Innovation Management

Second edition

by Keith Goffin and Rick Mitchell

Chapter 3


Management recommendations

  • Irrespective of whether your organization is in the manufacturing, service, public, or not-for-profit sector, identify the role of services in your business. Consider which customer segments require particular services.
  • Identify where innovations in both the service product and the augmentations can lead to competitive advantage. Make these improvements as tangible as possible to customers.
  • Use the Gap Model to gauge the current quality of your services and identify potential improvements.
  • Recognize the need for an efficient new service development process.

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Chapter summary

Managing service innovation involves particular challenges that are relevant to both manufacturers (facing the need to provide more services) and the service sector. This chapter showed:

  • The leading role of the service sector in developed economies and the increasing importance of services for manufacturers.
  • That service products are inextricably linked to their production and delivery – the service augmentation. Service augmentation, including the environment in which the service is delivered, has a strong influence on customer satisfaction.
  • The intangibility, customer contact, inhomogenity, non-storability and the multifaceted quality of services all have implications for the management of innovation.
  • Managing service quality requires an awareness of the customer’s perception plus management of the core service product and the service augmentation. The Gap Model is a useful tool for this.
  • New service development is challenging because of the nature of services. A suitable management process is required and this must consider not only the product itself but also the augmented service offering. The process also needs to ensure good teamwork, spanning the front- and back-office boundary.

In the next five chapters, each of the elements of the Pentathlon Framework will be considered.

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Recommended reading

1. Johnston, R. and Clark, G., Service Operations Management (London: Financial Times - Prentice Hall, 2001). [Leading textbook on the management of services, including discussions on quality and new service development.]

2. Johne, A. and Storey, C., ‘New Service Development: A Review of the Literature and Annotated Bibliography’, European Journal of Marketing, Vol. 32, No. 3/4 (1998), review of the research into new service development.]

3. Tidd, J. and Hull, F.M. (eds), Service Innovation: Organizational Responses to Technological Opportunities & Market Imperatives (London: Imperial College Press, 2003). [Useful collection of readings on the latest research on innovation in the service sector.]

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Learning objectives

  1. Look at the important role of services in the economy.
  2. Introduce the terminology of services and manufacturing and describe the characteristics of services.
  3. Identify the specific challenges in managing innovation in services.
  4. Identify the key issues to be addressed in developing new service products.

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Multimedia material

  • The Harvard Business School video Time Based Competition has a very good illustration of innovation in healthcare. It shows how Karolinska Hospital in Sweden applied just-in-time principles to speed up surgery.
  • The Hollywood movie Falling Down with Michael Douglas (1993) has a sequence that illustrates the Gap Model. It shows Douglas in a fast food outlet, failing to have his expectations met.

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