actors) (Lusch & Vargo, 2006). The framework suggested by Gallouj and Weinstein (1997), which is based on a Lancasterian view, describes service innovation according to characteristics, such as offerings, technology, and competencies of customers and other actors (e.g., policy- makers). A service innovation results from changes in any of these characteristics (Gallouj & Savona, 2009). Using this approach, six modes of service innovation emerge, including: rad- ical, incremental, improvement, formalization, ad hoc, and recombinative innovations. Gallouj
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and Weinstein (1997) argue that recombinative service innovation is a “fundamental mode of creating innovations,” which lies at the heart of innovation in services; that is, it depends on an ability to explore and mobilize an extended set of resources and competencies (knowledge and skills). Different degrees of novelty are captured through three of the different modes (rad- ical, incremental, and improvement service innovations). Ad hoc forms of innovation are con- structions of solutions to customer-specific problems and hence not immediately reproducible; therefore, they rely on institutional formalization innovation to achieve the required degree of standardization of the various characteristics. The framework focuses on what is offered and type of innovations, but lacks a systemic perspective (because it focuses on the supplier– customer dyad).
Den Hertog, van der Aa, and de Jong (2010) based their conceptualization of service innov- ation on a dynamic capabilities approach and suggested a conceptual framework with six dynamic service innovation capabilities: (1) signaling user needs and technological options; (2) conceptualizing; (3) (un)bundling; (4) co-producing and orchestrating; (5) scaling and stretching; and (6) learning and adapting. Successful innovators outperform their competitors in at least some of these innovation capabilities. The authors argue that novelty can range from “new to the firm” to “new to the world,” but do not elaborate on what the differences mean for the conceptualization or practice of service innovation. They do, however, make three remarks related to implementation: (1) because dynamic capabilities come at a cost, an organization has to be selective in nurturing existing and developing new capabilities; (2) because a dynamic cap- ability cannot be created overnight, service innovations are built on and related to historically grown capabilities; and (3) although most elements can be transferred between organizations, adaptation of dynamic capabilities is needed to become a successful service innovator.
Koskela-Huotari, Edvardsson, Jonas, Sörhammar, and Witell (2016) drew on S-D logic to conceptualize service innovation as a process that unfolds through changes in the institutional arrangements governing actors’ resource integration practices in service ecosystems. Four case studies were used to illustrate the interdependent patterns of breaking, making, and maintain- ing the institutionalized rules of resource integration. Results indicated that institutional work allows actors to co-create value in novel and useful ways by: a) including new actors, b) redefining the roles of involved actors, and c) reframing resources within service ecosys- tems. Although effort is required to break and make the institutional rules in order for innovation to occur, at the same time institutional maintenance is needed for these changes to become an integral part of institutional structures.
Perspectives on service innovation
Two influential publications use different terminologies to suggest that there are three broad perspectives on service innovation (Coombs & Miles, 2000; Gallouj & Weinstein, 1997). Gallouj and Weinstein (1997) distinguished between a technologist perspective, which considers the diffusion of technological innovations derived from the manufacturing sector (e.g., Barras, 1986), and a service-oriented perspective, which focuses on non-technological forms of innov- ation such as consultancy services. Coombs and Miles (2000) distinguished between an assimila- tionist perspective and a demarcationist perspective. Assimilation assumes that frameworks and models used when discussing manufactured product innovation are equally applicable to the service context—whether technological or non-technological—and this perspective is often forwarded by economists and statisticians (Miles, 2016).
The prevalence of assimilation in many organizations may be explained by the view of services as ‘innovation laggards.’ This approach can be traced back to Pavitt’s (1984) sectorial
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taxonomy for innovation, in which the service sector is largely a passive adopter of technol- ogy and recipient of innovations from elsewhere. Essentially, it means that service innovation is equated or reduced to the adoption and use of technology. As Gallouj and Savona (2009) point out, such perspective strives to assimilate services within established frameworks used for manufacturing sectors and physical goods. Demarcation, on the other hand, stresses the unique characteristics of services (Rathmell, 1966; Shostack, 1977). Consequently, this approach proposes specific models and frameworks that comprehend the specificities of ser- vice offerings and processes (e.g., Edvardsson & Olsson, 1996), and this perspective is common in marketing and management research (Carlborg et al., 2014; Miles, 2016).
