Service Operations Management: The total experience Chapter Six Innovation and Services Development

Innovation and creativity Creativity provides the essential spirit and behaviour from which innovation or tangible beneficial change takes place. Culture of innovation and creativity The very essence of creativity and innovation is the formation and spread of knowledge, and so the process of ‘original thought’ must play a major role in contributing to the organizational culture. Clear evidence must be in existence to indicate built systems to underpin innovation.

Fig 6.1 Operational balance

Fig 6.2 Industrial economy versus service-innovation economy (Source: Adapted from Leibold, Probst, and Gibbert, (2002).)

Contemporary approaches to creativity and innovation display significant limitations in dealing with the new, rapidly changing service environment. Traditional logic of innovation through internal R&D which works on an innovation from its beginning to its end, keeping it secret from the external environment and especially from competitors, limits expansion of knowledge creation, learning, and growth. The nature of service innovation is changing from incremental towards being more and more disruptive, from closed to open, and becoming increasingly networked. This tendency of companies opening up in targeted connectivity, sharing risks and acceptance of disruptive practices is of growing significance.

The Innovation Value Chain Model developed by Morten Hansen and Julian Birkinshaw Three stages in the process of innovation and creativity: idea generation selecting and developing ideas diffusing ideas (getting them to spread) Linking improvements to customers’ needs

Drivers of innovation and creativity The traditionalists using mainstream planning approaches (NPV for example) are negatively correlated with innovation performance. In other words, imposing strong traditional financial criteria for project selection makes the firm less innovative than firms that have no particular financial criteria for the selection of projects. 1. Innovation means trying things out and often failing. Attempting to provide detailed plans and forecasts regarding what is going to work will mean missed opportunities. 2. Large firms with traditional planning processes and valuation tools need to create different procedures for managing innovation. 3. We need to change the way we value innovation projects and include the upside of uncertainty in our assessment

Fig 6.3 Innovation and knowledge at Flight Centre

THE BALDRIGE CRITERIA Leadership (90 points) Information and Analysis (75 points) Strategic Planning (55points) Human Resource Development and Management (140 points) Process Management (140 points) Business Results (250 points) Customer Focus and Satisfaction (250 points) Without ongoing innovation and improvement in all seven categories, organizations will not show that they are sustaining a competitive enterprise.

Developing Service Networks Commercial convergence From a service delivery perspective, selecting and evaluating partners in a network for entry into a new market or expansion beyond existing boundaries frequently requires the injection of cash, resources, knowledge or all three. In whole, or in part, the principles of mutual evaluation apply to network partners, joint ventures or indeed to the other key selections: such as selecting suppliers (often overlooked or assigned to the bottom of the priority list yet a bad supplier decision can go a long way to ruin customer relationships).

Fig 6.4 A new approach to innovation for services (Source: Adapted from Kim & Mauborgne (2004))

Fig 6.5 Service network

Evaluating the suitability of a network partner Customer Profiling Revenues and Profitability People and Structure Values, Mission, Strategy and Tactics Performance Metrics and Achievements Growth and Development Plan Innovation Market and Competitive Position Value for Money and Cost Components Skill Sets Process Engineering Key Differentiators Quality System Technology and Information Systems Investments Overall Perceptions

Table 6.1 Partner selection criteria scores