There’s a joke I often hear from CEOs: There are three ways to lose money–gambling, divorce and innovation. For the latter, conventional wisdom says that expenditures allocated under the umbrella of innovation cost millions and almost always fail.
But there’s the rub:
How do you increase revenues and profits in saturated markets?
To do so, every company in every industry needs an innovation strategy — whether it’s management innovation (GE), design-led innovation (Apple), R&D-led innovation (3M), business-model innovation (Product Red), high-tech product innovation (Amazon), needs-based innovation (PepsiCo), operational innovation (Toyota), consumer goods packaging innovation (P&G) or service innovation (Rolls Royce Engines).
In the future, service innovation (SI) will be one of the most effective ways to bolster revenues and differentiation in increasingly saturated markets.
It can be defined through three core areas: First, there is innovation in new or improved service
products, for example, the ZocDoc mobile app, a free service that allows people to easily find doctors nearby who accept their insurance, to view available appointment times, and simply click
to book an appointment. Another example is OnStar’s First Assist service that provides drivers in distress access medical professionals 24/7.
Second, there is innovation in service processes such as Cox Communications’ new Geospatial Enterprise Mapping System (GEMS), which merges prospect, customer and network data so Cox can minimize on-site inspections at prospect locations to lower Cox’s carbon footprint. Finally, there is organizational innovation like
Kinek’s reliable network of 1000-plus delivery centers that enable shoppers across North America to have items shipped from any source worldwide to secure “KinekPoint” destinations.
It’s not (yet) buzz-worthy, but it is in an organization’s best interest to consider the merits of service innovation. Service innovation can help CMOs develop new solutions with an added-value customer interface, like Uber, which connects riders with drivers of luxury cars looking to earn some extra money; that could be a game-changer in the transport category. Then there are new distribution methods such as the awesome mix of social media and e-commerce strategies that Burberry has with its “direct-to-buy,” offering fashion direct from the catwalk within minutes of seeing it. Or a novel application of technology to the service process such as SnapChat, a communication service that enables the user to send content to another user and have the content crushed within a designated time.
Then there are new forms of operation within the supply chain, such as Transclick, that by combining real-time language translation with mobile email, instant messaging and SMS , enables linguistically isolated
communities to collaborate and transact across the language barrier. Finally, new ways to organize or manage services similar to Discover Card that has created a real-time marketing campaign management tool that permits credit unions to deliver targeted messages and offers via multiple channels based on real-time transaction data. Or Toyota’s approach: Instead of giving money, they donate efficiency to 20 philanthropic organizations they help to improve, including Food Bank in the US.
Even in light of these successes, there are a host of reasons why companies overlook the inherent value of service innovation. While some fail to develop sufficient insight into their targeted consumers, others fail to connect service innovation to an explicit vision for their organization, or to the fabric of their brand(s). Pundits cite weak links between business strategy and the product portfolio, the dearth of management support and lack of resources as potential factors contributing to failed service innovation.
Service innovation is seldom executed properly, but when it is, it typically fulfills three key questions: First, is there a unique idea here? Second, is there an understanding of future market needs? Most important, can the CMO generate profitability from either a low-cost base or a service innovation that cannot be easily duplicated?
Service innovation is invaluable, but difficult to achieve. On one hand, service innovation is the most distinctive form of innovation and the hardest for competition to copy. But as different markets continue to become more saturated with new revenue streams and distinctive product offerings, CMOs across industries will look to new ways to increase or retain historic profitability levels. For many, service innovation will provide the answer and sooner than many CMOs might realize.
Now more than ever, service innovation is key to growth, to acquiring and sustaining competitive advantage, and to building shareholder value. However, service innovation often requires a change in corporate culture, and that is hard to sustain without significant investment and is difficult if the CMO’s focus is product-led initiatives. One thing is for certain, service innovation simply reflects the new battleground of business that will push technological advances and allow CMOs to achieve opportunities across every industry that change the world.