“Service Innovation: Managing

Innovation from Idea Generation

to Innovative Offer”

Date: August 2010

Author: A.H. (Hanneke) Vos

University of Twente

Faculty of Management and Governance

Master thesis, Business Administration, Service Management Track

Supervisory committee

Internal supervisors: prof.dr.ir. L.J.M. Nieuwenhuis, University of Twente

prof.dr. C.P.M. Wilderom, University of Twente

External supervisor: F.D. Spaargaren Msc Exser, Dutch centre for service innovation

prof.dr. F. Kwakman, Nyenrode Business University

dr. M.J. Flikkema, VU Amsterdam

Project initiator: Exser, Dutch centre for service innovation

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Abstract
This descriptive report has explored the relation between management in service firms,
service characteristics and firm characteristics during the innovation processes of service
firms operating at the Dutch market. The research items have been profiled on the basis
of a theoretical review of the service management literature. Differences in definitions,
typologies, approaches, schools of thought, characteristics, innovation types, dominant
innovation motives, service design, organizational features and management have been
considered, and it is proposed that the organization of an innovation process within
service firms is contingent with the type of service offered. The report concentrates on
the relation between service firm characteristics, service characteristics and management
aspects of the innovation process within service firms. In order to highlight these
differences, the service framework of Slivestro et al. 1992, extended with a new
description “installation service” and the innovation descriptions of the community
innovation survey (CIS) extended with the new description “recombinatorial innovation”
are used to guide the research activities. Research in service innovation is highly relevant
since great changes take part in this growing industry. During the last three decades scale
and complexity of services increased considerably due to increased competition, social
and political changes, critical customers and easy access information. All these changes
force service organizations to innovate. Despite the widely acknowledged importance of
the service industry, it is the least studied and least understood part of the economy. A
valuable contribution to the conceptual clarity of service innovation initiatives and
managerial aspects is presented in this report, concluding that the innovation process of
service firms is contingent upon their service characteristics and type of innovation.

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Table of contents
Abstract ......................................................................................................................................... 2

Table of contents ........................................................................................................................... 3

Preface........................................................................................................................................... 7

1. Introduction .......................................................................................................................... 8

1.1 Scientific relevance ............................................................................................................. 9

1.2 Governmental relevance .................................................................................................. 10

1.3 Exser, Dutch centre for service innovation ....................................................................... 11

2 Research Questions ............................................................................................................. 12

2.1 Main question .................................................................................................................. 12

2.2 Sub questions ................................................................................................................... 12

2.3 Literature search .............................................................................................................. 13

2.4 Report Structure ............................................................................................................... 13

3 Theoretical framework ........................................................................................................ 14

3.1 Services: a definition ........................................................................................................ 14

3.2 Service typology ............................................................................................................... 15

3.2.1 Silvestro et all’s service archetypes ............................................................................. 17
3.2.1.1 Silvestro et all’s service dimensions .................................................................... 17
3.2.1.2 Silvestro et all’s service descriptions .................................................................. 18

3.3 Service innovation: a definition ........................................................................................ 19

3.4 Service innovation approaches ........................................................................................ 20

3.5 Schools of thought ........................................................................................................... 21

3.6 Characteristics of service innovation................................................................................ 22

3.7 Innovation types............................................................................................................... 23

3.7.1 Forms of service innovation ........................................................................................ 23
3.7.1.1 Process innovation .............................................................................................. 23
3.7.1.2 Product innovation ............................................................................................. 23
3.7.1.3 Recombinatorial innovation ............................................................................... 24
3.7.1.4 Marketing innovation ......................................................................................... 24
3.7.1.5 Environmental innovation .................................................................................. 24

3.8 Dominant motives for service innovation ........................................................................ 24

3.8.1 Internal motives of service innovation ........................................................................ 24
3.8.2 External motives for innovation .................................................................................. 25
3.8.2.1 Social change motives ......................................................................................... 25
3.8.2.2 Technological change motives ............................................................................ 25
3.8.2.3 Economic change motives .................................................................................. 25
3.8.2.4 Environmental change motives .......................................................................... 26
3.8.2.5 Political change motives ..................................................................................... 26

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 3.8.2.6 Value-ethical change motives ............................................................................. 26

3.9 Service innovation models................................................................................................ 27

3.9.1 Edvardsson’s strategic frame of reference (1997)....................................................... 27
3.9.1.1 (Service) concept ................................................................................................ 27
3.9.1.2 Service process ................................................................................................... 28
3.9.1.3 Service system .................................................................................................... 28
3.9.2 Toivonen, Tuaminen & Brax’s General, systematic service innovation model, based on
Edvardsson’s model (2007). ...................................................................................................... 29
3.9.3 Den Hertog’s four dimensional model of service innovation, (2000) .......................... 29
3.9.3.1 Dimension 1: new service concept ..................................................................... 30
3.9.3.2 Dimension 2: new client interface ...................................................................... 30
3.9.3.3 Dimension 3: new service delivery system ......................................................... 30
3.9.3.4 Dimension 4: technological options .................................................................... 30

3.10 Organizational features and management practices ...................................................... 31

3.9.3 Innovation Energy ........................................................................................................ 32
3.10.1 Phases of the innovation process ............................................................................ 32
3.10.2 Idea generation ....................................................................................................... 33
3.10.3 Idea selection .......................................................................................................... 35
3.10.3.1 Centralization versus Decentralization ............................................................... 35
3.10.3.2 Selection systems ................................................................................................ 35
3.10.4 Resource mobilization ............................................................................................. 36
3.10.5 Resource allocation ................................................................................................. 36
3.10.6 Design and development ........................................................................................ 37
3.10.7 Testing/ Evaluation .................................................................................................. 38
3.10.8 Service launch ......................................................................................................... 38

4 Methodology ....................................................................................................................... 40

4.1 Research design ............................................................................................................... 40

4.2 Measurements ................................................................................................................. 41

4.3 Pre-testing the web survey ............................................................................................... 41

4.4 Data collection and sampling ........................................................................................... 41

5 Data analysis ....................................................................................................................... 43

5.1 Respondents ..................................................................................................................... 43

5.1.1 Demographics and response ....................................................................................... 43

5.2 Descriptive statistics......................................................................................................... 44

Firm size .................................................................................................................................... 44
Annual turnover ........................................................................................................................ 45
Service percentage annual turnover......................................................................................... 45
Service Sector ........................................................................................................................... 46
Profession of respondent ........................................................................................................ 47
Innovation type description ...................................................................................................... 47
Innovation budget assigned ...................................................................................................... 48
Number of moths from investment to (market) introduction. ................................................ 48
Innovation responsibility .......................................................................................................... 49
Education level.......................................................................................................................... 49
Part-time innovation employees .............................................................................................. 50
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 Fulltime innovation employees ................................................................................................ 50
Evaluation criteria ..................................................................................................................... 51
Service characteristics .............................................................................................................. 52
Professional services ................................................................................................................. 55
nstallation services ................................................................................................................... 55
Mass services ............................................................................................................................ 56
Shop services ............................................................................................................................ 56
Best suitable service description .............................................................................................. 57
Most important customer ........................................................................................................ 57
Internal innovation motives...................................................................................................... 58
Reactive elements to innovate ................................................................................................. 58
Idea generators ......................................................................................................................... 59
Most important selection criteria ............................................................................................. 60
Profession involved within the decision-making process ......................................................... 60
Financial resources qualified .................................................................................................... 61
Innovation spending in relation to professions ........................................................................ 62
Innovation spending in relation to knowledge and development ............................................ 63
Innovation themes assigned ..................................................................................................... 64
Innovation goals formulated and presented ............................................................................ 64
Profession responsible for innovation ...................................................................................... 65
Profession responsible for market launch/ implementation .................................................... 65
Importance of customers in relation to the innovation process .............................................. 66
Autonomy of the team ............................................................................................................. 67
Professions involved within the innovation team .................................................................... 67
Testing and embededment of innovation ................................................................................ 68
Protection instruments ............................................................................................................. 68

5.3 Depth, analysis ................................................................................................................. 69

Management characteristics related to firm size ..................................................................... 69
Management characteristics related to service description .................................................... 72
Management characteristics related to innovation types ........................................................ 74
Management characteristics related to service percentage of annual turnover ..................... 76
Management characteristics related to customer type ........................................................... 78
Service characteristics vs. service description .......................................................................... 80

6. Conclusion and recommendations....................................................................................... 81

7. Limitations .......................................................................................................................... 85

8. Appendix ............................................................................................................................. 91

a. Web survey ........................................................................................................................... 91

List of Figures
 Figure 1: EU service employment and GDP Figures, CBS (2008)
 Figure 2: The macroeconomic shift from Manufacturing to services, tipping point 1987, Tekes
(2007)
 Figure 3: Research model
 Figure 4: Service typology Viitamo (2007)
 Figure 5: Service Archetypes, Silvestro et al. (1992)
 Figure 6: concept model, Edvardsson (1997)
 Figure 7: Service process, Edvardsson (1997)

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  Figure 8: Service system, Edvardsson (1997)
 Figure 9: Four dimensional model of service innovation, Den Hertog (2000)
 Figure 10: innovation process steps
 Figure 11: Types of innovation processes, Toivonen et al. (2007)
 Figure 12: adjusted research model
 Figure 13: significant differences management/firm size
 Figure 14: significant differences management/service description
 Figure 15: significant differences management/innovation types
 Figure 16: significant differences management/service percentage of annual turnover
 Figure 17: significant differences management/customer type
 Figure 18: significant differences service characteristics/service description
 Figure 19: Low skilled/High skilled Service archetype, Nieuwenhuis, Vos, Flikkema and Spaargaren,
(2010)

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Preface
This Master thesis, from now on called report, is the final research project for receiving
the Master of Science degree in Business Administration, specialism Service Management,
at the University of Twente. The research has been carried out at Exser, Dutch centre for
service innovation.

Interest in service research has emerged from my personal nature and hospitality
background. I was employed at the hospitality industry for almost ten years and received
my Bachelor in International Hospitality Management (2005). After graduating I wanted to
gain more insight in the broad service industry and participated in a fast forward
management traineeship program. During this program I gained knowledge from logistic,
governmental, education and training services. These new insights on services and the
different ways in which they are organized triggered the start of my academic journey and
research.

I wish to thank all people whose help in creating this thesis is greatly appreciated. I
specially want to thank my supervisor at Exser Fabian Spaargaren, for his positivism,
support, advice and encouragement. I thank my supervisor at the University of Twente
Bart Nieuwenhuis, for his enthusiasm, critical insights, support and pragmatism. Meindert
Flikkema of the Vrije Universiteit Amsterdam, for his excitement, suggestions and
methodological insights. Frank Kwakman from Nyenrode business University, for his
valuable start-up assistance and background support. Inge Boomkamp, for her assistance
at selecting best suitable statistical tests. It has been a great pleasure to work with you all.

In addition, I really would like to thank Celeste Wilderom and Elfi Furtmueuller for their
enthusiasm while organizing the Master track Service Management at the University of
Twente. The way they communicate with their students, their passion, flexibility and
supervisor work were of great assistance during my academic training. It has been a
delight working with you.

Also I want to thank my colleagues at Exser for their interest in my research and a
pleasant working atmosphere.

Finally I would like to direct my warmest thanks to my parents, families and friends for
always supporting me in every way they possibly could.

Almere, August 2010

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1. Introduction
75% of the Dutch Gross Domestic Product is realized through services, and around 80% of
the Dutch working society is employed in this industry (CBS, 2008). An equivalent
distribution is visible throughout Europe (Figure 1, CBS, 2008). Despite the widely
acknowledged importance of the service industry, it is the least studied and understood
part of the economy (Flikkema & Jansen, 2004).

Services have been around since the start of human life and diversity has always been
high. Due to this diversity, services cannot be viewed as a “common” phenomenon,
instead a differential view, highlighting their operational differences is required.

During the last three decades, scale and complexity of services increased considerably.
Higher pressure from competition, due to globalization and fast growing market like China
and India, social and political changes, critical customers and easy access information
resulting in increased customer demands are examples of dimensions forcing
organizations to provide services in an increasingly effective, more efficient and
sustainable manner.

The service sector expelled the manufacturing industry from its first position, as
presented in Figure 2; the European economies reached the tipping point around 1987.
From 1987 on, the western service GDP percentage points have grown to almost 80% and
other economies are rapidly following.

But services are not only provided in the traditional service sectors. While zooming in on
the manufacturing industry the growth of services is also clearly visible. Manufacturing
firms increasingly start to concentrate on the provision of service activities beyond their
product activities. This phenomenon is described in literature as “Servitization”
(e.g.Vandermerwe & Rada,1988; Wise & Baumgartner, 1999; Mathieu, 2001; Shawney et
al., 2004; Brax, 2005; in Almeido, Cauchick Miguel, & Da Silva, 2008, Neely, 2009). In short
“Servitization” describes the ongoing development of manufacturing organisations
increasingly developing product related services, with the aim to differentiate and gain
competitive advantage.

Figure 1: EU service employment and GDP Figures, CBS (2008) Figure 2: The macroeconomic shift from
Manufacturing to services, tipping point 1987,
Tekes (2007)

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As became clear, service activities are necessary requirements to stay competitive in
today’s market environment. However, where did this enormous growth in services came
from?

The market environment has changed, constant development of technique results in easy
access information, increased knowledge and fast communication possibilities “In the
words of the Boston Consultancy Group consultants, most firms in the global economy are
now forced to compete with everyone, from everywhere, for everything” (Sirkin et al.,
2008 in Dervitsiotis, 2010). These changes do not only affect firms but influence the
behaviours of customers as well. As a result, firms constantly have to adapt to changing
circumstance and customer demands in a rapid way, which makes insight on innovation
crucial. All these changes provide new knowledge while they also demand new insights
and ways of operating. Opeartionalization of this new knowledge results in a rising
demand for services. In order to underpin this statement, couple of developments are
highlighted.

First of all, globalization (Tidd & Bessant, 2009; Dervitsiotis, 2010), the breakdown of
traditional trade barriers and the collapse of the Berlin Wall in 1989 were the first signs of
today’s global economy. Nowadays, firms have to anticipate on competition from
different markets. Globalization does not stand still, emerging markets like Brazil, Russia,
India and China are ready to become important players, resulting in an increased range of
competition as well as the availability of (unfamiliar) markets and segments. In order to
stay competitive, firms need new knowledge and have to work on distinctive ability.
Secondly, the Increased use of IT applications (Tidd & Bessant, 2009), made it possible to
share information in a rapid way, resulting in well informed and connected parties.
Furthermore the use of IT creates new possibilities for marketing purposes, operational
processes etc. Thirdly, as a result of globalization and IT, new communication channels are
possible resulting in higher accelerations of knowledge production, (Slater & Naver, 1995;
Bass, 2000; Jansen, Vera & Crossan, 2009). The organisation for economic co-operation
and development (2009) for example estimates that the public and private sector
together spent around $1 trillion each year in order to create new knowledge. Another
result of new communication channels results in the fourth point, (social) community
building and networking. Community building provides new challenges in the gathering of
information (Ahuja, 2000; Burt, 2000). Finally, the accessibility of IT increased the
availability of prototyping and simulation tools which even reduced the separation
between users and producers (Tidd & Bessant, 2009).

1.1 Scientific relevance

Research on innovation splits into two main streams of inquiry (Adler, 1989 in Brown &
Eisenhardt, 1995). Firstly, an economic oriented tradition concentrating on innovation
from a macro economic perspective, aiming at differences between innovation patterns
across and within countries and sectors and the evolution of technology. Secondly, an
organizations oriented tradition, focusing on innovation from a micro level perspective,
here the focus is on structures and processes. Although this report includes some
economical aspects it mainly focuses on the organizational tradition.

