Choosenick. Notes and observations on service design, as well as other interesting things/thinking. By Nick Marsh.

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A review of 'Innovation in Services: Corporate Culture and Investment Banking'

Just read an excellent article on service innovation in investment banking by Richard Lyons, Jennifer Chatman and Caneel Joyce. Lyons is the guy who came up with the best description of innovation ever. Unfortunately, the article is only available to purchase - but here are some of the key highlights:

The principle contention is that innovation in services, particularly professional services, is largely incremental, and that product innovation literature and thinking is generally anathema to such an approach. As they write “the central themes of R&D, intellectual property and breakthrough technologies often miss how service businesses evolve by steadily generating and implementing new ideas.”

The authors spend a long time examining why product innovation thinking doesn’t apply in highly collaborative and largely transparent client servicing businesses. Principally, its because knowledge travels very fast when clients employ more than one service firm!

They also explore what successful, strong, service innovation culture feels like. On the surface, a ‘strong’ culture would seem to hinder innovation, but the authors distinguish between consistency and uniformity in culture - if a firm has the right values, it doesn’t mean everyone is marching in lock step. They argue that a culture of innovation and leadership through innovation are the two vital ingredients for successful professional services firms.

They go on to outline five key distinctions between product and service innovation - for me, these are things I’m definitely aware of in the background when consulting on innovation for service firms, and they are eloquently and concisely put here:

  1. Innovation in services is distributed throughout the organisation. What norm might emphasize cultural agreement and intensity without mandating uniformity - “we agree to disagree”
  2. Innovation in services is fluid and continuous. Current research has focused on product based innovation, which is typically viewed as discreet. In contrast, in services the creative stage is intertwined with implementation and the conception is often the point of delivery.
  3. Innovation in services is broadly relevant to hiring/promotions. Substantial exposure to clients and variation in client needs require staff to be innovative and adaptable.
  4. Innovation in services is enabled by leadership. Leaders are responsible for managing the inherent paradox between a strong culture and innovation.
  5. Innovation is services balances risks and rewards. In addition to decreasing perceived risks, leaders can have a powerful impact on their organisations ability to innovate by increasing the rewards of innovation.

The authors then go on to examine some innovation models and metaphors borrowed from product innovation that don’t work in services:

  1. The innovation squad - Nope, service innovation is fluid and pervasive.
  2. The award winners - unhelpful, because of the above.
  3. The start-up - No, service innovation is incremental, so heritage helps.
  4. The sprint - “Service innovation is a marathon … if a firm consistently innovates at rate just above its competitors, it will be peerless much of the time”
  5. Leaderless innovation - not possible, as leadership is required to align individuals activities with the organisation’s overall strategies.

In short, the article argues that service innovation is very strategic, in that it requires leadership from the very top and is a long term effort, but is also very local, in that it requires smart decision making on the front line of client and customer engagements.

If you can afford the six dollars, highly recommended reading. I’ll be keeping an eye out for more of Lyon’s readable and intelligent work!

UPDATE Caneel Joyce got in touch via the comments to let everyone know that the article is now available for free download. Great! Go grab it here.
December 2nd, 2007 / Trackback / Comments