Transforming markets with ICT enabled service innovations – A dynamic capabilities perspective

Purpose – Information and communication technologies (ICT) is identified as key driver for the service phenomenon. Organisations operating, for example, in traditional service sector, manufacturing industry and public sector are increasingly interested in utilizing ICT to create service innovations to enhance their competitiveness. The purpose of this paper is to explore role of dynamic capabilities in four service innovation cases, which aim to transform relatively traditional and stable markets with ICT-enabled service innovations. Design/Methodology/approach – The study adopts a qualitative research approach and is based on case study research design. The primary data has been collected from semi-structured interviews in four case studies in the areas of banking, elderly care, public sector and heavy machinery. Case study is especially suitable as a research method in this context due to the high complexity of the phenomenon and early stage of this field of inquiry. Findings –Sensing capabilities related to understanding customers’ value creation processes and value co-creation within service system were found critical capabilities for service innovations. Also understanding technological opportunities and threats had important role. However, in contrast to some previous studies, capability to seize opportunities was observed to be less dependent on technological capabilities of the company and more dependent on firms’ capabilities to integrate technological resources and capabilities within the service system. Furthermore, capability to orchestrate service development with other service system entities was found to be essential, but very challenging especially for companies who have previously focused on product development. Finally, in many cases service innovations were recognized to be heavily dependent on the management capabilities and commitment, organizational culture and learning. Research limitations/implications – Research brings dynamic capabilities approach closer to the discussions of service innovations in service science. Paper explores the role of dynamic capabilities in creation ICT-enabled service innovations. Study addresses case studies from many different sectors, which provides interesting data for comparative case analysis but also limits possibility to generalize findings. Practical implications – Non-ICT companies, who are aiming at creating radical service innovations with help of ICT, can benefit by understanding what kind of technological and dynamic capabilities are needed. Moreover, they can benefit by adopting service systems perspective on capability development. Originality/value – Study provides original empirical contribution to the practice-oriented discussion about innovation in service science. Paper introduces four case studies from domains that have not been covered in previous empirical studies combining capabilities and service innovation.