As a response to the multidimensional nature of service innovation, Gallouj and Wein- stein (1997) and Coombs and Miles (2000) proposed a third distinct perspective that tran- scends the other two, which they refer to as integrative or synthetist. Specifically,
it encompasses both goods and services. Secondly, it applies both to technological innovation itself and to the non-technological forms of innovation. It can be seen as a way of clarifying and making more operational functional approaches that have proved to be too general.
(Gallouj & Weinstein, 1997, p. 539)
Although service innovation literature traditionally falls into either the assimilation or demar- cation perspective (Carlborg et al., 2014), contemporary research increasingly emphasizes adopting synthesis to understand and study service innovation (e.g., Drejer, 2004; Helkkula et al., 2018; Rubalcaba et al., 2012).
A fivefold framework for service innovation
Miles (2016) recently argued that the two traditional perspectives referred to by Gallouj and Weinstein (1997) and by Coombs and Miles (2000) can be better described in terms of two distinct dimensions. First, service innovation can focus on technological or non- technological elements (techno- versus servo- approaches). Second, emphasis can be placed on either similarities or differences between services and goods or on sectors (assimilation versus demarcation). In combination, the two dimensions provide an innovation framework with four categories (see Figure 6.1).
A techno-assimilation approach would stress industrialization of services, similar to the industrialization of manufacturing processes, based on prototypical manufacturing characteris- tics (Bowen, Siehl, & Schneider, 1989). This echoes Levitt’s (1972) production-line approach to service. Techno-demarcation emphasizes technological innovation, such as Barras’ (1986) attempt to characterize service innovation. Next, the servo-demarcation approach is common in studies of NSD that often highlight salient characteristics of services, as opposed to NSD that distinguishes it from product development models applied to goods (e.g., de Brentani, 2001; Kindström & Kowalkowski, 2009). Finally, servo-assimilation has relevance to research and practice that investigate the service features of all economic activities (Miles, 2016), such as new social practices and processes through market innovation (Vargo, Wieland, & Akaka, 2015).
Ultimately, a synthesis approach transcends assimilationist and demarcationist perspectives (Coombs & Miles, 2000; Gallouj & Weinstein, 1997) by integrating insights from service and manufacturing industries, with studies employing techno- and servo-approaches (Miles, 2016). The case for synthesis finds its rationale in the worldwide growth of the service sector and the
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-
Figure 6.1 Service innovation dimensions. Note: Based on Miles (2016, p. 15).
servitization of manufacturing firms (Vandermerwe & Rada, 1988). Accelerating technological development has blurred the lines between service and manufacturing sectors (Carlborg et al., 2014). Hence, the increasing role of technology in services (Breidbach et al., 2018), the “dematerialization of resources” (Normann, 2001), and the growth of “anything-as-a-service” business models (Kowalkowski & Ulaga, 2017) are likely to lead to further intertwinement between the manufacturing and service sectors. Today, service activities such as engineering, R&D, design services, and consulting are part of various integrated goods-service offerings (i.e., solutions) that enable firms to integrate more closely with customers and other stake- holders in ecosystems (Valtakoski, 2017). Consequently, services are part of innovation pro- cesses across the whole economy; therefore, “a simple distinction between manufacturing and services is unsustainable—a more integrated perspective is required” (Miles, 2016, p. 28).
Synthesis is the final approach to service innovation in the fivefold framework of Miles (2016). Theoretically and conceptually, it resonates with the S-D logic of marketing, which provides an overarching view of how value is co-created (Lusch & Vargo, 2006). A synthetist approach could facilitate the study of innovation in general and enable a better understanding of the relationship between the development of new technologies and new markets (Vargo et al., 2015).
Table 6.1 summarizes the five perspectives on service innovation, including typical defin- itions, key characteristics, and key models. Next, the five perspectives are discussed in greater detail, before moving on to examine theoretical archetypes of service innovation.
