Service Innovation: Concepts and Principles

1. Chapter 1 Concepts of services innovation

2. Definitions for service and innovation • “A service is a process consisting of a series of more or less intangible activities that normally, but not necessarily always, take place in interactions between the customer and service employees and/or physical resources or goods and/or systems of the service provider, which are provided as solutions to customer problems” (Gronroos, 2007). • Innovation is to create or make something new (Otterbacher, 2008). • Innovation is “the act of introducing something new.”

3. Service concept • Edvardsson and Olsson (1996, p. 149) defined the service concept as a “prototype for service, covering the needs of the customer and the design of the service” • The service concept integrates both what the customer needs and how the organization will deliver the service(Goldstein et al, 2002)

4. Service Concept (Source: Goldstein et al, 2002) What? Service concept How?

5. Service Innovation • Service innovation is the introduction of new or novel ideas which focus on services that provide new ways of delivering a benefit, new service concepts, or new service business models through continuous operational improvement, technology, investment in employee performance, or management of the customer experience (Verma, Anderson, Dixon, Enz, Thompson, &Victorino, 2008). • Service innovations is “the interdisciplinary nature of service, integrating technology, business, social and client (demand) innovations”. (Spohrer and Maglio, 2008)

6. Service innovation : Overview • Today, service innovation is evolving into a vast field encompassing the study of dynamic interactions among technological and human systems driving managerial and organizational change in services. (Randhawa & Scerri, 2015) • Service innovation is the potential to create new business models that can revolutionize an industry sector include the wellness tourism sector.

7. Product and Service Innovation • Product innovation is “the introduction of a new product, or a significant qualitative change in an existing product,” • Process innovation is “the introduction of a new process for making or delivering goods and services” (Greenhalgh and Rogers, 2007, p. 4). • Services are produced, delivered, and consumed simultaneously making it harder to distinguish between service product innovation (what is produced, delivered, and consumed), and service process innovation (how it is produced, delivered, and consumed) (Bessant and Tidd, 2007; Trott, 2012).

8. Classification of Service Innovation • Service innovation can also be classified based on the type of service that is being introduced (Miles, 1993): • physical services • human services • information services

9. Physical services • Examples include transportation and restaurants which are physically transformed often through the adoption of new technologies, such as, radio-frequency identification (RFID) and refrigeration equipment.

10. Human services • Innovation in human services takes the form of improvements in administrative data processing in public sector services and customized IT systems for medical services.

11. Information services • Information services are mainly characterised by innovations in IT such as online banking in financial services and interactive digital media in entertainment (Miles, 2005). • The type of service innovation also differs based on their level of newness or the degree of change, ranging from major service innovations for radically new markets, to relatively minor innovations (Francis and Bessant, 2005; Lovelock, 1984).

12. Information services • Technology, and in particular IT, has been both a key driver and component of such service business model innovations. • Some other revolutionary IT-based service innovations include e-commerce through online retailers (Amazon), and innovation in entertainment services, through gaming (Xbox), online music (iTunes), online videos (YouTube) and social networking (Facebook).

13. Principles for service innovation (Verma, Anderson, Dixon, Enz, Thompson, &Victorino, 2008) • customer focused • process focused • continuous improvement

14. Customer Focused • A customer-centric approach to exceeding guest expectations. • Any new technology, procedure, or method that improves the guest’s experience. • Service innovation is simply new ways of meeting or exceeding guests’ expectations.

15. Customer Focused • The customer is the moderator of the business. • Much attention is paid to the needs of the customer. • The customer perceives the value from various perspectives, which is varies due to their preferences on targeted results (Fungsaichon, 2014).

16. Process Focused • Synergistic use of technology and process re-engineering to bring about a transformational change in the quality of services being provided. • Defines the processes of how significant improvements in products and services are adapted and ultimately delivered to users. • Increased productivity improves the customer experience.

17. Innovation Process • These are Innovation process in five areas (Otterbacher, 2008): • 1. Generation of new or improved products • 2. Introduction of new production processes • 3. Development of new sales markets • 4. Development of new supply markets • 5. Reoganization or restructuring of the company

18. Continuous Improvement • Continually seeking out ways to provide intuitive service to your customers. • Continuous improvement of the customer experience, or the cost of delivery of that customer experience; the ability to both anticipate and to invent new ways of delighting the customer in an economically sustainable manner.

19. Service Process Innovation (Verma, Anderson, Dixon, Enz, Thompson, &Victorino, 2008) • Customer Feedback • Personalized Service • Measurement

20. Customer Feedback • Receiving feedback via using open forums (or blogs) in which customers or guests can share their experiences • Responding to customer comments by creating complaint systems that are designed so that customer dissatisfaction with the service can be improved before the end of their appointment • Developing a loyalty program so repeat customer can give feedback • Reading posts and blogs about their stay and opinions about the services they received

21. Personalized Service • Sending an email to the guests from a personal concierge prior to their stay • At this time the guest could select all the desired activities and make any special requests about the room. • Everything is set up when the guest arrives. • Simple and easy ways to get the guests’ needs met. • Use of technology can give the advantage of personalization; you can track web traffic to customize web pages to preferences and needs

22. Measurement • Tracking customer complaints via survey systems as well as tracking your best practices. • This helps to quantify services. • Survey guests before leaving so management can solve problems before guests depart from the hotel. • Having a proactive approach to quality.

23. Conclusion • The goal of a service is to provide a solution to a customer/guest problem while making use of human centred competencies and capabilities. • Changes are all over the map in the hospitality industry and in the spa industry. Most changes are categorically the same as in hospitality and other businesses are driven by the world economy. • A hospitality industry suggest that service innovation is the process by which significant improvements in products and services are adapted and ultimately delivered to customers/guests or users.