Managing Innovation, Design and Creativity

Chapter 24. Innovation in the service industry

The case study of the shared appreciation mortgage is an example of innovation in the service industry. It also provides some interesting insights into innovative organisations' perspective on what constitutes 'success or failure'. This chapter takes a closer look at particularities of the service industry, the role of design in developing services, and compares factors that underlie successful service development. Issues around success and failure in new product development and innovation in general are addressed in Chapter 25.

PARTICULARITIES ABOUT THE SERVICE INDUSTRY

Let us start with a few observations before we start looking at the particularities of the service industry. First, increasingly the boundary between tangible and intangible products becomes blurred. For many products it becomes more and more difficult to say whether it is a service or a product. Think about any form of leasing (a service) versus buying the product, for example, cars. Is a programme providing internet access a product or a service? Is the selling of 'weed-free fields' referred to in Chapter 18 a product or service? The second observation is that services tend to be much more profitable than products. Blumberg (1989) reported that service obtain margins of 15-25% before tax whereas product can demand only 7-11%. Not least for this reason more and more companies are either trying to tie in products with services or switch to selling services altogether. ...