User-based Innovation in Services : Book Review

User Ecosystem: Pathway to Innovation

“The effective service innovation happens if entrepreneurial innovation group with technical capabilities can unite material, service and experience to provide market accepted new service. “

The subsequent blog post peeks into the book “User-based innovation in Services” by Jon Sundbo and Marja Toivonen and takes you to insight concepts as to how and why these concepts are useful. The subsequent sections will discuss about the interesting concepts and topics from the literature.

Before we start it’s important to understand the term ‘Users’. Let’s quickly make our understanding, users or receivers of the services are generally termed as customers, clients or consumers. The customer is the One that buys goods or services and can still resale after processing. The consumer is the one that acquires goods or services for direct use or ownership rather than resale. The client is a party for which professional services are rendered.. The “Users”  is used as super set, has full blown ecosystem which is driven socially, culturally or individually. Now when we understand users’ as the driving force for service innovation and users’ various distinctions, let’s move towards various concepts.

Innovation at the service door step

The literature talks about the innovation that can happen and be generated from user ecosystem. It also talks about various processes, methods and frameworks that can be used to create, evaluate and deploy new services for the users. Users play immense role in service innovation, as they are the beneficiaries of the new service developed. While talking about service innovation, it’s important to be aware of all the actors of the service chain and it is a good practice to identify the immediate users and potential users.

The author illustrates multiple times the crucial role of firm’s employee towards bringing innovation and generating ideas when interacting with customer. This phenomena specially can be seen by the frontline staff. Many a times front line employees have to provide “on the spot” solutions with limited resources in hand, this is where first degree of innovation happens. The term bricolage can be used to describe this innovation. The bricolage should be studied more intensely by the firms in order to provide long term innovative solutions to the users.  In order to do so, firm should take opinions and ideas from frontline staff. These ideas then can be basis for firm wide service innovation drive. In order to achieve best results from customer interaction, staff members should behave and act professionally. The various forms of observation and interviews can lead to best in class innovation.

Extend as much Possible

Extended value chain can be seen as a framework which helps innovate service by studying the users chain and values visible between the links. The extended value chain has evolved due to the fact that innovations cannot be focused only on pure services, rather it’s a combination of services, raw materials, good and experiences. The earlier approaches were purely based on actors involved, which has it’s limitations. we would suggest to use this framework to broaden the arena for innovations opportunities. The reason to reflect it from the literature is that it’s  a proven framework through experiments and is well structured framework to study the user ecosystem for service innovation. In short you explain the extended value chain as below; raw material -> processing to raw product -> refines processing -> distribution -> service -> experience (Sundbo & Toivonen 2011, 78). The extended value chain also takes us to the term servitization which is nothing but merger between services and manufacturing (Sundbo & Toivonen 2011, 95).

Business Model does Matter for New Service

We got enticed with the idea of using the business model canvas approach to develop and evaluate new service concept. The tool is very handy to use and recognizes the multidimensional parameters during developing a new service. The potential in service idea can be revealed with respect to infrastructure management, product, customer interface and financial aspects. The literature has explained the business model canvas with a nice KIBS case study for company’s business logic in international context (Sundbo & Toivonen 2011, 136).

The creator of business model canvas,  “Osterwalder” has divided the nine building blocks of the canvas based on broader areas (Sundbo & Toivonen 2011, 136). The blocks are mapped to each area as to keep the focus intact. Following vectoring explains it :

Product <> Value Proposition
Customer Interface <> Target customer, Distribution channel, customer relationship
Infrastructure Management <> Value Configuration, Capability, Partnership
Financial Aspects <> Cost Structure, Revenue Streams

Not only Co-creation but co-innovation is a trend

As mentioned at the start of this article, Users reside at the center for any service innovation.
So it’s important that users are very much involved in the service innovation process. The most fundamental and effective practices that can lead to innovations by involving users are (Sundbo & Toivonen 2011, 350) :
– Listening
– Understanding
– Dialogue

Every firm wants higher profitability. The literature talks about a managerial accounting framework which shows the ways to restructure services (Sundbo & Toivonen 2011, 352-353). The framework can be utilized by any enterprise to increase profitability by controlling various factors. The above framework is seen to be applied by one of the finnish telecom equipment vendors. The telecom firm mentioned here has achieved good results for last few quarters by putting a check on various profitability factors.

Public services are the perfect arena for analyzing the complexity of user innovation. Even though the result of government’s political nature and management tends to isolate user’s voice, public services are indeed a reflection of government’s willingness to resolve user’s needs. So why not democratizing these same services? Government openness to co-create with users (citizens) results in user’s empowerment but most importantly best alternatives of what the public services should be and be about (Sundbo & Toivonen 2011, 227). The book helps us to understand these by generating a framework for analyzing user participation in public services and describing different kinds of user’s participation.

Service employees too play an important role in co-creation. Front line employees represent an opportunity; if properly train to read user’s needs could make them advocates of service co-creation. Employee driven innovation in public services empowers the staff but also nurtures modern business strategy theories of company’s most valuable assets; treat employees good and they will treat user’s better.

Final Words

The book touches on various extremely important concepts and frameworks like bricolage, extended value chain, business model canvas and co-innovation.  One can bring service innovation if the above mentioned concepts are utilized and practiced efficiently. So, the firms are advised to listen and treat their employees and customers better to learn more about innovation opportunities.

References:

Text by Laurea SID students: Hugo Molina & Man Singh

Various User definitions from : http://www.answers.com/

Sundbo, J. Toivonen, M. (2011)  User-Based Innovation In Services

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