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As presented during the introduction of this report, the interest for innovation in services
increased considerably during the last three decades. Traditionally innovation
management is studied with a great focus on the manufacturing industry, in which
technology was leading. However, in line with the enormous growth of services, new
management approaches need to be defined to guide innovation activities within services
(Frei, 2008).

While studying service firms, there are at least two complicating factors. The first one
refers to a multidisciplinary analysis needed. Services include different domains of
knowledge, customer types, technology utility etc. A multidisciplinary approach provides
insight into the distinctions between the various innovative activities within the service
industry (Vence & Trigo, 2009).

The second complicating factor refers to the high degree of heterogeneity of services. At
the start of the service innovation research, around 1980 services were viewed as
homogeneous while in fact they are heterogeneous. For example, there are not only
differences between hotels and consultancy firms, but even within these branches e.g., a
conference hotel operates differently than a leisure hotel. Both service forms have
different characteristics, not directly comparable. This situation describes both
intrasectoral as well as intersectoral heterogeneity (Flikkema, 2008; Vence & Trigo, 2009).

The visible growth, the need to innovate and the heterogeneous character of service
industries requires more research on different behavioural innovation patterns within this
essential industry. At the moment, there is little fragmented information available
specifically concentrating on managing innovation in service firms. A comprehensive
innovation management model in service firms is not yet apparent in the literature and
increasingly needed to guide innovative activities (Den Hertog, 2000). The aim of this
conceptual research is to contribute to more clarity on the management of innovation
within service firms.

1.2 Governmental relevance

The government plays a contributive role in relation to service innovation, e.g. funding,
regulation and procurement influence the activities of service firms. The current
innovation policies of most ministries of economic affairs are almost entirely focused on
technological innovation in the narrow sense of the term (Viitamo, 2007; Flikkema, 2008),
these policies need to be revised.

In today’s rapid changing environment innovation is necessary to keep up with

competitors or one step ahead. At first sight it seems irrelevant to stress the importance
of continuous innovation, since innovation is assumed as being a familiar business
element already. The real world is actually disappointing, most service firms are not ready
for innovation yet (Preissl, 2000), which is a problem for both firms, as well as the socio
economic development of the Netherlands. Services are of great relevance to our
economy and workforce, as well as, our export activities. According to the Dutch Minister
of Economic Affairs (2009), Service innovation is necessary to generate more jobs and
growth, since the service industry keeps the Dutch economy running.

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1.3 Exser, Dutch centre for service innovation
This report is commissioned and supported by Exser, Dutch centre for service innovation.
Exser is a joint initiative of several innovative service providers and “Almere Kennisstad”.
The Dutch government, the municipality of Almere and the province of Flevoland
supported this initiative. The main goal of Exser is to reinforce the innovative growth of
the Dutch service sector, in a bid to enhance the competitive strengths of the
Netherlands. Existing innovation programs primarily focus on the development of new
technologies for the benefit of the manufacturing industry, usually with a focus on the use
of the new technologies involved. This is remarkable since technology is only one of the
factors that determine the success or failure of an innovation. Exser focuses on the
development and provision of knowledge and experience involving the social and
management-related elements of innovation. Exser promotes a culture for excellent
service innovation, allowing service providers and government to benefit from service-
oriented research and education in the Netherlands.

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2 Research Questions
The aim of this report is to contribute to the research on management of service firms
and focuses on the scientific domain of innovation in service. The research is explicitly
designed to gain insight in the way different service firms manage their innovation
trajectories and to provide insight in characteristics of services, which may contribute to
conceptual clarity in the service domain. Based on these elements of reference, the
following research questions have been formulated:

2.1 Main question

Research question: How do the management of innovation in service firms, service
characteristics and firm characteristics relate?

In order to guide the research, the above research question is divided into sub questions
presented below.

2.2 Sub questions

1. Where do ideas for innovation in service firms come from?
2. How are ideas for innovation in service firms transformed into marketable and
valuable offers for new or existing customers?
3. Which characteristics of service firms, service type, innovation type, and customer
served vary in relation to the management of innovation in service firms?

The sub questions as presented above are summarized in the following research model.

Figure 3: Research model

The first block of interest refers to the traditional NACE ("Nomenclature statistique des
Activités économiques dans la Communauté Européenne") classification of economic
activities. This classification is used to ensure that the sample is representative for the
service sector. The second block concentrates on the strategic motives of service firms to
innovate. Why are service firms performing innovative activities and are there differences
between sectors, sizes and operational markets?

Thirdly the way innovations are managed are included in this research. In respect to
management, the primary focus lies on process elements; how are ideas generated and
translated into opportunities, how are these opportunities selected and how do they
contribute to the overall strategy and create value?

The final building block sheds light on the outcomes of the innovative initiatives. What are
the characteristics of service innovation and do differences between service types exist?

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The ultimate goal of this research is to recognize patterns in the way various types of
service firms manage innovation and to develop a better understanding of this important
industry.

2.3 Literature search

In order to find relevant articles related to concepts of service innovation, a broad range
of sources have been investigated. While selecting journal articles, impact factors of
journals are taken in consideration.

The aim of the literature review is to contribute in answering the research question and to
generate a more specific, less homogenous view on innovations and management aspects
within the service industry.

The following search engines are used to select relevant materials; Google, Google
Scholar, PiCarta, Scopus, Web of Science and SER.

In order to find relevant articles, different search items in various combinations have been
used, some of the keywords during the search process of this report are: service, services,
innovation, innovations, service innovation, service innovations, service development,
new service development, innovation in capital intensive services, knowledge intensive
services, management, managerial approaches, innovation motives, suggestion making,
idea generation etc. Furthermore, a couple of articles are selected based on personal
contacts from the authors with experts in the service management field.

2.4 Report Structure

The introduction part of this report includes an introduction to the topic, a short
description of the initiator of this report, and the main research questions. After this
introduction, the main theoretical concepts are
highlighted.
Introduction
The theoretical framework starts by introducing a
Research questions
service definition, followed by service typologies,
definitions of service innovation, approaches to Theoretical framework
service innovation, schools of thought and the role
 Service definition
of technique.  Typology
 Innovation definition
The second part, which is more micro oriented,  Approaches
with the exception of the dominant motives part,  Schools of thought
 Characteristics of services
describes models in relation to service innovation,  Motives for innovation
dominant innovation motives, management aspects  Models for service innovation
of innovation in services, types of innovation in  Service innovation proces
 Innovation types
services and possible outcome characteristics.
Methodology
The third section describes the methodology used
Analysis
to realize the research and finally in the fourth
section the conclusions, recommendations and Conclusions and recommendations
future insights are presented.

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3 Theoretical framework

3.1 Services: a definition

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.

As a result of the infinite character of services and the debate that is still going on, there is
not just one clear widely accepted definition available. Academic scholars have
interpreted service in a way that best fits their research interests and paradigms.

One of the earliest attempts to codify services is to define what services are not.

“Services are actually all those economic activities in which the primary output is neither a
product nor a construction” (Quinn & Gagnon, 1986).

A later attempt points attention to the use of capabilities and competences in order to
create a solution,

“To produce a service is to organize a solution to a problem (a treatment, an operation)

which does not principally involve supplying a good. It is to place a bundle of capabilities
and competences (human, technological, organizational) at the disposal of a client and to
organize a solution, which may be given to varying degrees of precision” (Gadrey, Gallouj,
& Weinstein, 1995).

Another option is to condense and reduce services into something a party actually offers,

“Any activity or benefit that one party can offer to another that is essentially intangible
and does not result in the ownership of anything” (Kotler, Marketing Management:
Analysis, Planning, Implementation and Control, 1997).

More recent literature emphasizes the interaction of service customers and service
producers resulting in the following definition:

“A service is a process consisting of a series of more or less intangible activities that

normally, but not necessarily always, take place in interactions between the customer and
service employees and/or physical resources or goods and/or systems of the service
provider, which are provided as solutions to customer problems” (Gronroos, 2007).
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From above mentioned definition in literature we conclude that a service cannot be
described as a product or construction. A service is an intangible element. A service is a
perception of reality. The goal of a service is to provide a solution to a customer problem
while making use of human centred competencies and capabilities. However this solution
only transfers the customers’ perception of reality, the outcome does not result in actual
ownership. In our opinion, the transformation of reality is more relevant than the
tangibility question of a product or a service. Furthermore, during the service delivery
process, cooperation between client and provider takes an essential role and influences
the customer’s perception. Based on these foundations, for the research presented in this
report we adopt the following definition of Flikkema et al. (2007):

“A service is an attempt to transform customer B’s reality C, as constructed by its

service provider A, at the request of B and frequently in cooperation with B”.
(Flikkema et al., 2007)

3.2 Service typology

Since the heterogeneity of services is high (Flikkema, 2008; Vence & Trigo, 2009), it might
be possible that different characteristics have an effect on innovation initiatives.
Consequently, insight in this heterogeneity aspect is a basic requirement for analysing
service innovation.

Typologies can be viewed as tools, assisting the description of an organizational

phenomenon, it highlights the interaction between various elements (Paswan et al. 2009).
A typology is more than a simple classification scheme. Through a service typology it
becomes possible to display the connections between multiple variables and to contribute
to the categorization of service initiatives.

During the last three decades some authors have tried to make useful classifications, in all
kind of ways, for example Silverstro, 1992; Sunbo, 1997; Lovelock, 2000; Den Hertog,
2000; Coombs & Miles, 2002; Howells & Tehter, 2004; Vence & Trigo, 2007; Aslesn &
Isaksen, 2007; Viitamo, 2007; Pyoung Yol & Woosung, 2008.

Recently the attempts to classify services are shifting from a production approach to a
knowledge economy and flexible production mode (Baker, Miles, Rubalcaba, Plaisier,
Tamminen, & De Voldere, 2008). Due to these new insights, authors (e.g., Viitamo, 2007;
Pyoung Yol & Woosung, 2008) start to make an attempt to create a taxonomies in line
with these developments. Kox and Rubalcaba (2007) for example distinguish between
operational services mainly providing standardized business services and knowledge
intensive business services (KIBS), highly focused on client-specific services with a high
knowledge content. So far, all described attempts to characterize service activities mainly
focus on the importance of client interactions during the service process. This point of
references is not surprising since the co production between customers and suppliers
provides valuable inputs in relation to design, production and delivery of services (Baker,
Miles, Rubalcaba, Plaisier, Tamminen, & De Voldere, 2008).
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Viitamo (2007) refers to the customer oriented background as well. However Viitamo
enlarged the stream of thoughts by incorporating the relative level of capital intensity in
his model. Viitamo’s first dimension concentrates on the input of labour and capital. The
second dimension gives attention to the tangibility level of input or outputs and the
complexity levels of the work that needs to be done. The aim of this dimension is to make
a distinction between capital intensive processes relying on technological assets and
capabilities and labour intensive processes based on non-technological assets and
capabilities mainly referring to skills, competences and expertise. The third dimensions,
which is not explicitly incorporated in the original model relates to the degree of
customization.

. Customization

Standardization

Figure 4: Typology Viitamo (2007)

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3.2.1 Silvestro et all’s service archetypes
Without devaluating the other existing service archetypes and typologies, in this report
Silvestro et al.’s (1992) service archetypes are used as a point of reference. We decided to
make use of this framework since it is widely used and often cited. Furthermore, it
incorporates valuable service archetypes useful to distinguish different types of service
firms. Based on the six dimensions, presented below, Silvestro et al. (1992) were able to
create a cohesive framework resulting in the identification of three service archetypes,
professional services, mass services and service shops. The different elements of this
model are elaborated below.

3.2.1.1 Silvestro et all’s service dimensions

Equipment/people focus
“Equipment-focused services are those where the provision of certain equipment is the
core element in the service delivery. People focused services are those where the
provision of contact staff is the core element in service delivery” (Silvestro, Fitzgerald, &
Johnston, 1992; original authors, Thomas, 1975; Kotler, 1980). An example of equipment-
focused service are train services, an example of people focused service is consultancy.
Customer contact time per transaction
“High customer contact is where the customer spends hours, days or weeks in the service
system, per transaction. Low customer contact is where the contact with the service
system is a few minutes” (Silvestro, Fitzgerald, & Johnston, 1992; original author, Chase,
1978; 1981).

Degree of customization
“A high degree of customization is where the service process can be adapted to suit the
needs of individual customers. A low degree of customization is where there is a non-
varying standardized process; the customer may be offered several routes but the
availability of routes is predetermined” (Silvestro, Fitzgerald, & Johnston, 1992; original
authors, Maister, 1983; Johnston & Morris, 1985; Haynes, 1990).

Degree of discretion
“A high degree of discretion is where front-office personnel can exercise judgement in
altering the service package or process without referring to superiors. A low degree of
discretion is where changes to service provision can be made on y with authorization from
superiors” (Silvestro, Fitzgerald, & Johnston, 1992; original author, Lovelock, 1983).

Value added back office/front office

“A back office oriented service is where the proportion of front-office (customer contact)
staff to total staff is small. A front-office service is where the proportion of front-office
staff to total staff is large” (Silvestro, Fitzgerald, & Johnston, 1992; original author,
Maister, 1983).

Product/process focus
“A product-oriented service is where the emphasis is on what the customer buys. A
process-oriented service is where the emphasis is on how the service is delivered to the
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customer” (Silvestro, Fitzgerald, & Johnston, 1992; original author Johnston & Morris,
1985).

Figure 5: Service Archetypes, Silvestro et al. (1992)

3.2.1.2 Silvestro et all’s service descriptions

Based on the elements above, Silvestro et al. developed three main service types as
presented below.

Professional Services
In which the customer often actively participates in the process of defining the service,
detailing his/her individual requirements; negotiation of the service specification thus
forms part of the service process (human intensive, knowledge intensive and customized
services).

Mass services
In which specifications are determined prior to the customer's participation in the service
process; they are built into the service design, rather than being individually negotiated
with each customer during the service process (capital intensive, high volumes and
standardized services).

Service Shops
Are not explicitly defined by Silvestro ET al. (1992) according to those authors, shops are
centred in the middle of the two other types. The service elements in a service shop are
modular, the customer shops the relevant elements together. In accordance to Verma
(1998) service shops are characterized by low labour intensity but high customer
contact/customization. They are similar to a job shop type of operation in manufacturing.
A service shop is able to provide varied customized services to its customers.

The often cited framework of Silvestro et al. is mainly focusing on the operational produce
processes of various types of services, which is in line with the primary focus of our
research model. The framework of Silvestro et al. is an adjustment of Schmenner’s (1986)
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industry level classification model with high and low degrees of interaction and
customization on one axis and the level of labour intensity on the other. Schmenner
(1986) identified the resulting four quadrants as service factories, service shops, mass
services and professional services (Mulligan, College, & Park, 1999). The service factory
disappeared in the model of Silvestro et al., this type of service evolved in the operations
literature into an integrated view of product and services (Silvestro, Fitzgerald, &
Johnston, 1992).

In our view the choice to exclude the service factory is no longer completely justified since
today services and production processes are slightly growing to each other within the
coming 10 years 50% of traditional products might be transferred into a total service
package (Exser/Philips Business Beyond Products seminar 2010). Together with Flikkema,
Kwakman and Spaargaren we anticipate on this trend and designed a new service
archetype known as installation services, in which customization plays an important role,
while the active participation of the customer is far less compared to professional
services.

Installation services
These services are characterized by providing customized services. Installation service
providers always try to respond to the unique customer situation. Employees are low,
middle or highly educated and understand their jobs well. Although the customization is
high, customers play a passive role during the service delivery process.

3.3 Service innovation: a definition

In paragraph 3.1, a definition of services has been presented. It became clear that there is
no general accepted definition available yet. Although authors point attention to loosely
coupled service elements they hardly provide a clear definition of service innovation as
well. Still, there are some attempts for defining service innovation, as presented below.

 “Innovations in services are a mix of reproduced (although incremental) innovations

and ‘small’ non-reproduced changes to solve single customers’ problems (what we will
also call ad hoc innovation). The latter is particularly a result of the customer
interaction process “ (Sunbo & Gallouj, 2000).

