1ZM55 - Service
Innovation Management
8 open-ended questions
- 6 questions of 10 points
- 2 questions of 5 points
- Paper based exam
,Lecture 1: Introduction to Service Innovation Management
Services defined
Service = The application of competences for the benefit of another
- Deeds
- Processes
- Effort (performances)
Tangibility spectrum
From 4 to 7 P’s
Not only product, place, promotion, price but also people, physical evidence and process
IHIP paradigm
These characteristics make services different from products
- Intangibility
- Heterogeneity
- Inseparability
- Perishability
, Characteristics Solutions
Intangibility - Services cannot be inventoried - Focus on tangible cues
- Services cannot be easily patented - Use personal sources
- Services cannot be readily displayed or - Stimulate word-of-mouth
communicated - Create company image
- Pricing is difficult - Communicate after sale
Heterogeneity - Service delivery and customer satisfaction - Industrialise service
depend on employee and customer action - Customise service
- Service quality depends on many
uncontrollable factors
- There is no sure knowledge that the service
delivered, matches what was planned and
promoted
Inseparability - Customer takes part in production process - Training and selection
- Other customers are co-producers - Manage customers
- Problems with mass production - Multi-site strategy
- Not possible to keep in stock (franchising)
Perishability - It is difficult to synchronise supply and - Demand management
demand with services - Supply management
- Services cannot be returned or resold
- Restricted in time and place
Criticism on IHIP paradigm
→ By Lovelock
Physical acts Physical acts to Non physical acts Processing of
to customers’ owned objects to customers’ information (e.g.
bodies (e.g. (e.g. freight minds (e.g. news) internet banking)
health care) transport)
Intangibility Misleading Misleading Yes Yes
(performance is (performance is
ephemeral but ephemeral but
experience may may physically
be highly transform
tanbile) possession in
tangible ways)
Heterogeneity Yes Many exceptions Many exceptions Many exceptions
(can often be (can often be (can often be
standardized) standardized) standardized)
Inseparability Yes No (customer Only when the Many exceptions
usually absent performance is (customers often
during delivered ‘live’ absent during
production) production)
Perishability Yes Yes Many exceptions Many exceptions
(performance can (performance can
often be stored in often be stored in
electronic/printed electronic/printed
form) form)
, The challenges
Challenge 1: Towards an experience economy
Commodities are things that you grow in the ground, raise on the ground or pull out of the
ground (vegetables, animals). Basis of the agrarian economy.
After the industrial revolution, commodities were used as raw material to be able to
manufacture goods. These goods become the predominant economic offering.
Last 50/60 years, goods have become commoditized. Goods are treated like a commodity
(people don’t care who makes them). There is an antidote to commodiation, that is
customisation. Customising a good turns it into a service, because it was done for a
particular person and delivered on demand to that particular person.
The last 20 years services are being commoditized as well (long-distance telephone
service). So what happens when you customize a service?? You turn it into an experience.
We are shifting to an experience economy
Challenge 2: Amazing paradox
3 ways of innovating
“.. modern economies are both service economies and economies of innovation.
Paradoxically, they are not regarded as economies of innovation in services. It is as if
service and innovation were two parallel universes that coexist in blissful ignorance of each
other”
→ In the traditional model, a central challenge is the difficulty to dig out all relevant issues
before entering the real markets. The length of the process and the considerable resources
required are problems, too. In smaller companies, external funding is often the prerequisite
for this model
Innovation Management
8 open-ended questions
- 6 questions of 10 points
- 2 questions of 5 points
- Paper based exam
,Lecture 1: Introduction to Service Innovation Management
Services defined
Service = The application of competences for the benefit of another
- Deeds
- Processes
- Effort (performances)
Tangibility spectrum
From 4 to 7 P’s
Not only product, place, promotion, price but also people, physical evidence and process
IHIP paradigm
These characteristics make services different from products
- Intangibility
- Heterogeneity
- Inseparability
- Perishability
, Characteristics Solutions
Intangibility - Services cannot be inventoried - Focus on tangible cues
- Services cannot be easily patented - Use personal sources
- Services cannot be readily displayed or - Stimulate word-of-mouth
communicated - Create company image
- Pricing is difficult - Communicate after sale
Heterogeneity - Service delivery and customer satisfaction - Industrialise service
depend on employee and customer action - Customise service
- Service quality depends on many
uncontrollable factors
- There is no sure knowledge that the service
delivered, matches what was planned and
promoted
Inseparability - Customer takes part in production process - Training and selection
- Other customers are co-producers - Manage customers
- Problems with mass production - Multi-site strategy
- Not possible to keep in stock (franchising)
Perishability - It is difficult to synchronise supply and - Demand management
demand with services - Supply management
- Services cannot be returned or resold
- Restricted in time and place
Criticism on IHIP paradigm
→ By Lovelock
Physical acts Physical acts to Non physical acts Processing of
to customers’ owned objects to customers’ information (e.g.
bodies (e.g. (e.g. freight minds (e.g. news) internet banking)
health care) transport)
Intangibility Misleading Misleading Yes Yes
(performance is (performance is
ephemeral but ephemeral but
experience may may physically
be highly transform
tanbile) possession in
tangible ways)
Heterogeneity Yes Many exceptions Many exceptions Many exceptions
(can often be (can often be (can often be
standardized) standardized) standardized)
Inseparability Yes No (customer Only when the Many exceptions
usually absent performance is (customers often
during delivered ‘live’ absent during
production) production)
Perishability Yes Yes Many exceptions Many exceptions
(performance can (performance can
often be stored in often be stored in
electronic/printed electronic/printed
form) form)
, The challenges
Challenge 1: Towards an experience economy
Commodities are things that you grow in the ground, raise on the ground or pull out of the
ground (vegetables, animals). Basis of the agrarian economy.
After the industrial revolution, commodities were used as raw material to be able to
manufacture goods. These goods become the predominant economic offering.
Last 50/60 years, goods have become commoditized. Goods are treated like a commodity
(people don’t care who makes them). There is an antidote to commodiation, that is
customisation. Customising a good turns it into a service, because it was done for a
particular person and delivered on demand to that particular person.
The last 20 years services are being commoditized as well (long-distance telephone
service). So what happens when you customize a service?? You turn it into an experience.
We are shifting to an experience economy
Challenge 2: Amazing paradox
3 ways of innovating
“.. modern economies are both service economies and economies of innovation.
Paradoxically, they are not regarded as economies of innovation in services. It is as if
service and innovation were two parallel universes that coexist in blissful ignorance of each
other”
→ In the traditional model, a central challenge is the difficulty to dig out all relevant issues
before entering the real markets. The length of the process and the considerable resources
required are problems, too. In smaller companies, external funding is often the prerequisite
for this model