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Table 6.1 Perspectives on service innovation: definitions and characteristics
Perspective
Description
Typical
definition
Key charac-
teristics
Exemplar
models
Techno-assimilation
Knowledge on product innovation holds for services, and innov-
ation is based on technological change
“Technology-based
inventions, driven by
the emergence of new
markets or new service
opportunities” (Ko &
Lu, 2010 p. 164)
Significant, product
process, risk, capability
Sectoral technological
taxonomy (Miozzo &
Soete, 2001)
Techno-demarcation
Service innovation is based on technology and is fundamentally different from product innovation
“Fundamental change in services that represent revolutionary changes in technology or service benefits” (Cheng & Krum- wiede, 2010 p. 162)
Process, firm
The reverse product cycle
(Barras, 1986)
Servo-assimilation
Knowledge on product innov- ation holds for services, and innovation is based on non- technological change
“A new way of business think- ing to reform relatively conser- vative and inflexible operational procedures and processes, which can trans- form organizations to better meet the needs of their mar- kets” (Kuo, Kuo, & Ho, 2014 p. 697)
Organization, management, market
Oslo Manual (OECD, 2018)
Servo-demarcation
Service innovation is non- technological and is funda- mentally different from prod- uct innovation
“As the extent to which new knowledge is integrated by the firm into service offerings, which directly or indirectly results in value for the firm and its customers/clients”(Salunke, Weerawardena, & McColl-Kennedy, 2011 p. 1253)
Customer, change
An integrated service devel- opment model (Edvardsson, 1997)
Synthesis
Service innovation should provide an integrative per- spective that concerns all types of innovations
“Finding new ways of co- solving customer problems” (Michel, Brown, and Gallan, 2008 p. 50) or “improved cocreation of value” (Helk- kula, et al., 2018, p. 293)
Change, customer, more value System of characteristics and competencies (Gallouj & Weinstein, 1997)
Techno-assimilation
The extension of manufacturing concepts to service organizations and industries has received considerable attention, especially in the 1970s and 1980s before service research became an established part of business and management research (e.g., Bowen et al., 1989; Chase, 1978). Manufacturing approaches to service provision, such as substitution of people for technology, detailed division of labor, service standardization, and decoupling the client from the service organization, can be applied to increase the efficiency of service provision. Today, these theories are more nuanced, as service operations have followed a trend similar to that encountered in manufacturing/production principles—from mass production logic to lean service production (Kowalkowski & Ulaga, 2017).
The concept of innovation associated with the assimilation perspective is reflected in the innovation indicators suggested by the OECD Oslo Manual (OECD, 2018). Almost all examples in the manual imply application of novel hardware and software; the only excep- tions are innovations centered on the location of services (e.g., home delivery, pickup of rented vehicles, and provision of management contact points for outsourced services on-site rather than remotely), or application of procedures and methods which in practice are likely to involve new technical support (e.g., the implementation of a new reservation and projects management system). Although in principle the manual does not exclude non-technological product innovation (e.g., a new insurance contract, a new financial product, or a new field of expertise in consultancy) or non-technological process innovation (methodologies, proto- cols, etc.), Djellal, Gallouj, and Miles (2013) find that these formulations tend to work against inclusion of such cases.
Techno-demarcation
The introduction of the reverse product cycle model is often viewed as the beginning of research on service innovation (Carlborg et al., 2014; Miles, 2016). Barras (1986) described the reverse product cycle, in which service firms use new technologies as a first step to improve efficiency, improve quality of existing services, and then introduce new services. The reverse product cycle highlights central features, such as the importance of knowledge and competencies in service industries, although it has been criticized for neglecting non-technological characteristics of service innovation (Gallouj & Savona, 2010; Gallouj & Weinstein, 1997). It focuses on IT-based innovation, but as Djellal, Gallouj, and Miles (2013) point out, services also use other types of technologies such as physical, chemical, and biotechnological systems (e.g., cooking, refrigeration, transportation, materials handling, and health services).
The reverse cycle model describes the developments at a particular historical period when IT was being adopted across service industries. Such a view is reductionist and, rather than providing the basis for a theory of service innovation, it provides a theoretical lens on the diffusion of technological innovation from manufacturing to the service sector (Gallouj & Weinstein, 1997). The limitations of this view are further underlined by recent developments in industry. Rather than diffusing technological innovation from manufacturing, new technology-based service companies are increasingly driving innovation. Examples include plat- form companies (such as ride-hailing service firm Uber, online marketplace Airbnb, or retailer and internet conglomerate Alibaba Group), streaming media service providers (such as Netflix or Spotify), and startup firms in the financial technology sector.
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Servo-assimilation
A servo-assimilation perspective acknowledges that service innovation, in contrast to product innovation, is frequently based on non-technological change such as organizational innov- ation (e.g., Kuo et al., 2014). At the same time, the underlying assimilation view is that knowledge on product innovation also holds for services. Using a model applicable to innov- ation in general, Nijssen et al. (2006) find that willingness to cannibalize current organiza- tional skills and routines plays an important role for service innovation.