 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).

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While summarizing these statements, it becomes clear that the service innovation process
is the process through which renewals are achieved (Toivonen & Tuominen, 2006). This
process has a multidisciplinary nature, since different stakeholders are involved during the
design of the concept, the service system and launch (Edvardsson, 1997). The actual
outcome might be a combination of various existing elements or totally new offers
(Preissl, 2000). The final goal is to fulfil customer needs in a valuable (both for the
customer as well as the firm), high quality way. By combining these elements the
following definition can be given:

“Service innovation is the multidisciplinary process of designing, realizing and

marketing combinations of existing and/or new services and products with the final
attempt to create valuable customer experiences”(Flikkema et al. 2010)

3.4 Service innovation approaches

It became clear that there are no generally accepted definitions available yet. This is not
strange, scholars employed at least three approaches to describe, analyze and explain
innovation in service (Flikkema, Jansen, &, Van der Sluis, 2007; Flikkema et al., 2008; Den
Hertog et al., 2008; Chamberlin et al., 2010 ) all taking an other point of reference

The first one is the assimilation approach, focusing on technological change, innovation in
services is seen as fundamentally similar to innovation in manufacturing, that is, as the
production and the use of technologically advanced artefacts (Tether, 2005 in Flikkema,
2008), and it should therefore be studied using methods and constructs of manufacturing.
Second the demarcation approach which views service innovation as substantially
different from manufacturing, and new theories, instruments and indicators have to be
designed to understand innovation in service contexts. Finally, the followers of the
synthesis approach recognize that studies of innovation in services points’ attention to the
neglected aspects of innovation processes in general, highlighting different types of
innovation.

The latter two approaches emphasize the relevance of non-technological aspects of

innovation. In this respect, that what matters most from a global economic point of view
is the impact on manufacturing productivity, of the use of innovative services rather than
innovation in the production and development of those services (Chamerlin, Doutriaux, &
Hector, 2010). The question is which approach is right, however is there a wrong or right?

The assimilation approach seems relevant since services make intensive use of
technology. The distinguishing factor however, is the fact that service firms use these
techniques in a more creative way. On the other hand, the demarcation approach is
making sense as well since the technique use is indeed substantially different at least to
some extent. Based on these two reasoning’s it is most relevant to follow the synthesis
approach.

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3.5 Schools of thought
Besides the three innovation approaches to describe, analyze and explain innovation in
service, there are at least two schools of thought that have been popularly followed
(Chamerlin, Doutriaux, & Hector, 2010). The first one is the “supplier-dominated
perspective “mainly based on the work of Keith Pavitt (1984), who designed taxonomy of
innovation and classified service firms as being passive adopters of new technologies
developed by the manufacturing industry.

This perspective highlights the technology driven approaches on innovation that

dominated much of the innovation literature during the early 1980s till mid-1990s. The
second school of thought is known as “The Lille School” and mainly inspired by the ideas
of Gallouj. This stream argues that service innovation needs a broader perspective than
just technology. This stream is also supported today, by for example Den Hertog (2000)
who indicates that although, services play a large contributive role to innovation, they are
not merely passive recipients of other innovations, they are designers as well.
Furthermore Den Hertog argues that the recognition of the importance of non-
technological elements and approaches to service innovation is increasing.

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3.6 Characteristics of service innovation
Some characteristics of services (e.g. intangible, heterogeneous, not reproducible,
simultaneous consumption and production, no transfer of ownership, inseparable) are
already mentioned in paragraph 3.1.

Within service studies, there are quite some elements that need to be specified or need
further refinement. Although the definitions on service are still under construction, it is
clear that service innovation contains unique characteristics, presented in this part of the
report.

Service innovation can be viewed as an internally oriented and externally oriented

interaction process (Sunbo & Gallouj, 2000). Service innovation can be viewed as an
internal interaction process, i.e., a collective process in which both employees and
managers participate on informal and formal levels. Service firms treat their innovation
activities as differentiated unsystematic patterns and most of the times, in contrast to the
manufacturing industry, little attention is paid to formalized or systematic structures
(Sunbo & Gallouj, 2000).

Service innovation can also be viewed as an external process that mainly focuses on
interaction with (potential) customers, with the final goal to create high quality customer
value. Traditionally, service firms are much stronger at defining a core service surrounded
by supportive services during the delivery (Edvardsson, 1997; Sunbo & Gallouj, 2000).
However, due to Servitization, it can be argued that this difference becomes blurred. Den
Hertog (2000) incorporated this already in his research activities; “there is a difference
between highly standardized services products or formulas with quasi good characteristics
and customized services. Customized services are often based on more tacit forms of
knowledge and higher forms of co-production between service provider and customer“
(Den Hertog, Knowledge-Intensive Business Services as Co-Producers of Innovation, 2000),
these ideas fit with the ideas of Silvestro, Fitzgerald and Johnston (1992).

The rapid pace of change in technologies is affecting service design and performance
(Leek, Turnbull & Naude, 2003; Hipp and Grupp, 2005 in Carbonell et al. 2009). In relation
to technique, Gallouj and Weinstein (1997) argue that competences mobilised by a
service firm, and their technical characteristics, encompass not only technologies in the
narrow sense of the term, and the competences relating to those technologies, but also
the "technologies" specific to services (legal, financial, actuarial, human resource
management, commercial etc.) and the competences corresponding to them. The latter
shows, that technical aspects of service delivery exist in both physical as well as social
compositions, while talking about technical aspects in relation to service innovation, these
two angels should not be mixed-up.

Finally, when innovation in service industries is compared with innovation in

manufacturing industries it is observed that service industry firms focus more on
organizational innovations than manufacturing firms who tend to introduce more product
and/or process innovations (Chamerlin, Doutriaux, & Hector, 2010).

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3.7 Innovation types
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.

3.7.1 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 Product Recombinatorial Marketing

innovation innovation innovation
New or significantly New or significantly A new composition of A concept or strategy that
improved production improved capabilities, user services or products and differs significantly from
process, distribution friendliness, components or services existing methods, not used
method sub-systems before
or support activity

3.7.1.1 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).

3.7.1.2 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

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need to be new to your market. Product innovations could have been originally developed
by your enterprise or by other enterprises” (CIS 2008).

3.7.1.3 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).

3.7.1.4 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).

3.7.1.5 Environmental innovation

“An environmental innovation is a new or significantly improved product (goods or
service), process, organizational method or marketing method that creates environmental
benefits compared to alternatives. The environmental benefits can be the primary
objective of the innovation or the result of other innovation objectives. The
environmental benefits of an innovation can occur during the production of a good or
service, or during the after sales use of a good or service by the end user “(CIS 2008).

3.8 Dominant motives for service innovation

In this section the dominant motives of service firms to innovate are presented. The
section starts by highlighting the strategic motives of service innovation as highlighted by
Tidd & Bessant (2009), followed by a section of motives inspired by the STEEPV factors
(Social, Technological, Economic, Environmental, Political, Values- ethical) (Flikkema,
2007; 2008)

3.8.1 Internal motives of service innovation

The strategic position of a service firm is partly defined by the environment, expectations
and purposes of stakeholders to participate in business relations and the firm’s available
resources and competences (Johnson & Scholes, 2002). These items are central to the
future strategy of a service firm and raise important questions to think of.

In order to assess the abilities and disabilities, managers should analyze their firm from a
strategic management perspective. Strategic management refers primarily to positioning,
choices and actions undertaken by a service firm (Johnson & Scholes, 2002). Due to
continuous reductions of cycle times, increased competition, new technological
advancement and globalization, a variety of strategic perspectives have been developed
and emphasized the importance of innovation (Stalk & Hout, 1990; Kessler & Chakrabari,
1996; Menon, Chowdhury & Lukas, 2002; in Tidd & Bessant, 2009).

First of all, although technical and market changes can never be fully controlled, proactive
development can influence the competitive success, adaption, and renewal of service
firms (Brown & Eisenhardt, 1995). Service firms are able to experience first-to-the-market
advantages, the strategic goal of this first-market entry is, to offer something no one else
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is capable of. Second, it might be very interesting to offer a particular service outcome in a
way that others cannot match; faster production cycles, cost reductions and high levels of
customization are some examples of possible process novelties. Thirdly, some service
firms realize very complex services in order to make it difficult for others to copy these
services. In relation to this last-mentioned motive, careful planning is essential. Fourth, it
is possible to create strategic advance by creating unique services and to protect these
service offerings, by licensing or other fees. Fifth, it might be beneficial to move the
strategic direction, by for example focussing on quality.

As illustrated, service innovation creates new opportunities to obtain strategic advantage.

Innovation options are everywhere the challenge however is to actually see these options
and develop them. The strategic perspectives as presented above requires a shift in
management focus from a traditional “cost orientation” to a “time orientation” suitable
for fast chancing environments.

Internal Motives External Motives

Proactive development Social change
Competitive success, adaption & renewal Technological change
Economical change
Strategic motives Environmental change
First market entry Political change
Process novelties Value ethical change
Complex services
Licensing
Move direction

3.8.2 External motives for innovation

Service firms are highly influenced by their environment. The operational environment is
far from stable and constantly subjected to change. Although all changes in the end
related to strategic considerations, the elements presented below provide some basic
insights related to the environmental challenges a service firm needs to cope with.

3.8.2.1 Social change motives

Nowadays, customers are more assertive and well informed. The degree to which
customers are given the opportunity (or are forced) to co-produce is an important aspect
of service innovation. Furthermore, feedback from customers can shape innovations in
service firms, just as much as service firms can influence their customers’ innovation (Den
Hertog, Knowledge-Intensive Business Services as Co-Producers of Innovation, 2000).

3.8.2.2 Technological change motives

In Physical sense, the impact of for example the Internet revolution as started on B2C
level in 1993 created new opportunities for service firms and with that stimulated their
innovative abilities.

3.8.2.3 Economic change motives

At the moment it becomes a trend to concentrate on the core business and to outsource
additional areas. More and more traditional organization functions are taken over by
specialized service firms. In some outsourcing relationships, activities are precisely
defined and competition in these areas might be high, in such cases innovation is less
likely. In other cases there is sufficiently level of specialization to provide innovative
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solutions. For example, firms make progressively more use of for example specialized
HRM organizations which are increasingly capable of total human resource solutions (Den
Hertog, Knowledge-Intensive Business Services as Co-Producers of Innovation, 2000).

3.8.2.4 Environmental change motives

Natural energy resources are declining. In response on these developments there is a rise
for Energy efficiency. The growing requests for energy efficiency create new opportunities
for service innovation. Virtualization of computing for example allows software as a
service which opens up possibilities for economy of scale in computing.

3.8.2.5 Political change motives

The government can be a quite important motivation for innovation, when innovation is
promoted by R&D funding and/or procurement decisions or through new regulations e.g.
those fostering environmental innovation (Den Hertog, Knowledge-Intensive Business
Services as Co-Producers of Innovation, 2000).

3.8.2.6 Value-ethical change motives

In relation to these motives we can look at values in general like the rise of prosperity in
Western economies or sustainability issues. These items are important motives to
innovate, however, besides these elements, often more related to general awareness it is
important to pay attention to service professional trajectories. Trajectories are ideas and
logics that are diffused through the social system (Sunbo & Gallouj, 2000). Methods,
general knowledge and behaviour rules that exist within the different service professions
can be classified as the main innovation source within this perspective. General
management ideas or ideas for new organizational forms trajectories; motivational
systems, BPR, service management etc are of influence as well. (Sunbo & Gallouj, 2000).
In relation to social compositions, service firms start orient on intern innovation.
Aftercare, education of employees, inventive organization schemes etc. Are some
examples. Especially manufacturing firms are increasingly realizing the importance of
additional services in relation to competitiveness (Den Hertog, Knowledge-Intensive
Business Services as Co-Producers of Innovation, 2000).

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3.9 Service innovation models
The next step is, to translate the above mentioned motives to an actual innovation.
Before we turn to the actual innovation process, it is important to get insight in the basic
layers of service innovation. We provide this insight by drawing attention to three leading
management models.

3.9.1 Edvardsson’s strategic frame of reference (1997)

In relation to new service development, Edvardsson (1997) introduced a frame of
reference for strategic service development, with quality as the point of reference. In
Edvardsson’s view, service development includes the whole process from idea generation
to the market introduction of a new service. Edvardsson’s frame is the result of a number
of studies, pilots and testing within the Service Research Centre in which he participated.
In accordance to Edvardsson, the outcome of a service development process constitutes
the prerequisites for the service by three concepts as explained beneath: the service
concept, the service process and the service system and resource-structure.

3.9.1.1 (Service) concept

Figure 6: concept model, Edvardsson (1997)

The function of the service concept is to create a starting point, an overview of the basic
elements, which need to be present in order to realize a high quality service offering. A
service concept can be interpreted as a detailed description of both the potential
customers’ needs, as well as the way in which services are designed to fulfil these needs.
While designing a service offering it is useful to specify the needs with respect to extent
and nature (primary and secondary needs, core service and supportive services). The
result of a service concept is a prototype of the service, which describes the actual
customer value of the service and its related sub-services (Edvardsson, 1997).

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3.9.1.2 Service process

Figure 7: Service process, Edvardsson (1997)

Regularly, a service process is not a single activity, but a process of mutual sometimes
sequential steps. Since services are partly co produced with customers and/or suppliers, a
service firm is not able to influence direct control over all activities, however, a service
firm should be able to control the entire process. A service process can be interpreted as a
design model for a variety of customer processes, it precisely describes micro-processes,
standardized and alternative activities, which take place when a customer activates a
service process (Edvardsson, 1997).

3.9.1.3 Service system

Figure 8: Service system, Edvardsson (1997)

The service system includes all the resources available in order to realize a service.
Resource allocation is, to some extent, influenced by, strategy, business concepts and firm
goals. Although, resources are firm specific, we can generally classify four types of
resources; customers, organizational structure and systems, management and staff and
physical/technical resources. The service system can be divided in front office and back
office operations. Front office operations refer to the interactive parts of the service
which are clearly visible to the customers. The back office refers to support activities,
often invisible for customers. Furthermore internal and external infrastructures play a
considerable role in the division of resources and competences. The new service
development process can be described using four phases: idea generation, project
formation, actual design and implementation. The final service outcome is produced in a
customer process in which, customers, the firm and subcontractor are responsible for the
delivered quality (Edvardsson, 1997). This stream of thoughts has been a great source of
inspiration, and forms an excellent point of reference for the research on service
innovation.
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3.9.2 Toivonen, Tuaminen & Brax’s General, systematic service innovation
model, based on Edvardsson’s model (2007).
Based on the ideas of Edvardsson, Toivonen, Tuaminen & Brax designed a general
systematic service innovation model, including more practical focus elements. Toivonen
et al., tried to visionize the value proposition of services and renamed the service concept
in service structure and markets. The most important elements in relation to this item are
the structure (sub-services and their role: core versus supporting services), the role of the
service in relation to the firm’s product portfolio, pricing strategies and the market
positioning (relevant markets and main or potential customer segments). The process
received an extra attention to service and became service process. The service process
calls attention to the different phases within a process, the roles of both the provider as
well the users should be carefully designed. In relation to the formal aspect the form of
customer interfaces plays a pivotal role, items to think about relate to concepts like
personal or interactive interfaces, mass service or customized services etc. Finally the
service system is translated in a higher concentration on the role of resources and service
infrastructures. In relation to this category it is important to stress attention to the role of
technology. Furthermore the methods and guidelines, the general organization,
competences of both the provider as well as the users should be taken care of. Finally the
role of subcontractors should be highlighted as well as the effects of the physical
environment.

