Innovation in Services by F. Gallouj & O. Weinstein

1. Innovation in Services by F. Gallouj & O. Weinstein Heijmans, Jan Leon, Fernando Teshome, Negash

2. Article introduction • Lay the foundation of a theory to interpret innovation processes in the service sector. • Increasingly prominent role of service activities • Two groups of studies on innovation services: 1) Technical-oriented: impact of technology on services, 2) Service-oriented: focus on non-technological aspect of innovation, like consultancy firms. • Difficulties in service innovation • developed on the basis of innovation in manufacturing • particularly the analytically fuzzy nature of output of service activities

3. Service Schumpeter forms of innovation (directly increase innovation by increasing research and development spending) • introduction of a new good • introduction of a new means of production • discovery of a new source of raw material as alternative source • find a new market • the establishment of a new organisation The provision of any type of product can be described in terms of a set of characteristics that reflect both internal and external structure of the product. Modification to Lancasterian approach, initially for the examination of goods. • The final characteristic of the good (Y) which are linked to a good, benefits for customer; • The “internal”, technical characteristics of the good (X), describes the technology used to obtain the final characteristics; • Process characteristics (Z), relate to the production of the good.

4. Why Innovation in Services? Study centered on the specificities of Design • Intangible ‘product’ • Interaction among agents - Client involvement Key points • Studies of consulting and catering sectors • Service innovation is overlooked more easily • Service field gives way to ‘ad hoc’ innovations • Difficult to replicate • Not reliant upon a technology component

5. The service in more detail Not easily transferable or dissociable from the individual Tangible / Intangible and independent from the individual X mobilises C to achieve Y C mobilised directly to achieve Y

6. Service in ... • Product: set of final characteristics, • Y: service characteristic, • X: technical characteristics, • Each Y being obtained by a certain subset of X, • C: includes individual skills of both service providers and customers, • Role of customer presents in terms of C’ competences. • The client is “put to work” within the services, like self-service situations and hiring of equipment. The general service model by Gallouj and Weinstein:

7. Modes of Innovation If the representation of a product (good/service) is accepted ->innovation is change of char,com,ser Radical Innovation -The creation of totally new product, i.e new product # old product in terms of characteristics old system{[C’][C][X][Y] } =>>> {[C’*][C*][X*][Y*] } new system :- [X][Y] completely differs [X*][Y*] , while competences can be added :- [C’]- customers competence also renewed to [C’*], more radical innovations require clients training eg. Europ Assurance, changed the entire insurance system Companies no longer sell damage insurance, life insurance … as a product-. but provide as a services -Very difficult in practice eg. Transition from horse-drawn carriages to motor vehicles was radical innovation -Y (service characteristics)remains the almost the same. comfort, safety, speed

8. Modes of Innovation ImprovementInnovation- Competence enhancing -Certain qualities of a product/process are improved. eg. Value of Yi is increased either by improving Xj or Cp Incremental Innovation- -Innovation by addition/substitution of characters eg. Computer-aided route selection services in car-hire companies. Incrementental vs Improvement. no strict borderline Ad hoc innovation -A solution to a particular problem to a given client. Hence,a product of client/provider interface -Not easily replicable -Against the basic idea of “innovations have several applications”

9. Modes of Innovation Recombinative innovation -frequent innovation in services -Bundling/unbundling existing systems Splitting the characteristics of system s1, two autonomous new systems Recombining the characteristics of of two existing services, new service s3

10. Modes of innovation Formalisation Innovation - Neither qualitative nor quantitative variation in technical or service char., or competence. - Putting ‘into order ’ service characteristics, giving them shape and making them concrete eg. ‘Legal Audit’ Service -Finding a name for the service - Establishing reference points /methodologies by which it can be defined. -Followed by recombination model *Legal audit is then broken into patent audits, contract audits …. All of them “products” are independent and can be sold.

11. Conclusion - “An approach to products in terms of final,technical & process characteristics stimulates the study of innovation in process” -A product in terms of characteristics reconciles with “Science push”,[C] or/[X] & “demand-pull” [Y] approach. It gives tw point of entry for innovation

12. Thank you for your attention! Questions?