The importance of non-technological innovation more broadly was recognized by Abernathy and Clark (1985), who separated innovation into two domains of innovative activities: technology/production and market/customer. In their view, the non- technological ‘market/customer’ side of innovation focuses on service channels, relation- ships with the customer base, customer applications, customer knowledge, and modes of customer communication. Non-technological innovations may be particularly prominent, not only as a result of radical technological innovation, but also due to large-scale market changes, as in the case of liberalization and privatization of formerly publicly controlled sectors such as railroads and aviation (cf., Davies, 2004). Although many empirical studies and policy documents (e.g., OECD, 2018) increasingly include more service industries and non-technological forms of innovation, thereby striving to expand the scope of innovation to encompass the service features of all economic activities, Djellal et al. (2013) argue that there is still progress to be made. This is especially true for non- technological product (output) innovations, non-technological process innovations, ad hoc innovations (e.g., tailor-made services), innovations in integrated goods-service offerings (i.e., solutions), social innovation, and user-driven innovations that are initiated by con- sumers for their own use without direct intervention of a firm.
Servo-demarcation
For decades, scholars have described service activities and industries as being distinct from manufacturing. Miles (2016) finds that many of those who have highlighted key characteris- tics of services and NSD come from the management and marketing disciplines (e.g., Edvardsson, 1997). Supported by arguments that services require novel theories, models, and indicators, proponents of a service-demarcation approach often call attention to a number of unique characteristics of, and preconditions for, service innovation in general and NSD in particular. For example, many new services do not require as large an initial investment as goods development projects do (e.g., patent applications, manufacturing facilities, physical prototypes), but tend to be more resource-intensive at the back end of development projects (Kindström & Kowalkowski, 2009).
Co-production requires, among other things, increased customer centricity which means that in NSD projects, more interaction with and feedback from customers is usually required (Drejer, 2004; Edvardsson, Gustafsson, Kristensson, Magnusson, & Matthing, 2006). Further- more, as compared to manufacturing, the overall R&D intensity in service firms is relatively low, because service firms typically do not pursue conventional R&D (Hipp & Grupp, 2005; Hollenstein, 2003; Miles, 2016). Literature on the servitization of manufacturing industries implies that offering services has become increasingly important for traditional manufacturers. However, this shift is seldom reflected in actual innovation work:
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Investing resources in product development is obvious for any leading manufacturer. The very same companies typically invest only a negligible share of their development resources in new services, and even fewer pursue service research in a scientific sense ... service innovation often becomes a concern only once the new product is ready to launch.
(Kowalkowski & Ulaga, 2017 p. 149).
To conclude, in addition to general frameworks and models, servo-demarcation provides conceptual and empirical contributions that aim to identify sector-specific innovation behav- iors. For instance, these might include theories developed in the field of retailing (Djellal et al., 2013) or service-specific traits within manufacturing (Kindström & Kowalkowski, 2009).
Synthesis
Schumpeter (1934) viewed innovation as a novel combination of new and existing know- ledge. Although his thinking influenced the synthesis perspective, Witell et al. (2016) point out that in certain ways his conceptualization of service innovation moves away from the original ideas. Schumpeter (1934) argued that the process of developing a new offering should be differentiated from the process of its commercialization and from evaluation of the outcome, but a synthesis perspective views service innovation as including both the develop- ment process and its outcome. Furthermore, such a ‘neo-Schumpeterian’ view of service innovation (e.g., Drejer, 2004; Flikkema, Jansen, & Van Der Sluis, 2007; Sundbo, 1997; Toivonen & Tuominen, 2009) emphasizes that economic development is driven by the emergence of new combinations (i.e., innovations) that are economically more viable than previous solutions (Witell et al., 2016).
As Hill (1977) points out, even for identical output, the same activity may be classified as a good or a service, depending on the responsibilities of the firm in the production process. From an innovation perspective, such classifications can be irrelevant—and even misleading—to the effort to understand value creation and the success and failure of service innovations (Kindström & Kowalkowski, 2014). For example, the decrease of manufacturing’s share of GDP worldwide largely reflects price reductions for goods relative to services (The Econo- mist, 2005). “Regardless of sector size or importance though, the division between service and manufacturing may be artificial. The service sector seemingly has become a catch-all for every- thing that does not qualify as manufacturing” (Kindström & Kowalkowski, 2014 p. 96).