3.9.3 Den Hertog’s four dimensional model of service innovation, (2000)

Another more practical point of reference is create by Den Hertog, who introduced a four
dimensional model of service innovation, to map service innovation and discuss the
practical development of new services or service innovation policies. According to Den
Hertog service innovation involves some combinations of the bellow mentioned
dimensions of service innovation. In practise, it may be a combination of the dimensions,
search and selection process, that ultimately characterises each particular service
innovation. The weight of the individual dimensions and the importance of the various
linkages between them vary across individual services, innovations and firms.

Figure 9: Four dimensional model of service innovation, Den Hertog (2000)

The four dimensions of Den Hertog’s model are presented below.

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3.9.3.1 Dimension 1: new service concept
Although not all service innovations have a strong novel conceptual element, conceptual
innovations are much more likely to be found in services settings than in traditional
manufacturing firms. Such innovations are usually highly intangible, meaning that while in
some cases, the service itself may have quiet intangible elements, the new features have
less to do with material artefacts.

3.9.3.2 Dimension 2: new client interface

They way the service provider interacts with the customer can itself be a source of
innovation. Product offerings are increasingly marketed and even produced in a customer
specific way and delivered electronically as far as they have information components. In
business services in particular, customers are often also part and parcel of the production
of the service product.

3.9.3.3 Dimension 3: new service delivery system

This dimension has a close relation with empowerment. Internal organisational
arrangements have to be managed to allow service workers to perform their job as
designed, and to develop and offer innovative services. On the one hand, new service
may require new organizational forms, (inter) personal capabilities and skills. On the other
hand, an organisation can be designed and employees can be trained as to leave room for
innovations and non-conventional solutions to practical problems.

3.9.3.4 Dimension 4: technological options

Service innovation is possible without technological innovation, technology is not always a
dimension. However, in practise there is a wide range of relationships between
‘technology ‘and ‘service innovation’. These vary from technology mainly playing a role as
a facilitating or enabling factor, to something much closer to supply-push, technology
driven innovation.

While analyzing the three management models as presented above, the main point of
consideration in relation to service innovation are:

Balanced service packages & conceptual clarity;

 Service package in line with the mission, vision and product portfolios.
 Core service in line with supportive services.
 Positioning and pricing strategy in line with the former two aspects.

Awareness that delivery processes can be divided in different faces with their own
interaction points

 Design the roles of providers and subcontractors, point attention to every interaction
moment.
 Design and play the role of the user and design interaction moments.

Contributive infrastructure

 Empower the workforce to act as designed.

 Competent and skilled providers as well as users.
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 (Social) 91 building opportunities.
3.10 Organizational features and management practices
How innovation is managed has a great influence on the success of innovation. Managing
innovation, in particular service innovation and the understanding of the organizational
aspects of innovation in both short term as well as long term perspective is a complex
field of inquiry. Complications occurring in relation to an effective organization of
innovation are rooted in the paradoxical nature of innovation processes (De Weerd-
Nederhof, 2010). Generally innovation activities cannot be described as single events,
they often request conflicting organizational demands. As a result of this paradoxical
nature, every innovation process has to deal with different management practices.

Another difficulty in relation to the management of service innovation refers to the close
relationship with managing chance. Innovation managers experience difficulties in
relation to this concept and especially in relation to radical change. What most managers’
lack is a habit of thinking about their firm’s capabilities as carefully as they think about
individual people capabilities (Clayton, Christensen, & Overdorf, 2000). In order to
overcome this lack of competence, innovation managers need to be skilled not just in
assessing people but also in assessing the abilities and disabilities of their organization as
a whole.

Literature on service innovation management has not received widespread attention

(Vermeulen & Van der Aa, 2003). With the exception of some authors (Sunbo, 1997;
Clayton et al. 2000) most research attempts provide some insights in new service
development processes (NSD process). The management of NSD has become an
important competitive concern in many service industries. Nevertheless, it remains one of
the least studied and implicit topic within service management literature (Menor,
Tatikonda, & Sampson, 2002).

The aim of this section is to provide more insight in relation to the organizational features
of service innovation processes and some of the management practices that facilitate this
type of innovation. We highlight the service innovation process using Figure 10:

Customers/Environment

Customer/ Environment

Figure 10: innovation process steps, Flikkema et al. 2010

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3.9.3 Innovation Energy
Before we discuss the phases within the innovation trajectory, we first highlight the
innovation energy formula of Tidd & Bessant (2009), which describes the basic
requirements that should be satisfied by a workforce to become innovative.

Attitude, Behaviours and Structures = Innovation Energy

Attitude
In relation to attitude Tidd & Bessant (2009) are mainly focusing on the role of employees.
However, the context is actually broader and refers to all stakeholders the firm is
surrounded with. Motivated stakeholders are stakeholders who can make a difference to
a firm’s innovation profile. In this respect Van Dijk & Van den Ende (2002), highlight the
importance of intrinsic motivation. In line with this reasoning, service firms need to
convert stakeholders from a “so what” mentality to a “so that is why we are doing this”
(Tidd & Bessant, 2009).
Behaviours
“Behaviour beats process every day of the week” (Tidd & Bessant, 2009), the most
innovative behaviours occur in case there is room available to try out new things, to build
on new ideas through collaboration, to make ideas in the form a customer would buy it,
to express disagreement and to navigate between creative and analytical behaviour (Tidd
& Bessant, 2009; Hur, 2009).
Structure
The physical environment influences attitude and energy. Firms able to create energizing
spaces are able to realize the biggest rewards, trust and openness, challenge and
involvement, support and space for ideas, conflict and debate are contributive elements
(Tidd & Bessant, 2009).

3.10.1 Phases of the innovation process

Figure 9 provides an overview of the phases within an innovation process and is based on
the research of Cooper 2008. Cooper highlights the importance of planning and execution
of innovation projects. However, progress in relation to the stages of innovation is rarely
linear (Van de Ven et al., 2008 in Dervitsiotis, 2010). Overlapping phases and interaction
positively affect performance, particularly in radical innovation trajectories (e.g.,
Eisenhardt & Tabrizi, 1995; Brown & Eisenhardt, 1997; De Meyer et al., 2002 in
Blindenbach-Driessen & Van den Ende, 2006). The underlying idea refers to the fact that it
is less useful to plan under conditions of high uncertainty. In these situations, focusing on
flexibility and learning through improvisation and experience often result in effective
performance (e.g., Eisenhardt & Tabrizi, in press; Miner & Moorman, 1993; Weick, 1993 in
Brown & Eisenhardt, 1995).

An essential element in relation to effective innovative performance refers to the central

position of the customer within the service innovation process. The customer has always
been of high importance due to this co-producer role. However, the actual involvement of
customers during the innovation process is steadily growing. Nowadays, customers are
often used as an active participant (Michel et al., 2008 in Van der Aa & Den Hertog, 2010)
during different phases within the development process.

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To summarize, it is almost an illusion to think that the innovation steps as perfectly
followed by each other. The defined innovation steps should be mainly viewed as
guidelines. Feedback loops, knowledge of customers and anticipation on the environment
are necessary within every single step.

3.10.2 Idea generation

Idea generation is closely related to creativity and goes pared with” out of the box
thinking”, stepping away from normal or traditional pathways. In relation to idea
generating it is important to recognize that creativity is a feature which everyone is
capable of however, the way in which people like to express themselves differs greatly
(Tidd & Bessant, 2009). One individual might like radical change, while others prefer slight
incremental steps.

Idea generation refers to the process in which people know where to look for and why,
which in time can be collectively executed (McGuiness, 1990). In accordance to
McGuinness (1990) idea generation within organizations is related to three forms. Starting
with the individual’s ability to generate ideas which depends on personal perception and
initiative. Followed by the ability to find credibility with the organization and Last but not
least intensive search in the form of for example organized R&D activities or departments.

Idea generation is possible in several ways, own employees for example are very valuable
since they are actually involved within daily procedures and in that sense the first to
detect possible gaps. Unfortunately in practice it seems hard to detect these gaps.
Conway and McGuinnis (1986) identified several ways to detect ideas; customer driven,
market driven planned diversification and opportunistic diversification, close follower and
technology driven which are still valid today. Customer drive ideas relate to customer
knowledge, what type of customer do I serve and what are trends in their behaviour?
Furthermore satisfaction rates are valuable information tools, what makes customer
satisfied and what are causes of dissatisfaction? Market driven ideas occur through to
visible market changes, market needs, adaption of strategy etc. Planned diversification
can be described as a result of ideas generated in line with strategic efforts, with the aim
to penetrate new markets and to distinguish from competition. Opportunistic
diversification is the result of a new concept used to penetrate a new market, although
diversification was not a primary intention. Close follower ideas are identified by following
competition and anticipating on movements and new ideas developed. To end with,
Technology driven ideas are results of the ongoing technological developments and
availability of novel technology also known as technological push.

Customer driven Market driven Close follower Technology driven

Customer knowledge Planned diversification Knowledge Technology push
Opportunistic of competition
diversification

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Toivonen, Tuominen & Brax (2007), identified three types of innovation processes; 1) the
model of a separate planning stage, also known as the traditional R&D model, 2) the
model of rapid application (simultaneous planning and production) and 3) the model of
posterior recognition of innovation, also known as the practice based model.

4
5
6

Figure 10: Types of innovation processes, Toivonen et al. (2007)

Based on traditional business logic it seems best appropriate to use the separate planning
Figure 11 types of innovation processes (Toivonen et al. 2007)

approach to realize innovations. By careful planning in line with firm’s mission and vision
the best results should be achieved (Johnson & Scholes, 2002). However, in practice
things are different, most service firms in the research of Toivonen, Tuominen & Brax,
(2007) used the model of rapid application. The authors identified different reasons for
the popular use of this model.

First of all, most service innovation need small amounts of investment, resulting in smaller
fear of economic loses. Second, new service development often goes paired with
questions that cannot be answered without operating in real markets. A third explanation
refers to the urgent need of service in the market and finally if new concepts are delivered
in interaction with existing clients, it is natural to continue this development along with
operation in the market.

As became clear, ideas emerge from the variety and diversity of experience and
behaviours that are to be found across a firm and its surroundings, on all levels (Johnson
& Scholes, 2002). Employees for example interpret situations in unique ways and might
come up with different ideas for a particular situation since they tap experience from
different backgrounds. The greater the variety of experiences, the higher chance on
innovation (Johnson & Scholes, 2002).

Furthermore, education is an important element in relation to idea generation. The

formation of new ideas and solutions call for knowledge and expertise (Mumford, 2000 in
Damanpour & Schneider, 2008). Employees are more likely to use complex and diverse
problem solving abilities and decision making if they are educated well (Bantel & Jackson,
1989; Huber et al. 1993; Lee, Wong & Chong, 2005 in Damanpour & Schneider, 2008).

However, not only employees are beneficial, the whole surrounded network is important;
changing demands, new partners, new segments etc. are all sources of information and
ideas.

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3.10.3 Idea selection

3.10.3.1 Centralization versus Decentralization

The more centralized a firm, the more likely it is that decisions are made at the top level
(Narayanan, 2001). Decentralization on the other hand, often generates higher
participation levels of individuals on all levels of the firm in decision-making and thereby
more interest in outcomes. This interest in the outcome supports information flows and
exchange of ideas, which in turn supports learning and innovation (Narayanan, 2001).
Narayan (2001) describes the pros and cons of the two organizational forms which are
summarized below.

Through the use of centralization, economies of scale and scope can be realized.
Furthermore central facilities are more likely to result in good internal communication
links. These benefits are not only related to clear communication lines but also include a
lower risk of distraction, since centralized innovators are not involved in short term
operational problems. Another potential benefit is the reduced risk of competitors
copying or leapfrogging ideas in an early statement and with that retain a competitive
position. Finally, centralized innovation generates more space to create well established
networks with universities, government and other support agencies.

Decentralization on the other hand has the advantage of good external coupling and
communication linkages with other organizational functions. Decentralized innovation
initiatives are more focused on back office procedures, in particular business and
operational units. Decentralized innovation generates more informal communication
patterns between innovation teams and other corporate functions. Furthermore,
decentralized research centres may enable competitive surveillance in specific localities,
especially in overseas locations. By establishing innovation units in selected regions, a firm
may be able to tap into governmental aid and incentives. Decentralized innovation may
be more responsive to various local market needs.

Some authors argue that developing innovations apart from the rest of the firm leads to
undesired side effects, like a reduced share of information (Griffin & Hauser, 1996; Gann
& Salter, 2000 in Blindenbach-Driessen & Van den Ende, 2006). This is why Blindenbach-
Driessen and Van den Ende (2006) suggest developing innovations in close relation with
business activities. However, in these cases, different managerial procedures need to be
applied.

3.10.3.2 Selection systems

The survive of an idea depends on the selection mechanisms used by a firm. Selection
systems take different forms. In relation to strategic position, the market is a key selection
mechanism (Johnson & Scholes, 2002). Strategies develop and prosper in close
cooperation with the market, not only from financial perspective but also in accordance
to personal preference of customers (e.g. Cooper & De Brentani, 1991; Gounaris,
Papastathopoulou, & Avalonitis, 2003 in Flikkema, 2008) and understanding of competitor
strategies and offerings (Cooper & De Brentanti, 1991 in Flikkema, 2008) are essential.
Service innovation projects that feature strong market orientation and high quality of

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execution of marketing activities on all levels of innovativeness are considerably more
successful (Johnson & Scholes, 2002).

At the strategic action level, selection mechanisms refer to planning, budget and
evaluation issues (Johnson & Scholes, 2002). At the level of strategic choices, selections
are often based on the attractiveness of an idea (Johnson & Scholes, 2002). These reasons
could be rational, analytical demonstrated or due to more subjective reasons. However, it
is unlikely that brand new ideas gain prevalent support from the start. In these cases it is
important to gain initial support from for example a manager acting as a champion of the
potential innovation.

Idea Decision
Generation Making
Internal & External stakeholders Centralization
Economy of scale
High internal communication links
Variety and diversity of experiences and behaviours. Lower risk of distraction
Reduced risk of copying
High amount of space to create network opportunities
Training & Education
Decentralization
Focus on Back Office activities
High communication links with other organizational functions and
teams
Competitive surveillance in specific locations (especially overseas)
Establishment of innovation unit anticipating on local market
needs

Selection systems
Market, financial & preference of customers
Competitors, strategies & offerings
Strategy, planning, budget, evaluation,
Attractiveness, analytical demonstrated or subjective
Champions, support for potential

3.10.4 Resource mobilization

Resource mobilization mainly concentrates on the financial sources available (Flikkema,
2008). Financial resources consist partly on innovation budgets as present on the firms’
budget plan. A second source of innovation budget is realized through the government,
on local, national as well as European levels. The Government is an important provider of
grants for innovation activities. Regrettably, most innovation grants within the
Netherlands are provided to technological projects (CBS, CIS results 2004-2006). Third
important resources are customers. Especially in a business to business environment
customers are likely to provide financial resources when necessary. In a business to
consumer environment financial resources are paid in kind, mostly in the form of time
invested in the innovation.

3.10.5 Resource allocation

Eisenhardt & Brown (1995) developed an integrative model of product development from
which components are suitable for service innovation as well. The main logics behind the
model refer to, process performance, product affectivity and financial success.

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Process performance relates to the ability of a firm to design an effective project team,
guided by a strong leader, gaining high support of senior management and connected to
customers and suppliers. Process performance is dependent on the amount, variety,
problem-solving ability and accessibility of information and resources available (e.g.,
Brown & Eisenhardt, 1995; Dix, 1993; Kaplan & Norton, 1993; Katzenbach & Smith, 1994
in Plaisier, 2010).

Product effectiveness relates to the fit of the innovation with both firm competences as
well as customer needs. Product effectiveness is a result of a well defined vision,
extensive use of suppliers and customer who decline the complexity of an innovation
process with their insights, resulting in faster and productive development processes and
early identifications of problems (Brown & Eisenhardt, 1995).

Finally financial success highly depends on the right fit between process, designed
innovation and actual market shape (Brown & Eisenhardt, 1995).

