Service Innovation is the improvement of the services a business offers to its clients through new ideas. Market-creating service innovation refers to an idea for enhancing a performance such that customers perceive it as offering new benefits of sufficient to an extent appeal that it significantly influences their behavior and that of competing companies (Berry, et al, 2006).
Service innovations differ from product innovation by being labor-intensive since delivery staff are part of the innovation. In addition, service innovations must be decentralized or taken closer to the clients if they are to meaningful to the target market. Service innovations also lack tangible products to carry a brand name (Berry, et al, 2006).
Service innovations that create new markets differ from each other on the benefit offered and the degree of service “separability”. Businesses can innovate by delivering benefits that revolutionize the customer’s access to the core benefit (Berry, et al, 2006). For example, Cirque du Soleil managed to create a new market for live entertainment a crucial benefit by offering customers a show that was neither a circus nor a dance performance but rather a hybrid of the two.
There are four types of market-creating service innovations. These are: (1) Flexible solutions-refers to service innovations that offer a new core benefit and can be consumed apart from when and where they are produced. Examples of companies to implement this are federal Express (Fedex), eBay and CNN. (2) Controllable convenience-refers to innovations that create markets on the basis of new delivery benefits offer controllable convenience. Examples of companies in this cell are Google, Skype and Netflix. (3) Comfortable gains-refers to service innovations that present a new core benefit that is consumed at the place and time of production. Companies in this cell include Starbucks, Cirque du Soleil and Barnes & Noble. (4) Respectful Access- service innovators offer a new benefit. The production and consumption processes of the service are inseparable. These companies create respect for their customers by creating physical presence to give their customers respectful access to the services they need.
The drivers to creating market-creating service innovations include: Investmenting in employees performance, inclusive customer service experience management, an adjustable business model and Continuous operational innovation. Others include: Brand differentiation, an innovation champion, a superior customer benefit, affordability and Continuous strategic innovation (Berry, et al, 2006).
In order for businesses in the services industry to remain competitive in their respective industries, executives must understand the different types of market-creating innovations as well as the factors that enable these innovations.
References
Berry, L., Shankar, V., Parish, J., Cadwallader, S. & Dotzel, T. 2006 . Creating New Markets Through Service Innovation WINTERVOL.47 NO.2. MIT Sloan management Review.
