Innovating backwards: Reverse R&D processes in service innovation

Transcription

1 Innovating backwards: Reverse R&D processes in service innovation Ivanka Visnjic 13, Taija Turunen 23, Andy Neely 3, 1 ESADE Business School, Spain 2 Aalto University, Finland 3 Cambridge University, UK

2 Contents Where are services in the research on innovation? Are service firms, the black sheep of innovation? Is product perspective on innovation applicable to service firms? What we did : research approach and the cases we have chosen What we learned: Service R&D is simultaneous to production and use not sequential Service innovation is closely related and complementary to other types of innovations Implications of findings

3 Cambridge Service Alliance: who we are Cambridge Service Alliance is a global partnership between businesses and universities that brings together leading firms and academics with interest in strategy and delivery of complex service systems and their providers. Partners Founded in 2010, by the University of Cambridge, IBM and BAE Systems, the Alliance is currently expanding its partnership to researchers from other universities and other companies with interests in complex service systems. Caterpillar is the recently joining partner. Themes of research Business Model & Service Innovation Performance & Information Analytics Service & Support Engineering

4 Where are services in the research on innovation? Innovation has been traditionally seen as an outcome of a collision between technological opportunities and user needs (Schumpeter 1934). The interest in different innovation contexts service environments as opposed to the well-studied product environments is gradually increasing (Drejer 2004). The interest in different types of innovation other than technology innovation is increasing: Process innovation (Hammer 2004) Design innovation (Verganti 2006; Walsh 1996) Business model innovation (Amit & Zott 2001; Zott & Amit 2010) Managerial innovation (Birkishaw et al. 2011) etc.

5 Are service firms, the black sheep of innovation? Quantitative measures of innovation (e.g. R&D spend) suggest service firms are less innovative than product firms, potentially failing to capture all innovation efforts in the context of services (Gallouj 2010). However, a good number of highly innovative service firms have not only obtained competitive advantage but also disrupted their competitors as a result of radically innovating their services (e.g. Ryanair, Amazon,etc). Perception that innovation activities in the service firms are less organized than those of firms in the product sectors: Service firms rarely have R&D departments for innovation activities Innovation tends to be conducted by different units and in relation to different functions, such as strategic planning, training, and market development (Fagerberg et al. 2006).

6 Open question: is product perspective on innovation process applicable to service firms? <?>

7 Research methodology We analyzed 12 complex service providers to understand the pillars of the innovation in service firms or what service innovation is. Complex services were defined as services that are either provided either over, require collaboration amongst several service providers or contain element of risk Among 12, we chose 4 firms with distinctive service innovation projects to understand the process or how service innovation unfolds. Distinctive firms exhibited learning & financial success or disappointment & financial loss Level of analysis: the characteristics of the innovation process were captured at the level of a service as well as at the level of a firm. Data collection: Semi structured interviews, historical archival data, financial data

8 Cases Company alias Railco Trainco Logico Airco Core business area Train solutions Train solutions Engine and equipment manufacturer Engine and equipment manufacturer Challenges with the service innovation Overall smooth service innovation process. Some operational challenges resulted in decreased profitability initially. Significant operational challenges resulted in losses in the first years. Negligible challenges, unremarkable on the profitability levels. Overall smooth service innovation process Some challenges in cocreation with customer resulted in decreased profitability initially.

9 ECOSYSTEM What have we learned (1/2): Process of service innovation doesn t precede but is simultaneous to production & use Process of product innovation: ACCOUNTABILITY SPREAD RESEARCH DESIGN & DEVELOPMENT PRODUCTION USE Process of service innovation: (INITIAL) DESIGN ACCOUNTABILITY SPREAD CO-PRODUCTION (PRODUCTION + USE) CO-INNOVATION (RESEARCH & DEVELOPMENT) NEW SERVICES OR RENEWAL OF SERVICE PLAN NEW SERVICES OR RENEWAL OF SERVICE PLAN

10 What have we learned (2/2): Service innovation is strongly related and complementary to other types of innovation BUSINESS MODEL INNOVATION: FROM PRODUCT BASED TO SERVICE BASED BUSINESS MODEL ACCOUNTABILITY SPREAD (INITIAL) DESIGN ACCOUNTABILITY SPREAD CO-PRODUCTION (PRODUCTION + USE) CO-INNOVATION (R&D) SERVICE (PROCESS) INNOVATION NEW SERVICES (DESIGN) INNOVATION NEW PRODUCT INNOVATION

11 Discussion ON THE LEVEL OF A SINGLE SERVICE: FINDING: Process of service innovation has a different value chain position than the product counterpart; it is simultaneous not sequential to production and use IMPLICATIONS: - Learning happens during the first service delivery for the benefit of the subsequent ones - Managing innovation project requires planning for active participation of the client - Risk & investment assessment needs to account for delivery risk if not for market risk; - Performance assessment of the first service need to account learning for subsequent service as well as P&L ON THE LEVEL OF A SERVICE PROVIDER: FINDING: Service innovation is closely linked and complementary to other types of innovations in the firm IMPLICATIONS: - Knowledge leverage can happen across the innovation projects - Managing innovation projects requires firm-wide platform-based vision and strategy - Risk & investment assessment needs to account for requirement for other innovation types - Performance assessment of the first service need to account learning for other services

12 Thank you! Ivanka Visnjic ESADE Business School GSM: Taija Turunen Aalto University, School of Science GSM: Andy Neely Cambridge University