Models for service-based innovation – pushing beyond "delight"

@theservdesgroup
 

Abstract

In this article, The Service Design Group, the premier customer experience and service design consultancy in the US, presents best practices and models for service-based innovation and the importance of aligning service innovation to hard, measurable business results.

 
 

Background

In a previous client engagement, the business unit in question was heavily invested in continuous product innovation, working with leading product design firms. The team asked The Service Design Group for a perspective on the role of service design. We were happy to help.

Since we already did the work to codify the patterns and best practices for service innovation we routinely use with our clients, we thought we'd share them here. Enjoy!

First, a note on product vs. service innovation

Service innovation is much more complex than product innovation.

In our experience, there isn't much literature specifically addressing service innovation. State-of-the-art innovation thinking still seems centered on innovating and producing things. While we fully support product innovation efforts, we believe the space of service innovation to be infinitely more fascinating.

Why? Because service innovation is much more complex than product innovation, and with that complexity comes increased opportunity for innovation.

The complexity and opportunity surrounding service-based innovation stems from the intrinsic dynamics of services. Primarily, services span space, time and channels, and services consist of people, process, content, technology and environments. Innovation in this context requires an ability to integrate across all of these dynamics while also keeping an eye on the fact that in the end, one must ensure that service delivery, monitoring, management and continuous improvement would be possible.

The Service Design Group uses six patterns (i.e. "prompts") when working with clients to generate service-based innovation concepts. Each is intended to make a firm think about its existing business, and the opportunities for services, in a different manner.

#1. as a Service

Prompt = What could you do as a service?

Avoid the trap of doing the exact same thing you're doing today and simply changing the access, payment or contract model.

We've seen "as a Service" take off, with Software as a Service (SaaS), Platform as a Service (PaaS), and Infrastructure as a Service (IaaS). Each "aaS" service has enjoyed significant growth and success at the expense of product-based equivalents. Early movers introduced services that disrupted traditional software and hardware procurement, deployment, and renewal cycles. Generally speaking, software clients switched from an "owned" model to a "leasing" or "on-demand" model so they could stop managing IT and instead focus on core competencies and differentiators.

An important consideration when using this model is to avoid the trap of doing the exact same thing you're doing today and simply changing the access, payment or contract model. Rather, you have to envision the offering from the ground up and deliver it "as a Service." That means you need to question every facet, from how it is priced, to what features to keep, to how to provide support, deliver updates, and manage service levels.

#2. Product-Service-Wrapper

Prompt = How could you surround your product with services?

It's critical to ensure the existing product has enough brand permission or brand equity to be accepted as a service provider.

Typically, companies that excel at product-based innovation overlook opportunities to augment, extend or integrate products with offerings from the service space. We push our clients to temporarily suspend any and all product enhancement concepts. This "thought exercise" forces service-based concepts to come to light. Often, the service concepts have a greater chance of producing market differentiation and penetration as compared to the next incremental change planned for the product line.

It's important to keep in mind that if you pursue a Product-Service-Wrapper innovation approach, it's critical to ensure that the existing product has enough brand permission or brand equity to be accepted as a "service provider" and that introducing the service wrapper for the product will not create channel conflicts.

#3. Tear Down, Build Up

Prompt = Why does this service exist?

Often, internal services become entrenched and explainable by that's just the way it is.

Typically, large enterprises and government agencies utilize shared service centers (e.g. procurement, IT support, security, etc.). Often, internal services become entrenched and explainable by "that's just the way it is." No one knows why it exists, who the customer is, or what value is created. Shared service providers tend to dissolve into "executing a process" vs. "delivering a consumer-grade experience."

It's important to "tear down" the organization's tacit knowledge of the service ("just because") and then "build up" by re-articulating the primary stakeholder (who), value created (what) and core mission (why).

Essentially, "Tear Down, Build Up" removes preconceived notions of what is true, creating space to envision each service as a value-add component of a service system.

#4. Service Extreme

Prompt = What if we outsourced everything?

Reimagining a firm in this manner quickly uncovers core competencies and weaknesses.

This is a purposefully provacative view that we love to challenge our clients with. The concept is to imagine every activity a firm performs as being fulfilled by an external service provider.

Approaching the entirety of a firm's activities, and envisioning each as an outsourced service, is a valuable innovation tool. Reimagining a firm in this manner quickly uncovers core competencies and weaknesses. Core competencies are those activities whose value would decrease if outsourced. Weaknesses are those whose value would increase via outsourcing.

#5. Sharing Economy

Prompt = What if you were the Uber in your market?

Markets will form to allow peer-to-peer exchanges of excess capacity.

Firms like Uber and Airbnb are disrupting traditional markets. These firms exist on the premise of the "sharing economy" – the economic principle that markets will form to allow peer-to-peer exchanges of excess capacity. Excess capacity may be space in your car (ala Uber) or in your house (ala Airbnb).

We ask our clients to explore both "what if you were the Uber in your market" and "are you or could you be relevant to the sharing economy." This is often a difficult topic to explore, as much confusion exists on exactly what sharing economy players do, but we like to include this exercise in our models for service innovation because it typically produces interesting concepts.

#6. Employees First!

Prompt = Forget the customer, what do we need?

Multiple external-facing efforts can be replaced by a single internal-facing improvement.

For better or worse, the importance of employee-facing services is often ignored in service innovation. The concept of Employees First! is to stop and think about the value of internal facing service innovations.

The Service Design Group explores this model for service innovation with its clients and finds it is a powerful tool to unlock previously missed opportunities. In the extreme case, multiple external-facing efforts can be replaced by a single internal-facing improvement.

Innovation is Great, But Don't Forget...

[a service] must be measureable, manageable and capable of producing... results.

No matter which of The Service Design Group's six models you explore when doing service-based innovation, it's important to remember that for a service to be successful post-innovation, it must be measureable, manageable and capable of producing specific results. As a best practice, we include measureability, serviceability and manageability in our innovation discussions. Additionally, we push our clients to identify specific and desired business results before we innovate. This allows us to ensure that concepts from the innovation models are bounded by the outcome(s) they should produce.

Wait! What about delight?

...[it is a] dangerous practice to explore service innovation [only] through the lens of how can we create customer delight...

You may have noticed that there is no mention of "producing delight" in this article. This is by design.

The Service Design Group rejects the notion that the role of service-based innovation is to create delight. We believe it to be a dangerous practice to explore service innovation through the lens of "how can we create customer delight?"

That's why each of the six best practice models for service-based innovation presented by The Service Design Group focus on flexing business models and the dynamics of the firm. We do this because we believe business models and firm dynamics to be the true drivers (or destroyers) of success. Business model and firm dynamics, not levels of delight, ultimately determine whether an organization can adapt, create value, and achieve results.

What have we missed?

This is our go-to list of models for service-based innovation. What are we missing? Are there others out there to explore and share?

 

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