Resource Mobilization Design/

& Allocation Development
Financial mobilization sources Development of a business case
Intern Commercial feasibility
Budget plan Technical feasibility
Extra funding
Project team
Extern Transfer ideas into designs
Governmental grants (local, national, European) Are responsible for speed and quality
External parties

Allocation
Design of a project team
(Multidiciplinair, senior management support, strong leader,
connected to customers and suppliers)
Clear vision

Design of product /service

Fit between firm capabilities and customer needs
Clear vision
Extensive use of suppliers and customers
Right fit between process, design and market shape

3.10.6 Design and development

During the design and development stage, commercial and technical feasibility of the
innovation need to be investigated, most of the time these investigations are summarized
in a business case (Ernst, 2002). The outcomes of the business case create useful insights
for decision making (Ernst, 2002).

Project team members are the people who transform vague ideas, concepts and product
or service specifications into the design of new products or services. Composition, group
process, and work organization of the project team affect the information streams,
available resources and problem-solving style of the team. These ultimately influence the
speed and quality of the innovation process (Brown & Eisenhardt, 1995).

Although team performance is not a main area of research, it is an essential step in the
management process of service innovation. In order to highlight the most important key
elements I embroider on the work of Flikkema (2008) and Plaisier (2010).

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Team diversity is necessary, differentiated members, share other opinions, they refer to
other situations and experiences from different backgrounds (personality, culture, gender,
goals etc.) (Chang, 1995; Johnson & Scholes, 2002).

In order to design a well operating team, team basics as defined by Katzenbach & Smith
(1994) require careful considerations (Plaisier, 2010). These basics are: size, there is a
direct correlation between team size, individual and group performance (Amelsvoort &
Scholtes, 1994 in Plaisier, 2010). A team consisting of seven till twelve persons with
different backgrounds is most optimal (Katzenbach & Smith, 1993; Amelsvoort & Scholtes,
1994 in Plaisier, 2010). Skills and competences, team role diversity should be available in
relation to skills as well as social emotional roles (Forsyth, 1990 in Plaisier, 2010).
Complementary skills e.g., technical or functional expertise, problem solving ability
(Katzenbach & Smith, 1993 in Plaisier, 2010), cultural differences (Hofstede, 1995) and
psygologic boundaries (Hirschhorn & Gilmore, 1992 in Plaisier, 2010). Goals setting, all
these required differences should meet each other on the level of goal setting. Without
goal congruence it is impossible to complete a task successfully. Team approach and
accountability, in order to perform their tasks well, team members should communicate
with each other on a frequent basis and should be easy accessible to each other.
Communications include formal as well as informal communications on both face to face
as well as interactive communication lines (Van Amelsfoort en Scholtes, 1994 in Plaisier,
2010).

3.10.7 Testing/ Evaluation

Before a service is available on the market it is advised to design a test phase (Kotler &
Keller, 2007). Testing involves presenting the designed service innovation to a couple of
customers in the pre developed target market and to evaluate their experiences. Service
innovation can be tested both symbolically as well as physically. Nowadays it is also
possible to make computer based service designs through the use of virtual reality (Kotler
& Keller, 2007).

Service firms need to evaluate the proposed new innovation on defined targets like sales
forecasts, costs, profit projections etc. if these projections satisfy the innovation’s
objectives, the innovation is ready for the market launch.

The management of service quality is a never ending process. Service firms need to be
aware of the effects of every service encounter. Strategic concept, overall commitment to
quality, high service standards, systems for monitoring service performance and customer
complaints, and an emphasis on customer and employee satisfaction are necessary
requirements (Edvardsson, Thomasson, & Ovretveit, 1994; Kotler & Keller, 2007). If one of
these concepts is lying behind, it is time for innovative solutions.

3.10.8 Service launch

As shown by a number of authors (e.g. Cooper et al. 1994; Edgett, 1994; De Brentani,
2001; Gounaris et al., 2003 in Flikkema, 2008) the actual launch stage of the service
innovation is of great importance. Training of service employees and internal marketing of
the innovation are important management responsibilities in order to successfully launch
the innovation (e.g. Gronroos, 2000; Tidd & Bessant, 2009).

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During the service launch, multiple actors take part in often complex processes. That is
why a holistic marketing approach is necessary. Holistic marketing requires external,
internal and interactive marketing (Kotler & Keller, 2007). External marketing refers to
the more traditional marketing elements like, pricing, distribution channels,
advertisement campaigns etc. Internal and interactive marketing are explicitly essential in
service firms and are highly related to customer contact. Training and motivating service
employees to service customer in an appropriate way is essential, every service employee
acts as a part-time marketers in the service delivery process and should be properly
skilled( Gronroos, 2000; Kotler & Keller, 2007). Furthermore it is essential to differentiate,
through a clear distinction between core and supportive services (Edvardsson, 1997;
Kotler & keller, 2007; Frei, 2008), and the development of appropriate brand strategies,
which may include different labels under one corporate umbrella (Frei, 2008).

Finally it is valuable to notice that services outcomes persist of intangible elements, it is

difficult for (potential) customers to assess the potential benefits of a service innovation
before they actually experience it. Therefore marketing is of great importance to service
firms. In order to market their services and product, service firms have to decide what
kind of umbrella they require, for example branding by strategies; the Accor Hotel group,
different brands for each price category, Formule 1 relatively cheap in comparison with
Sofitel. The formation of an umbrella brand, with different brands per business activity;
the EasyGroup, easyjet, easyhotel, easypizza etc. or the use of Sub brands under a major
brand; Center Parcs as sub brand of Pierre Vacances.

Test Evaluation Market Launch

Testing Service Launch

Presenting the designed Training of employees
innovation to a couple of Holistic approach (external,
customers in the pre developed internal and interactive
target market. marketing)
Evaluation Clear distinction between core
Evaluate based on defined and supportive services.
targets(sales forecast, costs, Brand strategy
Profit projections etc.)

To conclude, shaping and managing innovation processes can be described as a complex

adventure, which resulted in the popular metaphor of an “innovation journey” (Van de
Ven et al., 2008; De Weerd-Nederhof, 2010). Although there are some principles available
as presented in this section, the application is only a tool for successful innovation and no
guarantee, since it is all a matter of balancing the service strategy with the (operational)
environment.

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4 Methodology
This chapter describes the research methodology applied in this study. As suggested in
Baarda and de Goede (2001), extra attention is paid to the design, variable measurement
and the data collection process. This service innovation study is a descriptive study using
cross-sectional data and digital survey methodology to describe the relationship between
management characteristics, firm’s characteristics and service characteristics within Dutch
service firms in the period 2008-2010.

4.1 Research design

Sample size; the sample of this research contains data on 80 service innovation initiatives.
46 service firms completed all the questions.

Study scope; this service innovation study is innovation type based in scope. The units of
analysis in this study are the new service innovation realized and the characteristics of the
service firm.

Level of data collection; In this study Respondents were specified as “managers

responsible or closely involved in the development and marketing of service innovations”. I
applied a single-respondent approach. We made the choice of not specifying the level of
data collection in advance since most service firms have difficulties in selecting “the main
person” responsible for innovation by job title only. Innovation responsibilities differ from
innovation, business development to sales, marketing etc. Furthermore, knowledgeable
respondents were more important to me than respondents of a certain organizational
level.

Performance perspective; A success approach is used in this study. This means that
respondents were asked to assess a successful innovation.

Service industries studied; The main point of reference is the Dutch service industry. The
objective is to create an a-typical sample, representative for service firms active on the
Dutch market.

Region of study; The focus is on the Dutch service industry, though there are service firms
in the research population with a multinational scope.

Types of innovation; four types of innovation were studied, i.e., process innovation,
product innovation, recombinatorial innovation and marketing innovation.

Figure 4 captures the characteristics of the research design.

Size Scope Level of Performance Industry Region Type of

Data perspective studied innovation
collection
80 Innovation Managers Successful Service Netherlands Process
type responsible or innovation industry Product
Closely related to Recombinatorial
innovation Marketing

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4.2 Measurements
In order to attain an answer to the main research question and to operationalize the
concepts, as presented during the theoretical section of this report, a web survey has
been used. Literature shows that web surveys are a suitable method to find answers on
“what” questions (Yin, 1994 in Flikkema, 2008). Most of the survey questions are assessed
on a 5 point Likert Scale and programmed in the web-survey programme Survey monkey
(advised during the master class service management, 2009).

The survey results are analyzed using the following tests; descriptive, crosstabs, chi-
square analysis, Kruksal Wallis tests, Mann Withney tests, ANOVA and one sample T-tests.
The justifications for these tests are presented in the Depth analysis section.

4.3 Pre-testing the web survey

Construct validity refers to the degree to which inferences can legitimately be made from
the operationalizations in a study to the theoretical constructs on which the
operationalizations are based. The following steps have been made to design
measurements which are good representatives of concepts in this research.

First, the expert validity are checked. Besides primary internal advisors, two academic
experts on service management were closely involved in order to validate the
operationalization of the constructs from the research model.

Second, three intended respondents of the questionnaire with at least a drs or master
degree, one from a financial service firm, one from a consultancy service firm and one
from a innovation service firm were invited to test the questionnaire and to validate the
operationalizations of the constructs during a personal test and interview meeting. All of
them accepted this interview. During the interview meetings, survey items not validated
during earlier studies received explicit attention. At the start of the interview meeting
test persons are asked to fill out the questionnaire while immediately expressing their
thoughts loudly. This way of working was designed in order to reduce ambiguity and
complexity of the web survey, to improve instructions, to optimize the routing and to
tune the lay-out.

Thirdly, after the personal interviews and processing of the results, the web survey has
been discussed again with the supervisor committee. Finally the survey is additionally by
prof. dr. A.P. de Man of the VU in Amsterdam.

4.4 Data collection and sampling

The data collection of this study took part using different strategies. First all we made a
list in order to get a A-typical research pool, contributive to possible generalization.
During our journey to get the right email addresses we found out that it is a really tough
job to collect these. One of the major prejudice risks is the receptionist at the telephone
central of a service firm. Most receptionist experience difficulties in selecting the main
person responsible for innovation. This might be an innovation manager, sales manager,
business development manager, marketing manager etc. Besides, a lot of receptionists
are instructed to not disturb these high organizational level employees and to keep their
email addresses as private as possible. Although we had some successes while referring to

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the importance of the research and by naming all universities involved in this research the
collection process went very slow.

We tried to overcome these problems by contacting different service industry

organizations, however we received only some small successes. First of all, Koninklijke
Horeca Nederland (KHN) was very enthusiastic about this research, but unfortunately in
their opinion the research was not suitable enough for small firms, which is 80% of their
member organizations database. KHN forwarded my request to het Bedrijfschap Horeca
en Catering unfortunately, they shared the same opinion. Second we were in contact
with the Algemene Nederlandse Vereniging van Reisondernemingen (ANVR), regrettably
these organizations were working on a research already by themselves and willing but
currently unable (risk of overloading) to send my questionnaire.

We received some success as well, the Vereniging van Nederlandse Recreatie

Ondernemers Nederland (RECRON) was willing to help us and published a research link in
their digital newsletter. Also within the innovation industry organizations, we received
more success. First of all SYNTENS (A Dutch network for innovations within small and
medium sized firms) was willing to put a link form the web survey on their website.
Secondly NOVAY (Dutch networked innovation) was willing to send my questionnaire
directly to a batch of 300-400 innovation managers, which was really contributive. Finally
the industry organization Uneto VNI (Dutch installation and technical retail trade
services), was prepared to sent my web survey to a batch of their database as well.

Sampling strategy Due to the fact that we made use of member lists of industry
organizations, the sampling strategy has to be qualified as a selective sampling. The point
that we generated data through two organizations directly related to innovation might
explain possible variance in the data. However, this cannot be checked with the data,
although we intuitively believe that this is a most likely scenario. Finally service quality
and firm size might discriminate between the data since SYNTENS concentrates on
medium and mall sized firms.

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5 Data analysis
This chapter reports the results of the data analysis. First of all respondent characteristics
are described, followed by descriptive statistics of the web survey results. Finally, results
of the analysis in consistence with the research question “How do the management of
innovation in service firms, service characteristics and firm characteristics relate”? Are
presented. We analyzed the data on the following levels; 1) management capabilities, 2)
service characteristics and 3) firm characteristics.

5.1 Respondents
In total 1282 respondents were directly approached to fill in the web survey,
supplemented with the actions of sector organisations. These actions resulted in 80
respondents who started the web survey. At first site, this seems a response percentage
of 6, 2%. Unfortunately, while analyzing the data we found that only 46 respondents
actually finished the web survey in total, which decreases the response rate from 6, 2% till
3, and 6%. Since the respondents dropped out at different positions, or restarted later,
the N’s in the descriptive section are given per question.

5.1.1 Demographics and response

The format from Van Riel et al. (2004) is used to describe the demographics. In total 80
respondents were willing to fill out the web survey. Unfortunately, 46 respondents
completed the whole survey.

Industry Participants % Firm Participants % Occupation Participants %

Size
Wholesale and 1 1,25 1 to 10 14 17,8 General 24 30,0
retail Manager
Transport and 2 2,50 10 to 50 14 17,8 Business Unit 5 6,3
storage Manager
Hotels, 1 1,25 50 to 100 11 14,0 Marketing 5 6,3
campgrounds and Manager
restaurants
Information and 3 3,75 100 to 500 15 19,0 Research & 5 6,3
communication Development
Manager
Telecommunication 3 3,75 500 to 2000 9 11,2 Sales Manager 3 3,8
IT services 10 12,50 >2000 16 20,2 Product 2 2,5
Manager
Financial activities 12 15,00 Business 13 16,3
and insurance Development
Manager
Advertising, 2 2,50 Operations 2 2,5
marketing research Manager
and consulting

Administrative and 5 6,25 Anders/other 17 21,3

support services
Employment, 5 6,25
employment
agencies and
personnel
management

Beveiliging en 1 1,25
opsporing
Other services 13 16,25

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Education 8 10,00
Health and welfare 2 2,50
Arts, entertainment 2 2,50
and recreation
Other sectors 6 7,50
Valid 76 95,00 79 76 95,0
Missing 4 5,00 3 4 5,0
Total 80 100% 80 100% 80 100%

Most respondents are active within financial activities and insurance (15%), IT services
(13%), Education (10%) or other non defined service industries (24%). The firms size
categories are relatively equally defined. Respondents are mainly general manager (30%)
followed by business development manager (16%). The “other” sector is also relatively
high (21%) and contains all high level management functions which are described in detail
within the description section of this report.

5.2 Descriptive statistics

Firm size N Valid 79 Missing 1

20
15
10
5 Number of
0 employees

Within an ideal situation, numbers of employee categories in the survey are equal to the
categories used by “Centraal bureau voor de statistiek”, a Dutch organization responsible
for the statistics of the Dutch economy. Regrettably, the number of employee categories
is too large for the sample. In order to create a better representation of the values, the
numbers of employee categories are minimized and the values recoded. Based on the
Figure as presented above, it becomes visible that the firm size categories are relatively
equally divided although, they do not represent reality since 90% of the service firms are
small or medium sized firms in the total economy(CBS, 2009).

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Annual turnover
N Valid 64 Skewness 2,819 Kurtosis 8,983

Missing 16 Mean €166,049,634 SD €338,881,113,- Mode €1,000,000

1E+10
€1,000,000,-
1E+09
100000000
10000000
1000000
100000 Annual turnover
10000
1000
100
10
1

The annual turnover ranges from €6, 000, - to €1, 800, 000, 000,-. Not all respondents
were willing to answer this question. 16 respondents did not answer this question. The
mean annual turnover was €166, 049, 634, - while the mode is positioned at €1, 000, 000,-
. The logarithmic distribution is fairly linear.

