Services Innovation TU – Strategic Management of Technology and Innovation David Ing, IBM Business Consulting Services, Canada Helsinki University of Technology October 21, 2004

TU : Strategic Management of Technology and Innovation |2 Services innovation Why services? What services? - Special features How are services different? - Challenges of innovation

TU : Strategic Management of Technology and Innovation |3 What is the GDP Composition by Sector in various countries? Sources: CIA Factbook

TU : Strategic Management of Technology and Innovation |4 Value capture seeks profit from customer's system economics, before production cost Value capture: How do I capture, as profit, a portion of the value I created for customers? Customer needs... some remain silent, poorly defined, or poorly articulated A customer's system economics includes: amount paid; costs to use, store and dispose; hassle Value migrates from outmoded business designs to new ones that are better able to satisfy customers' most important priorities. Sources: Slywotsky, Value Migration; Slywotsky & Morrison, The Profit Zone

TU : Strategic Management of Technology and Innovation |5 What services? / Special features Personal servicesLocal / non-scalable? Hospitality: hotels, restaurantsPolycentric? Financial servicesBigger / better Travel and transportationAlliances Social servicesNot-for-profit / profit Entertainment / fashionCreative class Product distribution services Transportation / installation Disintermediation Product support services Defect / how-to; maintenance Opportunity for loyalty Professional services Perform (technical); consulting Higher value

TU : Strategic Management of Technology and Innovation |6 How are services different? Challenges of innovation Tangibility Scalability - Call centers - Outsourcing Replicability - Inbound / outbound - Method - Modularity (virtual teams) Stickiness (knowledge work) Uniqueness / sustainability