Referring to Gallouj and Weinstein (1997) and other studies (e.g., Carlborg et al., 2014; Gago & Rubalcaba, 2007; Rubalcaba, Gago, and Gallego, 2010) suggests that the synthesis perspective is now widely represented in studies of service innovation. Furthermore, Vargo, Wieland, and Akaka (2015) argue that the separation between technological and non- technological innovation has made it difficult to develop an integrative approach for studying innovation in general. However, Miles (2016, pp. 27–28) suggests that it may be “more accurate to say that there is much research that aims to contribute to the elaboration of an integrative [synthesis] approach but that a consolidated view is yet to be established (or at least to be widely agreed upon).” A recent conceptualization that contributes to the synthesis approach is the service innovation typology by Helkkula et al. (2018). Identifying four dis- tinct theoretical archetypes, they embed elements of traditional perspectives while acknow- ledging the multidimensional nature of service innovation. Such conceptual work may complement the five empirically driven perspectives proposed by Miles (2016) and presented in Table 6.1, addressing calls for theoretical integration and advancing a consolidated view.
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In the next section, the Helkkula, Kowalkowski, and Tronvoll (2018) typology is discussed in relation to different theoretical lenses and illustrated by a mini case example, which illus- trates how the conceptualization might be empirically applied.
Four theoretical archetypes of service innovation: a typology
Based on the synthesis approach to service innovation, which transcends two broad empirically driven perspectives (assimilation/technologist and demarcation/service-oriented), Helkkula et al. (2018) strove for theoretical integration by proposing a typology of theoretical archetypes. Responding to calls for an overarching framework (e.g., Gallouj & Savona, 2009; Rubalcaba et al., 2012) or typology (Carlborg et al., 2014), they draw on synthesis and S-D logic to present four archetypes—output-based, process-based, experiential, and systemic—each informed by dis- tinct theories and different underlying assumptions. Prior to this, innovation research in general (and service innovation research in particular) has focused primarily on output and process, which are the first two archetypes. However, recent research has moved beyond these traditional conceptualizations to provide a more experiential and systemic understanding of service innov- ation (Edvardsson & Tronvoll, 2013; Helkkula, Kelleher, & Pihlström, 2012). The two arche- types cited here include the social aspects of service innovation and broaden its scope beyond firm-centered production activities, processes, and offerings. In Table 6.2, the four archetypes of service innovation are differentiated in terms of characteristics and roles of actors.
A key contribution of the output-based archetype of service innovation is the characterization of innovation in terms of measurable activities and items. Theoretically, this archetype is rooted in an assimilation perspective that equates service innovation with output; that is, the scope of the innovation is measured as the number of new services launched. Service innovation is an economic concept that should provide benefits to its developer, typically the supplier firm (Toivonen & Tuominen, 2009). Although research acknowledges the role of customers in relation to innovation output, traditional assessments build on a neoclassical economic view that separates production from consumption, and resonates with the early, unidirectional Schumpe- terian innovation model of entrepreneurship that brings innovations to markets (Laursen & Salter, 2006). It also resonates with Nobel Memorial Prize recipient Simon S. Kuznets’ influential system of national accounts (e.g., Kuznets, 1966), including its use to measure productivity and to set production targets across different sectors of the economy (Fogel, 2000).
The process-based archetype of service innovation contributes by focusing on activity and time span; it applies to any change in the service creation process that influences value creation, including shifts in roles, competencies, skills, practices, norms, and behaviors of a firm’s employees or customers (Helkkula et al., 2018). Service innovation is regarded as an activity rather than an output and, as opposed to a closed production system, the customer is seen as a potentially active participant in the production process. Interdependence patterns and divi- sions of work can vary largely between different service processes (Larsson & Bowen, 1989), and process innovations can alter customer involvement and disposition to participate in vari- ous ways (Chase & Apte, 2007). Although it is common in the literature to conceptually dis- tinguish between process- and output-based service innovation (e.g., Menor & Roth, 2007), it may be difficult to discern the beginning and end of a process and how it relates to the output.
