Service Innovation

Innovation is “the tendency to think about new and better ways of doing things and to try them out in practice” (Fagerberg, 2006, cited in Miles, 2006, p. x). Schumpeter, an influential innovation writer, has said innovation’s purpose is to create better or more effective processes and products. 

Most Research and Development (R&D) investment goes into manufacturing innovation, with comparatively little into service innovation (Miles, 2011, p. 437). 

When we talk about innovation usually people think of tangible things, like the latest iPhone, or a new bit of technology, or an invention. Often when people discuss innovation they are talking about tangible things discovered through scientific processes.

Service innovation is also usually talked about in terms of technology. For instance, a new application on a mobile phone (making ordering easier, shortening queues, providing information). But remember that service innovation means social innovation first and foremost; e.g. making things easier, simpler, faster, decreasing pain, or increasing pleasure and generally adding value to experience in some way.

Miles argues that a recent focus (in research) on service innovation has been because of the growth in service industries, but service innovation extends to all industries and sectors of the economy wherever there is service. Miles also argues that some services are more innovative than others, picking out FIRE (finance, insurance, and real estate services) as involving advanced innovation in information technologies, and comparing this to hairdressing which they argue use only ‘basic’ technologies. 

It is useful to categorize service industry groups together in order to see the types of innovations they might have in common. So, for instance, other than the FIRE category above Miles identifies HORECA as a subgroup of service industries (hotels, restaurants, and catering). These are all industries whose business consists of food preparation and delivery, hospitality, entertainment, and comfort. Thus innovation in one business may be a point of learning for another business. So, for instance, see the Go Amazon innovation in food retail service. 

Services innovation is often criticized because the self-service and technological innovations (usually standardization) such as the one shown above in restaurants and fast food outlets lead to low wage, low skilled (or even no job as at Go Amazon) jobs.  It is just as likely that services emulate the trend of manufacturing away from mass production (and standardization) to customization. Technology also enables this line of innovation as well. New jobs are created at Go Amazon as well. 

Another category of services is 'social and collective services' such as public administration, health, and education, which are often delivered through state mechanisms as well as private, as well as hybrids, and so their patterns of organization can vary quite widely, but nevertheless, the back-office processes are becoming highly IT-intensive.

Reference

Miles, I. (2006). Innovation in services [Electronic Version]. The Oxford handbook of innovation, 433—458. http://www.oxfordhandbooks.com/oso/public/content/oho_business/9780199286805/toc.html.