Are service firms innovative and how can we tell?

15 May 2018 17:16

Are service firms innovative and how can we tell?

Service innovation is important. But how can you manage if you do not measure? An open invitation to global research cooperation in measuring perceived innovativeness – a new approach!

What service quality meant for the field of service marketing in the last part of the 20th century, service innovation can do for our field in the first part of the 21st century.

Realizing this, Center for Service Innovation (CSI) at NHH - Norwegian School of Economics embarked on an ambitious research project in 2014. There were three main questions we wanted to address:

  • How may – if at all - innovation be different from quality?
  • What could be a good way to measure service firms’ innovativeness?
  • What are antecedents to and consequences of service firms’ innovativeness?

Like quality, innovations are a function of what firms do, what customers do and how customers perceive the value of innovations, i.e. value in use. From this we draw that customers are the better judges of innovations. But how do customers perceive an innovation?

After numerous interviews of consumers of different ages, gender, and cultures one findings stood out: consumers in general perceive service innovations at an aggregate level as changes in the firms’ market offering, i.e. categories, rather than changes in attributes. From this it follows that despite firms’ claim that they innovate (e.g. innovation budget, R&D people employed, etc), if customers do not cognitively register any change in the market offering, it did not happen! In the consumer behavior literature, we know this as the “Just noticeable difference” phenomenon.

By combining what customers perceive and where firms innovate, we identified four main innovation areas, each measured using multiple items:

  • Value proposition
  • Value delivery
  • Relationship experience
  • Interactionspace

These areas are assumed to be positively correlated with Perceived innovativeness (PI) which is positively correlated with Perceived relative attractiveness (PRA) which is positively correlated with Customer loyalty.

Findings from a large national representative sample of 80 firms, each with 300 customers, in 20 industries, support our claim that Norwegian service firms are perceived as more predictable (i.e. high perceived quality and low perceived innovativeness) than market drivers (i.e. high perceived quality and high perceived innovativeness). In some cases, we will claim that quality is too high which most likely will generate a negative return on quality if increased further.


An open invitation

Today, we are proud, honored, and delighted to announce that The Norwegian Innovation Index (NII) is going international by joining forces with Rockbridge Associates and the Social Innovation Collaboratory at Fordham and Service Research Center (CTF) at Karlstad Business school.  The general idea is that by using a common method, we can share data between nations and thereby gain a deeper understanding by comparing service firms within the same industry across countries.

“We are excited about working with Center for Service Innovation (CSI) at NHH - Norwegian school of Economics and the Social Innovation Collaboratory at Fordham. They are leaders in the study of innovation, and will be great partners as we transfer the ideas and methodology of the NII to the U.S. market" says Gina Woodall, President, Rockbridge Associates, Inc.

"With the Swedish Innovation Index, we can provide a more nuanced and holistic picture of what innovation in companies can be, it is no longer just a matter of patents and numbers showing R&D expenditure" says Dr. Per Kristensson, professor & Director CTF, Karlstad.

Building on the idea of sharing data, we invite leading research partners/institutions – one in each country - to this project. Please visit CSI’s webpage for more information.

If you are interested in measuring service firms’ perceived innovativeness in your country and find it in line with your research and your institution’s strategy, please do hesitate to contact Professor and Director at CSI, Tor W. Andreassen at NHH - Norwegian School of Economics.

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