The key contribution of the experiential archetype is its ability to focus on the individual service innovation experience and how the customer makes sense of it. Because such experi- ences involve individual sensemaking, they are not objective (Helkkula et al., 2018). Customers, supplier employees, and all other engaged actors perceive this value individually and subjectively in their own social context, co-creating value through experience
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Table 6.2 Archetypes of service innovation: characteristics and roles of actors
Foundation of the research approach Innovation focus
Description of service innovation
Focus on value creation
Role of main actors
Role of focal firm
Role of employees
Role of customer
Output-based archetype
Product innovation management
Attributes of the ser- vice innovation (e.g., new technology)
An offering not previ- ously available to the firm’s customers requiring modifica- tions in the sets of competencies applied by the service providers and/or customers
Creating outputs (to various extents) with valuable attributes
Companies that innovate offerings; customers as either passive adopters or active co-developers
To produce new ser- vice offerings
To take the new ser- vice to the market; launching, selling, and marketing activities
To generate ideas and provide inputs and feedback on new
Process-based archetype
New service develop- ment, operations management
Service innovation process; architectural elements (phases) of the customer’s ser- vice consumption
A change in the ser- vice creation process requiring modifica- tions in the sets of competencies applied by service providers and/or customers
The process of apply- ing new ideas or cur- rent thinking in fundamentally differ- ent ways
Companies that manage the process; actors who attend the process, such as customers
To enable new ser- vice processes
To divide work between front line employees who interact with custom- ers, and backstage employees who pro- duce in isolation
To more or less actively provide
Experiential archetype
Phenomenological (experientially deter- mined) value
Beneficiaries’ experi- ences while using the service and in the wider phenomeno- logical context, extending beyond
a specific service offering
An individual experi- ence of something new or revised
Co-creating valuable service experiences through service innovations
Customers or any other beneficiary in the service innov- ation phenomenon
To facilitate valuable experiences
To facilitate custom- ers’ experiences of value
To experience the service innovation
Systemic archetype
Social systems, living systems, industrial networks
Resource integra- tion by actors engaged in the ser- vices ecosystem
A reconfiguration of resources, actors, and institutional arrangements to enable service innovation
Integrating available resources within the service ecosystem in a specific context
Different elements of the system that make resources available for value creation
To integrate market and other resources in a novel and viable way
To integrate market, private, and other resources in a novel and viable way
To integrate private resources with other available resources
(Continued )
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Table 6.2 (Cont.) Output-based
Process-based archetype
inputs to the service production process
Service partners and other customers (in individual collective phases)
Other rele- vant actors
archetype
service concepts before they are launched, or follow- ing launch (‘after- innovation’)
Suppliers and service partners
Experiential archetype
phenomenon in his/ her social context
Other individuals in the social setting
Systemic archetype
in a novel and viable way
All other actors involved in the ser- vice ecosystem
Based on Helkkula et al. (2018, p. 290)
(Rubalcaba et al., 2012). This conceptualization of service innovation in terms of the experi- ence of engaged actors is seldom the starting point in innovation literature. However, Helk- kula et al. (2018) argue that this archetype has attracted growing attention precisely because of its focus on the experience of the user/beneficiary, and it resonates with the rapidly grow- ing stream of literature on customer experience (e.g., Lemon & Verhoef, 2016).
Finally, the systemic archetype contributes by focusing on resource integration by actors in the ecosystem. It resonates with the view of Rubalcaba et al. (2012) that the unit of analysis for service innovation research should be the service ecosystem rather than the service offer- ing. Furthermore, it builds on the notion that individual firms cannot successfully launch a new offering or orchestrate the required networks without connecting to multiple actors in the ecosystem. These actors are guided by social values and institutional arrangements that influence how resources are accessed and integrated. The novel value creation enabled by a service innovation must therefore be understood as part of a collective, embedded in a social system (Helkkula, Kowalkowski, & Tronvoll, 2018). Traditionally, only market- facing resources controlled by a firm are considered when attempting to understand service innovation. However, from a systemic view, both private-facing resources controlled by a customer and public-facing resources controlled by society become key elements in service innovation. In addition, changes in institutions and institutional arrangements (Lawrence & Suddaby, 2006) are seen as an integral part of service innovation.
A combined value-centric view of service innovation
Classification schemes and taxonomies including the service innovation dimensions of Miles (2016) or the modes of innovation described by Gallouj and Weinstein (1997) are used to categorize phenomena based on empirically observable, measurable characteristics (Bailey, 1994). Such classifications generally refer to either-or notions (McKelvey, 1975), which means that a service innovation is either in a specific category or it is not. For example, Gallouj and Weinstein (1997) conceptualize six distinct categories. By contrast, typologies describe conceptually derived, interrelated sets of ‘ideal’ types. In practice, such ideal theoret- ical archetypes might not exist in isolation (Brodie, 2014; Doty & Glick, 1994); hence, the four archetypes are not mutually exclusive.
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Adopting a synthesis perspective, Helkkula et al. (2018) present a combined, value-centric view of service innovation. The authors’ idea is to exploit the strengths of each archetype while overcoming their limitations, by integrating them within an overarching view that conceptualizes service innovation in terms of value co-creation. Although prior research examines different types or modes of innovation in isolation rather than in parallel, in prac- tice, service innovation opportunities and challenges can be better addressed by drawing on all four archetypes. Regarding service innovation as improved value creation for the benefit of customer, a supplier and/or other actors require a combined view. As Helkkula et al. (2018, p. 285) point out,
no single theoretical archetype alone can capture the complexity of value cocreation in service innovation because of its phenomenological appearances. The combined typology of archetypes in service innovation distinguishes theoretical lenses, facilitating their prac- tical application and so bridging theory and practice in pursuit of novel value cocreation.
