CHAPTER TWO

2.0 REVIEW OF RELATED LITERATURE

2.1 COCEPTUAL FRAMEWORK

2.1.1 CONCEPT OF SERVICE AND SERVICE INNOVATION

Traditionally services are described as elements which cannot be touched; intangible. Due to their intangible character a service cannot be viewed as an object and in that sence are not reproducible. A service is viewed as an activity or process and no transfer of ownership takes place. Furthermore, service are interpreted as heterogeneous concepts, every service is unique and cannot completely be reproduced. Production and consumption of services takes place simultaneously in co-operation with the customers, it is hardly possible to separate these elements or produce them in advance and store them until they are requested (Gronroos, 2000). Recently however, scholars start to question the unique characteristics of service (Lovelock, 2004). For example, it is possible to store service request handled at automated helpdesks. Times have changed and due to the use of new techniques and ICT applications, new service options occur. Since the debate is still ongoing it is not explicitly included in this report.

A service innovation is a new service or such a renewal of an existing service which is put into practice and which provides benefit to the organization that has developed it; the benefit usually derives from the added value that the renewal provides to the customers. In addition, to be an innovation the renewal must be new not only to its developer, but in a broader context, and it must involve some element that can be repeated in new situations, i.e. it must show some generisable features(s). A service innovation process is the process through which the renewals described are achieved (Toivonen & Tuominen, Emergence of Innovations in Services: Theoretical discussion and two case studies, 2006)

2.1.2 TYPES OF INNOVATION

This section defines the innovation types of service firms; although it might be interesting to define outcome characteristics like technological - non-technological, esthetical – non esthetical. We prefer to make use of a broader angle, and during this section we follow the ideas of the Community Innovation Survey (2008), Tidd & Bessant (2009) Flikkema, Kwakman, Spaargaren en Vos (2010) who focus mainly on the forms and aspects of service innovation

2.1.2.1 Various forms of service innovation

Different authors address possible types of service innovation (e.g., Sunbo & Galouj, 2000; Preissl, 2000; Damanpour, Walker & Avellaneda, 2009). Traditionally, we can distinguish three main forms of service innovation (Tidd & Bessant, 2009; Flikkema, Kwakman, Spaargaren & Vos, 2010), process innovation, product innovation and organizational innovation. During this section we prefer to highlight the innovation types of the Community Innovation Survey (2006-2008) which is a highly valuable and recognized innovation monitor. The Community Innovation Survey incorporates these three innovation types as well, although some adjustments are needed. First, it is very hard for service firms to clearly differentiate between process innovations and organizational innovations (Preissl, 2000), because these two types of innovation are directly related to each other. Rearrangement of the workforce for example automatically results in a different way of operating. Secondly, the CIS incorporates both service and product innovations in the term product innovation. We prefer to highlight the differences between products and services and provide them with a unique service innovation definition. Finally, the CIS incorporates environmental innovation, due to an increasing interest for social responsible entrepreneurship. Nevertheless, it might be difficult for service firms to differentiate between environmental and process or marketing innovations.

Process innovation

A process innovation is the implementation of a new or significantly improved production process, distribution method, or support activity for goods or services. Process innovations must be new to your enterprise, but they do not need to be new to your market. The innovation could have been originally developed by your enterprise or by other enterprises” (CIS 2008).

Product innovation

A product innovation is the market introduction of a new or significantly improved good or service with respect to its capabilities, user friendliness, components or sub-systems. Product innovations (new or improved) must be new to your enterprise, but they do not need to be new to your market. Product innovations could have been originally developed by your enterprise or by other enterprises” (CIS 2008).

Recombinatorial innovation

A recombinatorial innovation is the commercialization of a new composition of services or products and services, that previously did not existed on the market in which the firm operates”( Flikkema et al. 2010).

Marketing innovation

A marketing innovation is the implementation of a new marketing concept or strategy that differs significantly from your enterprise’s existing marketing methods and which has not been used before. It requires significant changes in product design or packaging, product placement, product promotion or pricing. Exclude Seasonal, regular and other routine changes” (CIS 2008).