Service percentage
N Valid 70 Skewness -2,703 Kurtosis 6,94
annual turnover
Missing 10 Mean 91,76% SD 19,495 Mode 100%

60

50

40

30
Service percentage per
20 firm

10

Service percentages of annual turnovers range from 10% till 100%. The mean service
percentage is 91, 76 % mode 100%. Most of the respondents are employed in a 100%
service firm. Six firms are positioned in the range with less than 50% services, although
these firms have some service elements in their operational activities, they cannot be
characterized as real service firms.

Page 45 van 91
Service Sector
N Valid 76 Missing 4 Mode other services

14

12
Service Sector
10

In order to indicate the service sector in which respondents participate, codes used by the
Dutch ‘’Centraal Plan Bureau’’ (CPB) were used. Unfortunately 19 respondents (25% of
the sample) were not able to categorise their firm in one of the sectors and chose the
option other service or other sector. Furthermore it is visible that financial activities and
insurance, IT services, and education are large service groups within this sample. Together
these firms represent 40% of the sample. The following sectors did not respond to the
survey; repair of vehicles and motorcycles, publishers, film video radio and TV,
exploitation and trade in real estate, rend and lease, travel agents and tour operators,
facility management cleaning and landscape care and public administration.

Page 46 van 91
 N Valid 76 Missing 4 Mode General Manager
Profession of respondent

3 2 General Manager
2
5 24
5 Anders/other
5
Business Development
Manager
13
17 Business Unit Manager

Marketing Manager

Most of the respondents are General Managers (Mode); furthermore the business
development manager representation is large. The respondents that answered “Other”
have the following professions: Innovation, Sector Manager Business service, strategy
manager, director strategy & development, director marketing & sales, ICT manager,
Innovation manager, general director, service design consultant, manager, business
developer, senior project manager, owner, relation manager, recruitment manager, office
manager and quality manager.

Innovation type description

N Valid 61 Missing 16 Modus product/service innovation

30
25
20
15
10
5
0
innovation description

The product/service innovation description is mostly indicated as the best suitable

innovation description, followed by recombinatorial innovation, process innovation and
marketing innovation. 69% of the respondents are busy with authentic product or service
innovations.

Page 47 van 91
 N Valid 60 Missing 20 Median 3,5 Mode 5
Innovation budget assigned

30

25

20

15

10

5 Innovation budget
available
0

Most firms (24 out of 60) assigned more than €100.000, - (category 5) in order to develop
and introduce their chosen innovative activity. The mode is situated at 3, 5 and located
between €11, 000, - and €100, 000,-.

Number of moths from

N Valid 57 Skewness 3,113 Kurtosis 12,139
investment to (market)
introduction. Missing 23 Mean 13,75 SD 13,017 Mode 6

25
20
15
Number of months from
10 investment to (market)
5 introduction
0
1 tot 6 6 tot 12 12 tot 24 >24

The number of months firms used to develop their innovation from investment decision
till market introduction varies between 1 and 76 months. In order to get a better overview
of months necessary I recoded the data in four categories as presented in the Table
above. Most firms realized their innovation within a year. The original mode is positioned
at 6 months, the original mean is positioned at 13, 75 months.

Page 48 van 91
Innovation responsibility
N Valid 59 Missing 21 Mean 1,53 Mode 2

28 Part of the firm

31 Total firm

Based on the Figure above, there are no real differences between the responsibilities for
the innovation process. The responsibility covering is more or less equally divided. Half of
the time it is part of the firm’s responsibility and the other half it is a total firm’s
responsibility.

N Valid 57 Missing 23
Education level
LBO/VMBO MBO HBO WO
9% 19% 34% 38%

45%
40% 38%

35% 34%

30%
25%
19%
20% Education level
15%
9%
10%
5%
0%
LBO/VMBO MBO HBO WO

One of the survey questions concentrated on the education level of service firm
employees. While taking the main score of all answers categories (LBO/MBO/HBO and
WO), 38% received higher education, a scientific degree, 34% higher vocational education,
19% intermediate vocational education and 9% lower vocational education or lower

Page 49 van 91
secondary professional education. 72% of the service employees within this sample
received a higher degree.

Part-time innovation employees

N Valid 56 Missing 23 Mean 5,02 Mode 0

20
18
16
14
12
10 Number of part-time
8 innovation employees
6
4
2
0
0 1 2 3 4 5 10 16 22 25 45 50

The number of part-time innovation employees varies from 0-50. Most service firms
within this sample did not assign part-time innovation employees, mode is 0. On average
5 employees are assigned to a part-time innovation occupation.

Fulltime innovation employees

N Valid 55 Missing 25 Mean 12 Mode 2

12

10

6
Number of fulltime
innovation employees
4

0
1
0

2
3
4
5
7

100
10
12
15
16
20
40
50

Fulltime employee involvement originally ranges from 0 to 40,000 employees. The mean
is positioned at 7154 employees, while the mode was situated at two employees. This
difference is caused by the extreme outlier on at the right assigning 40,000 full time
employees. While removing this extreme outlier it becomes visible that the average
number of full time employees is positioned at 12 employees, while the mode is
positioned at 2.

Page 50 van 91
 100%
80%
60%
Full time
40%
20% Part-time
0%
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55

Overall, on average 24% of all employees are assigned to innovation activities on a full
time basis, while 62% are assigned on a part-time basis.

Evaluation criteria
N Valid 59 Missing 21 Item score 1 totally disagree to 5 totally agree

Mode 4

25

20

15

10 Careful evaluation

0
Totally disagree Totally agree

35 Mode 4

30

25

20

15 Goals are realized

10

0
Totally disagree Totally agree

Page 51 van 91
 30
Mode 4
25
20
15 Satisfaction with
10 performance

5
0
Totally disagree Totally agree

30
Mode 4
25

20

15 Results in
consistence with
10 expectations

0
Totally disagree Totally agree

At first sight the evaluation criteria are comparable. All the evaluation items received a
modus score of 4 (representing at least 30% of the
sample) which is at the high end.
Item score 1 -5 as presented in the legend
Service characteristics

25
N 54 Mode 4
20

15
Capital intensive-
10 labour intensive

0
Capital intensive Labour intensive

Page 52 van 91
 35 N 53 Mode 1

30

25

20
Knowledge work- manual
15
work
10

0
Knowledge work Manual work

14
N 51 Mode 2/4
12

10

8
Low volumes - high
6 volumes

0
Low volumes High volumes
N 52 Mode 4

18
16
14
12
10
Standardization - custom
8 made
6
4
2
0
Standardization Custom made
.

Page 53 van 91
 30 N 50 Mode 1

25

20

15 Human service delivery -

Mechanically service
delivery
10

0
Human Machine

35
N 53 Mode 5
30

25

20

15 Unskilled - highly skilled

10

0
Unskilled Highly skilled

35 N 52 Mode 5

30

25

20
Single contact - prolonged
15 contact

10

0
Single contact Prolonged contact

Page 54 van 91
The services delivered by firms within this sample can be roughly characterized as
knowledge intensive, mediate volumes, standardized with custom made elements,
delivered by highly skilled humans resulting in prolonged relationships with customers.

In this stage of the research it is already interesting to zoom in on this data a little bit
more. I mirrored the four service types with the service characteristics defined and
recoded the data into three answer options instead of five. Zooming in on the data, the
following Figures and descriptions can be presented.

Professional services
Professional services characteristics
Capital intensive <> Labour intensive Total
1 1 19 21

Knowledge work <> Hand work Total

19 1 1 21

Low volumes <> High volumes Total

13 3 3 19

Standardization <> Custom made Total

3 4 13 20

Service delivered Service delivered by Total

by humans <> machines
16 4 0 20

Low skilled <> Highly skilled Total

0 1 20 21

Single customer Permanent contact Total

contact <> with customers
2 0 19 21

Based on this Figure, Professional service firms are characterized by labour intensive
services, knowledge work, low volumes, custom made products delivered by highly skilled
humans during long-term customer contacts.

Installation services
Installation service firm characteristics
Capital intensive Labour intensive Total
8 8

Knowledge work Hand work Total

6 2 8
Low volumes High volumes Total
4 2 2 8

Standardization Custom made Total

0 4 4 8
Service delivered Service delivered by Total
by humans machines
8 0 0 8

Low skilled Highly skilled Total

0 3 5 8

Single customer Permanent contact Total

contact with customers

Page 55 van 91
 0 0 8 8

Installation service firms are characterized by labour intensive services, knowledge work,
low volumes, custom made service, delivered by highly skilled humans during long term
customer contacts.

Mass services
Mass service characteristics
Capital intensive Labour intensive Total
2 3 5

Knowledge work Hand work Total

4 1 5

Low volumes High volumes Total

1 2 2 5

Standardization Custom made Total

4 0 1 5
Service delivered Service delivered by Total
by humans machines
3 0 1 4

Low skilled Highly skilled Total

2 0 3 5

Single customer Permanent contact Total

contact with customers
0 0 5 5

Mass services are characterized by a combination of capital and labour intensive service
activities. All mass services are knowledge intensive. Although most services are
standardized, services are delivered both in high as well as low volume batches. Mass
services are delivered by both humans and machines requiring low as well as highly skilled
employees. Customer relations are characterized by permanent relations.

Shop services
Shop service characteristics
Capital intensive Labour intensive Total
3 7 9 19

Knowledge work Hand work Total

16 3 19

Low volumes High volumes Total

7 4 8 19

Standardization Custom made Total

11 4 4 19
Service delivered Service delivered by Total
by humans machines
9 4 5 18

Low skilled Highly skilled Total

2 1 16 19
Single customer Permanent contact Total
contact with customers
0 1 17 18

Page 56 van 91
Shop services know both capital as well as labour intensive activities. Most service actions
are characterized as knowledge intensive. Shop services are standardized and delivered in
both low as well as high volume ranges. Service is delivered partly by humans and partly
through machines. Service employees are highly skilled and customer interactions are on
a permanent base.

Best suitable service description

N Valid 53 Missing 27 Mean 2,42 Mode 1

25
20
15
10 service description
5
0
Professional Installation Mass Shop

Respondents were asked to choose a service situation best applicable to their firm. These
sentences where Dutch descriptions, based on the ideas of Silvestro et all’s professional,
mass and shop firms, adjusted with a description suitable for installation services as
designed by Flikkema et al. (2010). Most service firms within this sample indentify
themselves with the description of a professional service firm. The second most chosen
description is the service shop.

Most important customer

N Valid 53 Missing 27 Mean2 Mode 2

50 43
40
30
20
10 5 5
0 Customer type

Consumenten Bedrijven Beiden even

(business to (business to belangrijk
consumer) business) (equally
important)

Most of the respondents are operating in a business to business market.

Page 57 van 91
Internal innovation motives
Item score 1 Disagree to 3 Agree

Retaining employees

Cashing a good idea

Following competition

Strenghten position

Decrease production costs

Merchantability

Enlarge flexibility

Increase customer loyalty

Attract new customers

Image building

Increase busienss sales

0 1 2 3 4 5 6

Based on the Figure above, one of the main reasons to implement or market the
innovation relates to an increase in customer loyalty other important elements are
enlarged flexibility, merchantability, decreased production costs, strengthening of the
position and following competition.

Reactive elements to innovate

Item score 1 Disagree to 3 Agree

Policital development

Changes in ethics

Increased focus on sustainability

Social development

Economical development

Technological development

0 1 2 3 4

Economical and Technological development are the most important reactive elements.

Page58 van 91
Idea generators

General management Marketing R&D

Production Sales Purchase
HRM Fiancial Other sectors
External experts customers suppliers
competition firm same holding Scholars
Private reseach

5 3
2 4 21

14
9

8 10
3 6 3
0
0

Ideas are mainly generated by the general management of a service firm, the second
sources are customers, R&D and marketing. Purchase, HRM and financial departments are
not mentioned as idea generating departments.

Activities behind the generation and further

Item score 1 No role 2 small role to 4 big role
development of the innovation

Participation in inustry organizations

Training & Education
Conversations with suppliers
External advise
Monitoring competitors
Mean/SD
Research & Development
Mean
Market research
Co operation with other parties
Conversations with customers
Internal brainstorms

0 1 2 3 4

Conversations with customers and internal brainstorms are the most important activities
in order to generate ideas and to further develop them. Participation in industry
organizations, training and education play almost no role.

Page59 van 91
Most important selection criteria
Item score 1 Disagree to 3 Agree

Required versus available resources

Organizational adjustments
Financial risks
Fit with technological infrastructure
Advantages over alternatives
Fit with marketing plans
Fit with innovation program Mean/SD
Benefit-cost ratio customers
Mean
Benefit-cost ratio firm
Market potential
Fit with firm culture
Distinctive ability
Strategic fit

0 1 2 3 4 5

Advantages over alternatives and fit with marketing plans seem to be the least important
selection criteria within the decision-making process, whether to start with an innovation.
Based on the means distinctive ability, fit with firm culture and market potential are
important decision criteria.

Profession involved within the decision-making Item score 1 no role, 2 small role to 4 big role
process

Purchase management
Suppliers
Line management
R&D Management
External experts
Marketing management Mean/SD
Business Develop management Mean
Sales management
Business Unit Management
Customers
Management

0 1 2 3 4

General management, Sales management and business development management play

an important role. Purchase management, Line management, R&D management, External
experts and suppliers do not have a role during the decision-making process.

Page60 van 91
Financial resources qualified N Valid 45 Missing 35

45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Regional grants
Other

National grants
Local grants
Education budget
Flexible intern innovation budget

Financial contribution other parties

Financial contribution suppliers
Marketing budget

Financial contribution customers

Fixed intern innovation budget

Within the Table above, the mean scores in relation to innovation budgets are presented.
Most financial resources in relation to innovation activities are generated from flexible
internal innovation budgets (mean 41%). Fixed internal innovation budgets are assigned
as well (26%). No budgets are generated through local, regional or European grants.
Furthermore financial contribution from competitors was not available.

Page61 van 91
 N Valid 45 Missing 35
Innovation spending in relation to professions

Innovation spending

54%

13%
10%
7% 5% 4% 3% 3% 1%

Within the Table above, the main innovation spending sources are given. Within this Table
it becomes clear that most financial resources are spend on own staff, followed by IT
services and other.

Page62 van 91
Innovation spending in relation to knowledge and development N Valid 45 Missing 35
Innovation spending (knowledge and development)

31%

18% 17%
15%

8%
4% 4%
3%

While concentrating on the expenses of the innovation budget, it becomes visible that
service firm expend quite some financial resources on technological development or
applications. Furthermore knowledge development, concept design and marketing
programs are important elements. The other category is quite small.

Organization of innovation
N Valid 46 Missing 34 Mode 2 Mean 1,61

30
25
20
15
10 Organization of
5 innovation
0
Innovation is the Innovation is part
result of an of an ongoing
isolated project program

Within most service firms (n28), innovation is part of an ongoing program.

Page63 van 91
Innovation themes assigned
35 N Valid 46 Missing 34 Mode 2 Mean 1,63
30
25
20
15
10
5
0
Yes No

Most service firm did not assign (n29) a special innovation theme in regard to their
innovation activities.

Innovation goals formulated and

N Valid 46 Missing 34 Mode 2 Mean 1,53
presented

20

15
Innovation goals
10 formulated and
presented
5

0
Yes No

Most service firms did not formulate or present innovation goals (n24) within their firm on
a regular basis.

Page64 van 91
Profession responsible for innovation

General manager Business Unit manager

Marketing manager R&D manager
Sales manager Product manager
Business Development manager Operations manager
Purchase manager Other

2 3
16
14

13
2
2 6
3

The general manager is the main responsible profession in relation to innovation within
service firms, closely followed by business development managers and business unit
managers. The purchase manager is not mentioned as a responsible profession at all.