Thus, a shared view of service innovation enables theory building and allows for better oper- ationalization of service innovation in further (empirical) research (Witell et al., 2016).
Case illustration: from radio broadcasting to webcasting
In practice, service innovation seldom involves only one archetype. To improve understanding of how the four theoretical archetypes relate to empirical phenomena, consider an example of an innovative shift in audio service transmissions. This innovation changed how organizations provide access to and how customers consume such services, from radio broadcasting to webcasting. From an output- and process-based view, this shift represents technological (product) innovations.
In 1920, wireless broadcasts by radio waves began in the UK, and many other countries followed soon thereafter. Over the coming decades, broadcasting took several forms (primar- ily AM and FM stations, and later digital and satellite radio). In many households, the (analog) radio became the favored source for media consumption, especially before the breakthrough of television. With radios becoming available in cars, and devices becoming increasingly cheaper and more portable, radio output and consumption increased. However, audio frequency limitations and costs of broadcasting (including expensive licenses, regula- tions, and capital investments required for digital radio) limited the potential for growth of audio services. The shift to webcasting (the first internet radio service was launched in 1993) enabled greater freedom to broadcast, and has enabled organizations and individuals to set up internet radio studios at low cost. Recently, online access by any suitable device has increased output even further, increasing customer flexibility and choice. Changes in the processes of delivering and accessing radio represent innovations from a process-based view.
Although the shift to webcasting required customers to invest in new technology (as did the shift in some countries from analog to digital radio), it has provided them with greater freedom, as internet technologies enable customers to access audio services anywhere and anytime. From an experiential view, innovation has changed the individual experience and the social context. Initially, most households had one radio device, which shaped the (col- lective) experience of radio listening. Innovation has changed phenomenologically deter- mined value for the individual and potentially shifted the service experience from social/ collective to domestic/individual. Finally, from a systemic view, the shift has changed the service ecosystem, introducing new actors and resources (broadband and mobile infrastruc- ture, devices, apps, etc.) and establishing new rules and norms. Although traditional radio
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Enabling
Service System
Collectively Shaping
1...n
Service Process
Service Innovation
Service Experience
Figure 6.2
Note: Based on Helkkula et al. (2018, p. 293).
The narrative of value-centric service innovation.
broadcasters also provide webcasting, its availability has enabled worldwide distribution of audio services from a wide range of new niche actors.
Figure 6.2 illustrates how the four service innovation archetypes improved understanding of the shifts in radio listening behavior. Technological innovations changed the service pro- cesses, generating new ways of accessing audio services, from broadcasts to webcasting. Next, service process and output influenced the service experience through individual sense- making. Collectively, the service experience shaped the ecosystem. Such reconfiguration then enabled new and improved service processes and additional outputs. A combined value-centric view allows for the application of the archetypes in combination. In practice, firms need to balance innovation efforts: Witell et al. (2016) and Helkkula, Kowalkowski, and Tronvoll (2018) argue that NSD projects can be more effectively managed by combin- ing the archetypes—as shown by the value-centric view in Figure 6.2—to exploit their benefits and holistically explore new opportunities for value creation.
Discussion
This section offers reflections on the use of terminology, modes of service innovation, and the use of different perspectives. One key question to be addressed is whether research on service innovation is mature enough to move toward using one term, one mode, and one perspective, or if parallel existing paradigms continue to be required.
Terminology for service innovation
Different perspectives on service innovation apparently agree on only one issue—a service innovation is a new service (Witell et al., 2016). As this chapter shows, such a view of service innovation is not sufficient to capture the essence of the service innovation concept—because
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Generating
Service Output
Individually Sensemaking
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all new services should then be viewed as innovations. Schumpeter (1934) argued that innov- ation not only creates value for the entrepreneur, but also changes the market in such a way that other firms imitate and follow. This suggests that the concept of newness cannot relate solely to a single individual or firm perspective; it has to consider either the entire market or the world in order to remain relevant.
