Service Innovation in Industrial Contexts

Both academics and practitioners emphasize the importance for product firms of pursuing service innovation. Despite a strategic focus on service-led growth, however, many firms struggle to succeed with their service innovation initiatives. In order to increase our understanding of the nature of service innovation in product firms, this chapter discusses the specificities in, and dynamics of, service offerings, service processes, and business models in industrial contexts. First, it outlines key differences between new product development and new service development, and highlights issues like sales and delivery, which firms frequently fail to accomplish. While product development is generally ‘back heavy’ with many resources required for prototyping and technology development, service development is more ‘front heavy’ with more weight placed on market introduction, pilot testing, and securing the skills, systems, and infrastructures for sales and delivery. In terms of service offering innovation, a taxonomy based on service focus and revenue model is presented. In order to better understand service process innovation, Larsson and Bowen’s (1989) service design typology is then revisited. Finally, common service business model archetypes are introduced and discussed.