The development of innovation capability in services: research propositions and management implications

Abstract

How service companies can develop an ability to innovate within their operations and use this to help formulate business strategy is still largely unknown. In this paper we report findings from exploratory, case study research conducted at five service companies. At three of the companies studied, service operations made year-for-year innovations in support of company performance but had no influence on strategy. The other two companies were significantly different. The way in which their innovation capability developed not only supported current performance but also opened new strategic directions for their organisations. From our cross-case analyses, four propositions are offered to explain how this can occur: First, profit instability leading to the restructuring of service operations is more likely to lead to the development of a service innovation capability that can help formulate business strategy than profit stability. Second, the attainment of improved technical competencies by service operations’ employees is not sufficient to lead to the development of an innovation capability that can help formulate business strategy. Third, when employees develop behavioural competencies in addition to technical operational competencies, this combination leads to the development of innovation capability that can help formulate business strategy. Finally, recognition of the potential of service operations is necessary before new competencies can help formulate business strategy.

Appendices

Appendix 1 Data collection phase 2 – interview script

This is the interview script used in all interviews. However, for illustrative purposes, the incidents derived from Phase 1 of data collection within Health Insurance Co (Case Study 1) are shown. Other interview scripts for different case studies contained different incidents.

The documents listed below (data collection Phase 3) were requested, and where the document existed, examined to support interviewees’ assertions and triangulate data. The phrase ‘corroborating documents’ was used when we were unsure of precisely what document to request to support the interviewee’s answer. For example, in Q11, no corroborating documents were available. In Q20, the minutes of a meeting between call agents were made available to us. The minutes showed that some measures were no longer being used.

Section 1	General context questions	Supporting documents
Q1	What is your job role and how long have you been doing it?	Strategy document
Q2	Please could you describe the business strategy of the company?
Q3	Does the company have a competitive advantage? Please explain
Q4	How is the business strategy formulated? Are strategy reviews held?	Minutes of meetings
	How is the document put together? i.e. How is it devised?
	What form does the discussion take?
Q5	How would you define ‘operations’ in your company?	Minutes of meetings
Q6	Is there a follow up meeting with operations people after the strategy review?
Q7	How does the operations part of the business contribute to the strategy?
	How does it occur?	Minutes of meetings
Section 2	Performance and operational influence
Q8	What’s your assessment of the firm’s financial performance over the past 3 years? How fluctuating has it been? Incidents: Pressures from external market	Competitor surveys
Q9	How does it compare with the performance of your competitors?	As above
	How do you know? Do you undertake benchmarking exercises? (Internal, external or best practice?)	Related documents
Q10	What’s the organisational structure in operations?	Organisation chart
Q11	What is the influence of operations compared to other areas of the business? On what do you base your answer?	Corroborating docs
Q12	How do you and operations generally keep in tune with the market?	Sales/marketing meetings
	Incidents: Envoy project Segmenting customers by region
	Customer improvement opportunities
	Listen to customers’ feedback
	(Ways by which you get this info; info. comes in at lower levels?
	What happens when you get it? How is the info. used?
	How do you decide what to reject?)
Q13	What operations meetings take place at the different hierarchical levels?	Minutes of meetings
	Incidents: Bi-annual management conferences
Q14	Do you organise structured operations based workshops?	Minutes of meetings
	Incidents: Think tanks
	Operational review (same as Envoy project?)
	– How undertaken?
	Process review (different from above?)
	– How are they undertaken?
	(All of above – Purpose, frequency, who attends, formal or informal, organised, how are pilots organised?)	As above
	How do they tie in with meetings at different levels?
	Do you have any meetings to discuss outcomes of operations?
	Decisions made?
Q15	Is there an operations strategy? (or any equivalent?)	Strategy documents
	(If so, what is it? Who contributes, where does info. for it come from?)
Q16	Are operations strategy type workshop/discussions ever held?	Minutes of meetings
	(If yes, tell me about them, if not, why not held?)
Q17	What do you believe to be the operations priorities? i.e. things ops must do well	Minutes of meetings
Q18	How do you know that these are the priorities?	Strategy related docs
Q19	Do you know how well operations is doing in achieving its competitive priorities compared with those being achieved by your competitors?	Competitor surveys
Q20	What operations performance reports do you receive?	Appropriate report
	What do you do when you get them?	KPI reports
	How do you know that the KPIs reported are still valid? Are KPIs ever changed?	Corroborating documents
	(Do you ever do an audit of PMS? How is it undertaken?
	If not, why not?)
Q21	Do you keep records of the time you or /and your people spend on various activities?	Timesheets
Section 3	Improvement/innovation – creative process
Q22	How do the ideas from the staff get aired?	Corroborating docs
	Incidents: Ideas books
Q23	How do you decided that some activities (or initiatives) are deemed worthy of turning into pilots and others not?	Skills register
Q24	How do you decide that changing ‘X’ process is more important to improving competitiveness than changing ‘Y’ process?
Q25	How then do they become an everyday part of ops activities?
Q26	Does the firm use the words capabilities and competencies?
	What are operations competencies and capabilities?
	Are these competencies codified or articulated?
	(Is there a difference between the terms?
	Can you name them? Are any unique?
Q27	Does the firm undertake any assessments of its core and non-core competencies? How is this assessment carried out?	Minutes of any meetings
	If not, why not?
Q28	What is the knowledge that provides the company with competitive advantage?	Corroborating docs
Q29	Where does this competency reside within the organisation?	Frameworks
Q30	Do you have an R&D department? If not why not?
Q31	How do you know that operations have acquired the requisite level of competence?
	Incidents: Competency frameworks
Q32	Does the firm have measures that relate to how well new competencies are being developed?	KPI reports
		Corroborating docs
	If so, what are they? If not, why not?
	If answer yes, how are the data that generate these measures collated?
Q33	How is tacit knowledge discovered and/or assessed?	Corroborating docs

Appendix 2

Table 5 Examples of respondent job titles and examples of documents examined