Witell et al. (2016) emphasized that differences in perspectives should be mirrored in dif- ferent labels for what an innovation is (such as “innovation” for assimilation, “services innov- ation” for demarcation, and “service innovation” for synthesis). If the labels are used in this way, they are consistent with the origin and key characteristics used in each perspective (see Miles, 2016; Vargo & Lusch, 2008). Using the labels consistently would be beneficial for academics and practitioners when they read research and develop managerial implications, because it would clarify what implications can be attributed to each specific view of service innovation.
Put together, combine, and recombine
Arthur (2009) suggested that as more new technologies become available, larger solution space and more new services can be created. This logic is based on the idea that service innovation concerns recombining resources in novel ways. Lusch and Nambisan (2015) described service innovation as the rebundling of resources, to create novel resources that are beneficial to some actors. This is consistent with the Schumpeterian view of innovation, making “carrying out of new combinations” the core of how service innovation takes place (Schumpeter, 1934 p. 66). The recombinative view of innovation is also apparent in the lit- erature on product innovation, which is the foundation for the assimilation perspective on service innovation. Henderson and Clark (1990) call this “architectural innovation” and view it as reconfiguration of an established system to link together existing components in new ways.
Service innovation takes advantage of new combinations of resources derived from exist- ing knowledge and technology. Gremyr, Löfberg, and Witell (2010) and Gremyr, Witell, Löfberg, Edvardsson, & Fundin (2014) suggested that service innovations are often recombi- native, and that new services often go through a series of changes before succeeding on the market. Service research typically emphasizes the recombinative aspect of service innovation, but it also involves changing the resources that are recombined, or even breaking apart exist- ing service (Gallouj & Savona, 2009). Gremyr et al. (2014) provide an example of how Volvo combined changes in technology with a new business model and new service content, enabling the company to introduce a new service on the market and integrate it with the core product offering to create an innovative solution. Although recombinatory innovation typically focuses on the service offering (Gallouj & Weinstein, 1997), it also has bearing on the reconfiguration of the service ecosystem, as put forward by the systemic archetype in the Helkkula et al. (2018) typology. Such reconfiguration of resources can enable new offerings, processes, and experiences.
Synthesis as a potential replacement for assimilation and demarcation
Currently, there are many perspectives on service innovation, and it makes sense to seek a unifying approach, perhaps a synthesis perspective or a value-centric view. However, there are good reasons that the different perspectives continue to exist in parallel, and they are all likely to be used in the future, both in theory and practice. This is true, in part, because
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different perspectives emphasize different traits and characteristics of service innovations. If one wants to emphasize the technological view of service innovations, an assimilation per- spective fits best, whereas if the customer view is the main characteristic of the service innovation, either a demarcation or a synthesis perspective should be selected. Alternatively, an experiential and/or process-based archetype could pinpoint this view. Furthermore, as shown by research on service development in manufacturing (e.g., Gremyr et al., 2014; Kindström & Kowalkowski, 2009), a demarcation perspective may be particularly helpful when pursuing service innovation in goods-dominant companies.
To be able to provide a synthesis perspective, many models become rather abstract and may be more difficult to apply in practice and operationalize in research studies. An example is suggested by the many broad survey studies on service innovation activities. These typic- ally measure output and process-based innovations, which can be defined and measured using company data, whereas experiential and systemic innovation are more challenging to capture and compare in such studies. In summary, this is the price to be paid when one attempts to comprehend the different views through one perspective and model.
Conclusion
The present chapter reviews an exhaustive list of research on service innovation, and has attempted to create structure and provide summaries and guidelines on how researchers and managers can view this topic. Although the chapter focuses on certain specific models for service innovation, there is not one best way to view it. Taking a contingency perspective, the choice depends on the characteristics of the service innovation which core models best describe the context (firm, market, offering, beneficiary, ecosystem, etc.) where the service innovation is being developed.
This chapter distinguishes and describes the characteristics and core models present in sev- eral different perspectives on service innovation. The five perspectives focus on technological or non-technological elements (techno- versus servo- approaches) and similarities or differences between services and goods (assimilation versus demarcation) as well as a unifying synthesis perspective. In addition, the chapter describes four archetypes for service innovation—output- based, process-based, experiential, and systemic. Taken together, the perspectives and archetypes of service innovation provide a nuanced view that can guide researchers to better study and understanding of service innovation.
Advice to future researchers would include being consistent in terminology that describes service innovation and how it can be understood. Previous research has often been vague in describing what perspective it has adopted and what aspects best characterize a service innov- ation. It is important to observe that not all new services are innovations and that not all firms are innovative—and making a contradictory suggestion would diminish the value of the ‘service innovation’ concept.
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