Profession responsible for market launch/ implementation

General manager Business Unit manager

Marketing manager R&D manager
Sales manager Product manager
Business Development manager Operations manager
Purchase manager

0
4
14
14

9
5

11 11
3

The Figure above shows, that the responsibility for market launch or implementation is
presented within different professions. General management, business management, the
role of the business unit manager disappears a little compared to the formal Figure. Other
important professions are sales and marketing. Again purchase is not mentioned.
Page65 van 91
Importance of customers in relation
Item score 1 no meaning 2 insignificant meaning to 4 large meaning
to the innovation process

Mobilization of financial and other…

Allocation of financial and other…
Development
Decision-making
Idea generation
Mean/SD
Market introduction
Testing Mean
Idea testing
Evaluation
Improvement of ideas

0 1 2 3 4

While concentrating on the innovation development process and the role of customer, it
becomes visible that improvement of ideas, evaluation, idea testing and market
introduction the most important stages. Customers are not involved during the
mobilization and allocation of financial resources and within the actual
development/design stage.

Role of top management in relation to the innovation process Item score 1 Disagree to 3 Agree

Top management has

advocated consitently

Frequent flow of information

about progress
Mean/SD
Involvement top management Mean

Decisions after consultation

with top management

0 1 2 3 4 5

The role of top management is important within the innovation process. All selected
criteria received a high score, although they are skewed. While referring to the mean
scores, regular involvement of top management and frequent flows of information
concerning progress are important items with regard to top management involvement.

Page66 van 91
Autonomy of the team
Item score 1 totally disagree to 5 totally agree

Existing procedures dit not affect

the team
Team was constantly under time
pressure
Team had influence on the
process output specifications
Team had enough latitude within
the firm Mean/SD

Team had sufficent resources Mean

Team was able to set her own

priorities
Team had sufficient impact on
the approach of the process

0 1 2 3 4 5 6 7

Based on the Figure above, it is visible that the innovation teams were able to impact the
approach of the innovation process, could set their own priorities and were equipped
with enough resources and had enough latitude. The teams are least satisfied with the
existing procedures.

Professions involved within the innovation team

Marketing R&D Business Development

Sales FO staff BO staff
Purchase HRM Finance
Other

4
9 3 21
6
11
21

16

21 27

Based on the Figure it becomes clear that business development, Sales, R&D and back
office staff are most of the times involved within an innovation team. HRM, Purchase and
finance are the least involved professions.

Page67 van 91
 Item score 1 totally disagree to 5 totally agree
Testing and embededment of innovation

Test results are compared with

previously determined goals
Tested by customers prior to
market launch
Test results have given rise to
sufficiently tightement
Mean/SD
There were enough investements
in training and education Mean
Employees had adequate time and
space for feedback
Employees are adequately
informed prior to the launch

0 1 2 3 4

While referring to the Figure above, employees are well informed before the actual
launch of the innovation. Furthermore, employees had enough time and space to provide
feedback. Customer testing and comparison of test results with determined goals are
determined as less important roles.

Protection instruments

Short-time to market
1
Patents
15
Copyright
23
Trademark
Model right

5 Variety rights
Internet domains

3 secrecy
12 4 none
1 4
Other
0

In case service firms protect their innovation, they mainly use short-time to the market
periods in order to protect their innovations. Furthermore, internet domains and secrecy
are used. Variety rights are never indicated.

Page68 van 91
5.3 Depth, analysis
Research items included in the central research question are; management of innovation,
service characteristics and firm characteristics. The structure of this analysis section
correspondent with these items and is adjusted with idea generation and innovation
types. All elements are positioned in the adjusted research model as presented below. We
analyzed the data avail be while making use of innovation management items in relation
to 1) firm size, 2) service type, 3) innovation type, 4) Service percentage of annual
turnover and 5) customer type served. Statistical tests used are Pearson chi-squares,
Mann withney, Kruskal Wallis, ANOVA and one sample T-tests.

Figure 12: adjusted research model

Management characteristics related to firm size

Figure 13 shows the significant meanings between management characteristics and firm
size. During the analysis of these relations and differences we made a distinction between
firms <100 which we will call small firms from now on and firms >100 which we call large
firms.

Idea generation
While concentrating on idea generation it becomes visible that small service firms
cooperate more often with other parties than large firms.

Decision-making
Concentrating on decision making it becomes clear that large firms clearly incorporate
business unit managers in their decision-making process, assisted by marketing, purchase,
R&D and Line managers. Small firms make extensive use of general management,
sometimes assisted by marketing and R&D managers. In case R&D management is
involved they often receive a dominant role.

Finance and allocation

Small firms spend on average 1,1% of their marketing budget on innovation. Large service
firms spend 1/6, 17,6% of their marketing budget on innovation and spend on average
1,19% of their innovation budget in order to hire external expertise. Concentrating on
spending concerning knowledge and development it becomes visible that small firms
spend on average 2,22% of their budget to organizational development and large firms
11,5% .

Page69 van 91
Development
Within small firms general management is main responsible for total innovation
trajectories (from start to launch). The general management role is less principal within
large firms. In these firms business unit management is main responsible for the
development phase of the innovation and shares this responsibility with market
management at the launch phase. Large firms assign an important role to customers
during development stages, small firms incorporate their customers as well although, they
never assign a big role to customer involvement. While pointing attention on autonomy of
innovation teams, it becomes visible that innovation teams of large firms always work
under pressure of time. Small firms do indicated working against the clock, though, less
overriding.

Test & Launch

Once an innovation is designed, developed and implemented it might be valuable to
protect the innovation or its enclosed ideas. There are multiple ways to protect the
innovation 85% of the large service firms in our sample protect their innovation,
compared to 47% of small service firms.

Page70 van 91
 Firm sizes
Category Item <100 >100
Idea generation Activities behind the generation and further development of the innovation
Co-opera ti on wi th other pa rti es N45 Krus ka l Wa l l i s 10,53 DF 3, P0,015 <100 co-opera te fa r more wi th other pa rti es

Decision-making Most important selection criteria No s i gni fi ca nt mea ni ng beca us e coi nci dence
ca nnot be fa l s i fi ed
Professions involved within the decision-making process
Bus i nes s Uni t Ma na gement N42 Krus ka l Wa l l i s 21,26, DF 3, P 0,000 <100 no rol e, >100 bi g rol e
Ma rketi ng Ma na gement N42 Krus ka l Wa l l i s 13,32, DF 3, P 0,004 <100 mos t often no rol e,
>100 s ma l l rol e or bi g rol e
Purcha s e Ma na gement N41 Krus ka l Wa l l i s 11,60, DF3, P0,009 <100 no rol e, >100 s ma l l rol e
R&D Ma na gement N42 Krus ka l Wa l l i s 10,98, DF3, P0,012 <100 no rol e or bi g rol e, >100 di vi s i on over a l l
pos s i bi l i ti es
Li ne Ma na gement N43 Krus ka l Wa l l i s 16,49, DF3, P0,001 <100 no rol e >100 di vi s i on over a l l
pos s i bi l i ti es
Finance Financial resources qualified
Ma rketi ng budget Independent-Sa mpl es T-tes t, T -2,644, DF 27, P 0,014 <100 s pend on a vera ge 1,11% of thei r ma rketi ng
budget on i nnova ti on.
>100 s pend on a vera ge 17,6% of thei r ma rketi ng
budget on i nnova ti on.

Innovation spending in relation to professions

Externa l res ea rchers Independent-Sa mpl es T-tes t, T -2,078, DF 25, P 0,048 <100 do not s pend i nnova ti on budgets on
externa l res ea rchers .
>100 s pend on a vera ge 1,19% of thei r
i nnova ti on budget to externa l res ea rchers

Innovation spending in relation to knowledge and development

Orga ni za ti ona l devel opment Independent-Sa mpl es T-tes t, T -2,291, DF 29, P 0,030 <100 s pend on a vera ge 2,22% of thei r
i nnova ti on budget on orga ni za ti ona l
devel opment.
>100 s pend on a vera ge 11,15% of thei r
i nnova ti on budget on orga ni za ti ona l
devel opment.

Development Organization of innovation development No s i gni fi ca nt mea ni ng beca us e coi nci dence
ca nnot be fa l s i fi ed
Innovation themes assigned No s i gni fi ca nt mea ni ng beca us e coi nci dence
ca nnot be fa l s i fi ed

Innovation goals formulated and presented No s i gni fi ca nt mea ni ng beca us e coi nci dence
ca nnot be fa l s i fi ed
Profession responsible for innovation
Genera l Ma na ger N45 Ma nn Wi thney 97,50, Z -3,59, P 0,000 <100 Genera l ma na gement mos tl y i nvol ved
>100 Genera l ma na gement s el dom i nvol ved

Bus i nes s Uni t Ma na ger N45 Ma nn Wi thney 327,50, Z 3,17 P 0,002 The Bus i nes s Uni t Ma na ger
i s more often i nvol ved wi thi n fi rms >100

Profession responsible for market launch/implementation

Genera l Ma na ger N45 Ma nn Wi thney 84,00, Z -3,63, P 0,000 The Genera l ma na ger i s more often i nvol ved
wi thi n fi rms <100

Ma rketi ng Ma na ger N45 Ma nn Wi thney 269, Z 2,53, P 0,030 The Ma rketi ng ma na ger i s more often i nvol ved
wi thi n fi rms >100

Importance of customers during the innovation process

Devel opment of the i nnova ti on N 44 Krus ka l Wa l l i s 9,65, DF 3, P 0,022 <100 cus tomers pl a y never a bi g rol e duri ng the
i nnova ti on proces s .
>100 cus tomers pl a y often a bi g rol e duri ng the
i nnova ti on proces s .

Role of top management in relation to the innovation process No s i gni fi ca nt mea ni ng beca us e coi nci dence
ca nnot be fa l s i fi ed
Autonomy of the team
Tea m opera ted cons ta ntl y under ti me pres s ure N42 Krus ka l Wa l l i s 9,26, DF 3, P 0,010 <100 ha l f a greement/ha l f di s a greement.
>100 no di s a greement, mea ni ng pres s ure a t a l l
ti mes .

Professions involved within the innovation team No s i gni fi ca nt mea ni ng beca us e coi nci dence
ca nnot be fa l s i fi ed

Test & Launch Testing and embededment of the innovation No s i gni fi ca nt mea ni ng beca us e coi nci dence
ca nnot be fa l s i fi ed
Tools used in relation to protect the innovation
No protecti on i ns trument N45, Ma nn Wi thney 125, Z -2,64, P 0,008 <100 53% does not protect a n i nnova ti on
>100 15% does not protect a n i nnova ti on

Figure 13: significant differences management/firm size

Page71 van 91
Management characteristics related to service description
Figure 14 shows the significant meanings between management characteristics and
service descriptions.

Idea generation
Conversations with customers play a big role concerning idea generation within most of
the four service archetypes. Only mass service firms do not consider conversations with
their customers as one of the major ways to generate new ideas.

Decision-making
Examine the selection criteria for innovation, fit with firm culture received a high
agreement percentage with exception of the mass service firm. Within mass firms cultural
fit seems less important instead, fit with technological infrastructure is foremost an
important selection criteria. A second striking observation relates to the benefit-cost ratio
of the (potential) customer which is most dominant within professional and shop services,
in addition marketing is least prevailing within shop services. Pointing attention to the
professions involved within the decision-making process it becomes clear that installation
firms most often incorporate the advice of external experts compared to mass services
who never assign a large role to experts.

Finance and allocation

In regard to finance and allocation, mass services attract the most attention within this
sample. 20% of the mass service firms included within this sample received 80% of their
innovation budget through financial contribution of suppliers. In addition, 50% of the
innovation budget of these firms is assigned to technological developments or
applications.

Development
Mass services are least liking to predetermine innovation goals, installation firms on the
other hand most often do assign innovation goals to their innovation projects. The
assistance of back offices service staff during the innovation development is most
dominant within mass services, 80% incorporated these professions within their
innovation teams. Another important profession within the innovation team of a mass
firm is the purchase department.

Test & Launch

Concentrating on the test results of an innovation, most service shops indicated that test
results provide enough motivation for improvement. Mass services indicated the least
improvement triggers.

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 Service descriptions
Category Item Score Professional Installation Shop Mass
Idea generation Activities behind the generation and further development of the innovation
Convers a ti ons wi th cus tomers N49 Pea rs on Chi -s qua re 22,18, DF 9, P 0,008 Bi g rol e 79% 75% 65% 0%
Decision-making Most important selection criteria
Fi t wi th technol ogi ca l i nfra s tructure N48 Pea rs on Chi -s qua re 13,77, DF 6, P 0,032 Agree 33% 0% 71% 40%
Fi t wi th ma rketi ng pl a ns N49 Pea rs on Chi -s qua re 13,19, DF 6, P 0,040 Agree 68% 25% 76% 60%
Fi t wi th fi rm cul ture N49 Pea rs on Chi -s qua re 14,39, DF 6, P 0,026 Agree 84% 75% 65% 0%
Benefi t-cos t ra ti o cus tomers N48 Pea rs on Chi -s qua re 19,07, DF 6, P 0,004 Agree 72% 50% 71% 20%
Professions involved within the decision-making process
Externa l experts N43 Pea rs on Chi -s qua re 20,49, DF 9, P 0,015 Bi g rol e 25% 71% 20% 0%
Finance Financial resources qualified
Fi na nci a l contri buti on s uppl i ers ANOVA Mea n s qua re 379,259, F 3,037, P 0,040 0% 0% 0% 20% of the Ma s s
s ervi ces i nvol ved
i n thi s s tudy,
recei ve 80% of
thei r i nnova ti on
budgets from
s uppl i ers .
Innovation spending in relation to professions No s i gni fi ca nt mea ni ng beca us e coi nci dence
ca nnot be fa l s i fi ed
Innovation spending in relation to knowledge and development
Technol ogi ca l devel opment a nd/or a ppl i ca ti on ANOVA Mea n s qua re 5539,777, F 7,658, P 0,000 Mos t Ma s s a nd s hop fi rms
s pend 50% of thei r
i nnova ti on budget on
technol ogi ca l devel opment
a nd/or a ppl i ca ti on

Development Organization of innovation development No s i gni fi ca nt mea ni ng beca us e coi nci dence
ca nnot be fa l s i fi ed
Innovation themes assigned No s i gni fi ca nt mea ni ng beca us e coi nci dence
ca nnot be fa l s i fi ed
Innovation goals formulated and presented
N45 Pea rs on Chi -s qua re 9,036, DF, 3, P 0,029 Goa l s formul a ted 59% 75% 33% 0%
Profession responsible for innovation No s i gni fi ca nt mea ni ng beca us e coi nci dence
ca nnot be fa l s i fi ed
Profession responsible for market launch/implementation No s i gni fi ca nt mea ni ng beca us e coi nci dence
ca nnot be fa l s i fi ed
Importance of customers during the innovation process No s i gni fi ca nt mea ni ng beca us e coi nci dence
ca nnot be fa l s i fi ed

Role of top management in relation to the innovation process No s i gni fi ca nt mea ni ng beca us e coi nci dence
ca nnot be fa l s i fi ed
Autonomy of the team No s i gni fi ca nt mea ni ng beca us e coi nci dence
ca nnot be fa l s i fi ed
Professions involved within the innovation team
Ba ck Offi ce s ervi ce s ta ff Pea rs on Chi -s qua re 9,693, DF 3, P 0,021 Invol ved wi thi n 18% 29% 13% 80%
i nnova ti on tea m
Purcha s e Pea rs on Chi -Squa re 11,101, DF 3, P 0,011 6% 0% 13% 60%
Test & Launch Testing and embededment of the innovation
Tes t res ul ts ha ve gi ven s uffi ci ent moti ves to i mprove the i nnova ti on Agree 33% 38% 73% 20%
Pea rs on Chi -s qua re 14,886, DF 6, P 0,021
Tools used in relation to protect the innovation No s i gni fi ca nt mea ni ng beca us e coi nci dence
ca nnot be fa l s i fi ed

Figure 14: significant differences management/service description

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Management characteristics related to innovation types
Figure 15 shows the significant meanings between management characteristics and
innovation types.

