A Thought for Innovation in Services
March 20 (Monday) 2006
One of the many organizational research themes here at FRI is that of “innovation in services”. Participants in this research project are currently engaged in a discussion of how exactly “innovation in services” should be understood, how should its research be pursued, and what kind of results such research can be expected to produce. I would like to take the time to present one of the conceptualizations that we are currently examining as part of our research into the nature of innovation in services.
In my January 25 post in this section I touched upon the growing value of researching innovation in services. Here I would like to comment on how to interpret and define the two terms “service” and “innovation”.
Rather than the meaning of service that is widely used in reference to the “service industry”, “consumer services”, and other such contexts, the concept of service as used in our research implies a deeper, more fundamental meaning. The commonly used concept of “service” refers to a satisfaction-generating interaction whereby an individual or client receives the rendering of an intangible product. In our research at FRI, we seek to define the essential nature of service as the “exchange of information between entities”.
At the center this phenomenon-in which customer satisfaction is increased through the rendering of an intangible service-lies the activity in which added value is created through the process of transferring information from provider to receiver. For example, a service that instructs one where to find superior quality or cheaper goods is exactly this sort of transmission of information. Travel guides, medical examinations, prep school instruction, and other such services all involve the passing of information from a providing entity to a receiving entity.
Considering the concept of service in this broader, more fundamental way allows us to see it as something much more theoretical, general, and universal than what is usually understood. In fact, the above-mentioned service activities also occupy a great role in manufacturing activities as well.
Take, for example, the “Toyota Way”, a superior manufacturing method renowned throughout the world. Considering the Toyota Way in the framework of the above concept of service, we can redefine a major part of the Toyota Way as one method of service involving the “transmission and sharing of information”. The innovation introduced by the Toyota Method was something called “discontinuous innovation”, which broke away from the Ford production method that had previously dominated global production methods. The Ford production method was a push-style system in which the flow of tens of thousands of parts used for repair and servicing on the floor was controlled by one central system. In contrast to this, the superiority of the Toyota Way lay in the pull-style system of its production process, in which the post-process manager demands only the necessary parts at the necessary time from the front-end manager, thereby eliminating waste. This method operates like a string of dominos, where information from the final process flows backward to each previous phase of production. In other words, even in the automobile industry-the quintessential example of the manufacturing industry-the essence of its industrial activities can be understood as the mechanism of information transmission between sender and receiver. This, too, fits into our definition of service.
Within this process, innovation can be understood as changes in the form and efficiency of sending and receiving information, and the resulting improvements in productivity, quality and customer satisfaction.
Thus, “innovation in services” implies improvement and reform of the mechanisms guiding the behaviors of involved parties regarding information sharing and recognition, and in particular improved volume and efficiency in the collection, sorting, interpretation, and recognition of information.
This is the essential concept that we have extracted during our current phase of research into innovation in services, and we intend to use this concept as a base for concrete data analysis. I look forward to making further announcements in this corner as our research into innovation in services continues to unfold.