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Advancing Services Innovation

Five Key Concepts

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Handbook of Service Science

Abstract

As the many chapters in this volume agree, there is growing awareness of the importance of services innovation to the prosperity of advanced economies in the 21st century. In this chapter, we explore the challenges that services innovation poses, as well as the potential value it may create. The conceptual differences between products and services are also outlined. We pay particular attention to five key concepts in systems integration: the role of complexity; the role of dynamics; the role of systems integration; the role of openness; and the structure of organizations.

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Notes

  1. 1.

    There are three main phases in the PLC: (1) a fluid phase, when product innovation prevails, and many small firms offer competing product designs; (2) a transitional phase, when process innovation dominates, which is initiated by the emergence of a ‘dominant design’ and the shakeout as the industry becomes dominated by a few large firms that concentrate on cost-advantages obtained by high-volume production of standardized products; and (3) a specific phase when the rate of product and process innovations declines.

  2. 2.

    See also Schmenner (1986), who developed a similar model showing how service businesses move diagonally within a service-process matrix. In his inversion of the PPM, improvements in productivity are gained by moving from a bottom right (high customization and high labor intensity) to a top left quadrant (low customization and low labor intensity).

  3. 3.

    But these two fast food chains have traditionally followed slightly different strategies. McDonalds ‘produce to inventory’ by offering standardized products using automated assembly processes. Burger King ‘produce to order’ offering a little more flexibility and customization by cooking hamburgers in response to individual orders, allowing customers to select their own pickles, onions and condiments. The customer’s perception is the main difference between these two service offerings. Burger King tried to change the customers’ perceptions by offering product or service options that had little impact on the process.

  4. 4.

    Gerstner’s (2002) account of this move highlighted his previous experience as a large customer of IBM’s when he was at American Express. As a customer of IBM’s who relied on information technology as a key part of Amex’s operations, Gerstner well knew how complicated the IT world was. From his experiential (aka tacit) knowledge, he knew the potential value IBM could deliver to its customers by helping customers accomplish their mission critical tasks in this bewilderingly complex environment.

  5. 5.

    For a detailed analysis of the bill of material for an Apple iPod, and the resulting allocation of profit, see, “Who Captures Value in a Global Innovation System? The case of Apple's iPod” by Greg Linden, Kenneth L. Kraemer, Jason Dedrick, a Personal Computing Industry Center (PCIC) working paper, UC Irvine, June 2007.

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Author information

Authors and Affiliations

  1. Haas School of Business, UC Berkeley, Berkeley, USA

    Henry Chesbrough

  2. Innovation and Entrepreneurship Group, Imperial College Business School, Imperial College London, London, UK

    Andrew Davies

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  1. Henry Chesbrough
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Correspondence to Henry Chesbrough .

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Editors and Affiliations

  1. IBM Research - Almaden, Harry Road 650, San Jose, 95120-6099, USA

    Paul P. Maglio

  2. IBM Research - Almaden, Harry Road 650, San Jose, 95120-6099, USA

    Cheryl A. Kieliszewski

  3. IBM Research - Almaden, Harry Road 650, San Jose, 95120-6099, California, USA

    James C. Spohrer

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Chesbrough, H., Davies, A. (2010). Advancing Services Innovation . In: Maglio, P., Kieliszewski, C., Spohrer, J. (eds) Handbook of Service Science. Service Science: Research and Innovations in the Service Economy. Springer, Boston, MA. https://doi.org/10.1007/978-1-4419-1628-0_25

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