Idea generation
No significant meaning because coincidence cannot be falsified.

Decision-making
Cost-benefit ratios are important criteria during the selection process of every type of
innovation. However, there is one innovation type outstanding, recombinatorial
innovation. While aiming at recombinatorial innovation, 80% of the firms selected cost-
benefit ratio’s as an important selection item. Secondly, the possibility to create
distinctive ability through the innovation is an important aspect as well with exception in
case of process innovation. However, this does not mean that service firms cannot create
distinctive ability through process innovations.

Finance and allocation

Both during process innovations and recombinatorial innovations some service firms,
respectively (22% and 10%) generated their innovation budgets for 100% from sources
not incorporated in our web survey. Most service firms only slightly spend parts of their
innovation budget to training and coaching. Most spending in this category is incorporate
during marketing innovations. Spending with regard to IT services is mostly applicable
during process innovations and least during recombinatorial innovation. During
recombinatorial innovation most budget is spend on competence development.
Competence development is far less available within the other innovation types.

Development
In respect to the resources available for the innovation team it becomes clear that the
least resources are available within recombinatorial innovation, only 38% of the firms
making use of recombinatorial innovation agreed on the statement “enough resources
available for the team” compared to at least 80% of the other innovation types and even
100% during marketing innovations. While concentrating on the professions incorporated
in the innovation team, it becomes clear that the marketing department is included within
marketing innovation projects 100% of the times, while the R&D department is never
involved in the innovation team during these innovations. Furthermore the marketing
department is often included during product/service innovations, where R&D receives a
more dominant role.

Test & Launch

Except for the product/service innovation innovations, employees are adequate informed
prior to the actual market launch or implementation of an innovation.

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 Innovation types
Category Item Score Process Product/Service Recombinatorial Marketing
Idea generation Activities behind the generation and further development of the innovation No s i gni fi ca nt mea ni ng beca us e coi nci dence
ca nnot be fa l s i fi ed
Decision-making Most important selection criteria Agree
Benefi t-cos t ra ti o fi rm N49 Pea rs on Chi -s qua re 15,029, DF 6, P 0,020 64% 68% 80% 67%
Di s ti ncti ve a bi l i ty N48 Pea rs on Chi -s qua re 14,142, DF 6, P0,028 46% 95% 90% 83%
Professions involved within the decision-making process No s i gni fi ca nt mea ni ng beca us e coi nci dence
ca nnot be fa l s i fi ed
Finance Financial resources qualified
Other, ANOVA Mea n s qua re 1955,767, F 2,925, P 0,045 100% of the i nnova ti on 22% 10%
budget from a n other
s ource
Innovation spending in relation to professions
Coa ches a nd Tra i ners ANOVA Mea n s qua re 349,367, F 3,282, P 0,030 No s pendi ng 70% 95% 89% 60%
IT s ervi ces ANOVA Mea n s qua re 2370,847, F 4,756, P 0,006 No s pendi ng 40% 76% 89% 60%
Innovation spending in relation to knowledge and development
Competence devel opment ANOVA Mea n s qua re 237,526, F 2,949, P 0,044 No s pendi ng 78% 81% 50% 80%
Development Organization of innovation development No s i gni fi ca nt mea ni ng beca us e coi nci dence
ca nnot be fa l s i fi ed
Innovation themes assigned No s i gni fi ca nt mea ni ng beca us e coi nci dence
ca nnot be fa l s i fi ed
Innovation goals formulated and presented No s i gni fi ca nt mea ni ng beca us e coi nci dence
ca nnot be fa l s i fi ed
Profession responsible for innovation No s i gni fi ca nt mea ni ng beca us e coi nci dence
ca nnot be fa l s i fi ed
Profession responsible for market launch/implementation No s i gni fi ca nt mea ni ng beca us e coi nci dence
ca nnot be fa l s i fi ed
Importance of customers during the innovation process No s i gni fi ca nt mea ni ng beca us e coi nci dence
ca nnot be fa l s i fi ed
Role of top management in relation to the innovation process No s i gni fi ca nt mea ni ng beca us e coi nci dence
ca nnot be fa l s i fi ed
Autonomy of the team
Tea m ha d s uffi ci ent res ources Pea rs on Chi -s qua re 17,4, DF 6, P 0,008 Agree 89% 91% 38% 100%
Professions involved within the innovation team
Ma rketi ng Pea rs on Chi s qua re 8,574, DF 3, P 0,036 Invol ved 30% 52% 25% 100%
Res ea rch a nd Devel opment Chi s qua re 8,159, DF 3, P 0,043 Invol ved 40% 67% 38% 0%
Test & Launch Testing and embededment of the innovation
Empl oyees a re a dequa tel y i nformed pri or to the l a unch Chi s qua re 13,202, DF 6, P 0,040 Agree 90% 38% 90% 80%
Tools used in relation to protect the innovation No s i gni fi ca nt mea ni ng beca us e coi nci dence
ca nnot be fa l s i fi ed

Figure 15: significant differences management/innovation types

Page75 van 91
Management characteristics related to service percentage of annual turnover
Figure 16 shows the significant meanings between management characteristics and the
service percentage of annual turnovers. In this respect we defined two categories, firms
with turnovers for 100% generated through services, which we call full service firms and
firms with turnovers for less than 100% generated through services, which we call other
firms.

Idea generation
No significant meaning because coincidence cannot be falsified.

Decision-making
Fit with firm culture seems very important within 100% service firms, 81% of these firm
indicated cultural fit as an important selection criteria, compared to 31% of the other
firms.

Finance and allocation

66% of the full service firms assign a fixed innovation budget in order to finance their
innovation projects. 33% of the other firms assign a fixed budget.

Development
Standard operating procedures seem to harm the effectiveness of the innovation teams
within both types. 59 % of the full service innovation teams and 42% of the other firms
are affected by standard operating procedures. While focussing on the professions
involved within the innovation teams, it becomes visible that 48% of the full service firms
incorporate Front-Office service staff within their innovation teams, compared to 15% of
the other firms. The fact that Front-Office service staff is incorporated within the
innovation team might declare the difficulties experience with regard to standard
operating procedures. Front-office employees are in direct contact with customers and
probably have less room to move and work on innovation during their operational
activities.

Test & Launch

Full service firms are less likely to take out a patent in order to protect their innovations.
Other firms do patent their innovations 23% of the cases.

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 Service percentage of annual turnover
Ca tegory Item Score 100% <100%
Idea generation Activities behind the generation and further development of the innovation No s i gni fi ca nt mea ni ng beca us e coi nci dence ca nnot be
fa l s i fi ed
Decision-making Most important selection criteria
Fi t wi th fi rm cul ture N44 Krus ka l Wa l l i s 9,988, DF 2, P 0,007 Agree 81% 31%
Professions involved within the decision-making process No s i gni fi ca nt mea ni ng beca us e coi nci dence ca nnot be
fa l s i fi ed
Finance Financial resources qualified
Fi xed i ntern i nnova tion budget Independent-Sa mpl es T-tes t, T -2,279, DF 39, P 0,028 No budget 66% 33%
Innovation spending in relation to professions No s i gni fi ca nt mea ni ng beca us e coi nci dence ca nnot be
fa l s i fi ed
Innovation spending in relation to knowledge and development No s i gni fi ca nt mea ni ng beca us e coi nci dence ca nnot be
fa l s i fi ed
Development Organization of innovation development No s i gni fi ca nt mea ni ng beca us e coi nci dence ca nnot be
fa l s i fi ed
Innovation themes assigned No s i gni fi ca nt mea ni ng beca us e coi nci dence ca nnot be
fa l s i fi ed
Innovation goals formulated and presented No s i gni fi ca nt mea ni ng beca us e coi nci dence ca nnot be
fa l s i fi ed
Profession responsible for innovation No s i gni fi ca nt mea ni ng beca us e coi nci dence ca nnot be
fa l s i fi ed
Profession responsible for market launch/implementation No s i gni fi ca nt mea ni ng beca us e coi nci dence ca nnot be
fa l s i fi ed
Importance of customers during the innovation process No s i gni fi ca nt mea ni ng beca us e coi nci dence ca nnot be
fa l s i fi ed
Role of top management in relation to the innovation process No s i gni fi ca nt mea ni ng beca us e coi nci dence ca nnot be
fa l s i fi ed
Autonomy of the team
Exi s ting procedures di d not a ffect the tea m N39 Krus ka l Wa l l i s 6,345, DF 2, P 0,042 Agree 41% 58%
Professions involved within the innovation team
Front-Offi ce s ervi ce s taff N40 Ma nn wi thney 130,00, Z -1,986, P 0,048 Incl uded wi thi n 48% 15%
the i nnova tion tea m

Test & Launch Testing and embededment of the innovation No s i gni fi ca nt mea ni ng beca us e coi nci dence ca nnot be
fa l s i fi ed
Tools used in relation to protect the innovation
Pa tents N43, Ma nn Wi thney 102, Z 2,652, P 0,030 Pa tents us ed to 0% 23%
protect the i nnova tion

Figure 16: significant differences management/service percentage of annual turnover

Page77 van 91
Management characteristics related to customer type
Figure 17 shows the significant meanings between management characteristics and the
customer type served. We distinguish three categories, business to consumer (B2C),
business to business (B2B) and both equally important.

Idea generation
Conversations with suppliers is foremost an idea generation activity within firms serving
both B2B and B2C, slightly followed by B2C firms from which 20% assign a big role to this
activity.

Decision-making
Although conversations with suppliers are very important during the idea generation
phase of firms serving both types of customers, they do not provide a big role during the
decision stage of these firms. Suppliers do play a big role during decision making within
B2C firms and slightly within B2B firms.

Finance and allocation

We have seen that suppliers provide a big role during the decision making process of B2C
firms. In line with this observation it is not surprising that 20% of the B2C firms receives
innovation budget from their suppliers. While zooming in on the innovation spending
related to professions it becomes visible that most service firm spend innovation budget
on their own employees. Only within the B2B firms 17% of the firms reported not to
spend innovation budget on their own employees. Spending on coaches and training is
most visible within B2C firms and least within B2B firms. Spending on chain partners is
most likely within firm serving both types and least within B2C firms.

Development
Business unit managers are responsible for innovation particularly within firms serving
both customer types. B2C firms do not assign responsibility to the business unit
managers. Customers play an important role during the development stage of the
innovation process, within both B2C as well as combination service firms. In regard to the
formation of the innovation team it becomes visible that HRM and finance departments
are mostly incorporated within innovation trajectories of B2C firms, while they are never
incorporated within firms serving B2B as well as B2C customers.

Test & Launch

Service firms with a B2C component are most likely to test their innovation prior to the
market launch or implementation and to compare their test results with previously
determined goals. Testing with customers is most dominant within firms were both B2B
and B2C are served while comparison of test results with determined goals is most
dominant within B2C firms. Pointing attention protection of the innovation it becomes
clear that 20% of the firms serving both types of customers found another way to protect
their innovation, not incorporated in our web survey.

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 Customer type
Category Item Score B2C B2B Both
Idea generation Activities behind the generation and further development of the innovation
Convers a ti ons wi th s uppl i ers N48 Pea rs on Chi Squa re 18,149, DF 6, P 0,006 Bi g rol e 20% 3% 60%
Decision-making Most important selection criteria
No s i gni fi ca nt mea ni ng beca us e coi nci dence
(Pearson Chi-square)
ca nnot be fa l s i fi ed
Professions involved within the decision-making process
Suppl i ers N44 Pea rs on Chi -s qua re 31,526, DF 6, P 0,000 Bi g rol e 80,0% 8,6% 0,0%
Finance Financial resources qualified
Fi na nci a l contri buti on s uppl i ers ANOVA Mea n s qua re 568,889, F 4,667, P 0,015 No contri buti on 80% 100% 100%
Innovation spendings in relation to professions
Coa hes a nd Tra i ners ANOVA Mea n s qua re 369,156, F 3,317, P 0,046 No s pendi ng 60% 89% 80%
Own s ta ff ANOVA Mea n s qua re 7815,622, F 7,000, P 0,002 No s pendi ng 0% 17% 0%
Cha i n pa rtners ANOVA Mea n s qua re 902,222, F 6,877, P 0,003 No s pendi ng 100% 94% 60%
Innovation spendings in relation to knowledge and development No s i gni fi ca nt mea ni ng beca us e coi nci dence
ca nnot be fa l s i fi ed
Development Organization of innovation developmend No s i gni fi ca nt mea ni ng beca us e coi nci dence
ca nnot be fa l s i fi ed
Innovation themes assigned No s i gni fi ca nt mea ni ng beca us e coi nci dence
ca nnot be fa l s i fi ed
Innovation goals formulated and presented No s i gni fi ca nt mea ni ng beca us e coi nci dence
ca nnot be fa l s i fi ed
Profession responsible for innovation No s i gni fi ca nt mea ni ng beca us e coi nci dence
ca nnot be fa l s i fi ed
Profession responsible for market launch/implementation
Bus i nes s Uni t Ma na ger N46 Pea rs on Chi -s qua re 6,603, DF 2, P 0,037 Res pons i bl e 0% 17% 60%
Importance of customers during the innovation process
Devel opment N45 Pea rs on Chi -s qua re 13,291, DF 6, P 0,039 Bi g rol e 60% 11% 60%
Role of topmangement in relation to the innovation process No s i gni fi ca nt mea ni ng beca us e coi nci dence
(Pearson Chi-square) ca nnot be fa l s i fi ed
Autonomy of the team No s i gni fi ca nt mea ni ng beca us e coi nci dence
(Pearson Chi-square) ca nnot be fa l s i fi ed
Professions involved within the innovation team

HRM N44 Pea rs on Chi -s qua re 6,704, DF 2, P 0,035 Incl uded wi thi n
i nnova ti on tea m 40% 6% 0%
Fi na nce N44 Pea rs on Chi -s qua re 12,872, DF 2, P 0,002 Incl uded wi thi n
i nnova ti on tea m 80% 15% 0%
Test & Launch Testing and embededment of the innovation
Tes ted by cus tomers pri or to ma rket l a unch N46 Pea rs on Chi -s qua re 10,302, DF 4, P 0,036 Agree 60% 25% 80%
Tes t res ul ts a re compa red wi th previ ous l y determi ned goa l s N46 Pea rs on Chi -s qua re Agree
11,886, DF 4, P 0,018 80% 17% 60%
Tools used in relation to protect the innovation
Other protecti on tool N46 Pea rs on Chi -s qua re 8,382, DF 2, P 0,015 Us ed a s protecti on 0% 0% 20%
tool

Figure 17: significant differences management/customer type

Page79 van 91
Service characteristics vs. service description
We used use of Pearson Chi square tests (both variables are scaled ordinal) on all
characteristics service characteristics defined in our questionnaire to examine whether
service characteristics depend on the service description In Figure 18 the entire test
statistics are presented. Although, the data does not fully satisfy the assumptions of the
Pearson Chi square test (all frequencies must be at least one and only 20% of the cells <5
observations) the test results provide a first insight into possible causal links.

Service Characteristics / Service Pearson Chi Square DF P

descriptions
Capital Intensive -labour Intensive / Service 18,545 6
descriptions 0,005
Knowledge Work - Handwork / Service
descriptions 8,998 6 0,174
Low Volumes - High Volumes / Service
descriptions 6,505 6 0,369
Standardization - Custom Made / Service
descriptions 19,888 6 0,003
Delivery through Humans - Machinal / Service
Delivery descriptions 12,477 6 0,052
Low Skilled - High Skilled / Service
descriptions 18,483 6 0,005
Single Contact - Permanent Contact / Service
descriptions 4,919 6 0,554
Figure 18: significant differences
service characteristics/service
description
The Figure shows that, while using a confidence interval of 95% the service characteristics,
capital/labour intensive, standardization/ customized and low skilled/ high skilled differed
significantly between the service type groups. This outcome indicates that there is a
relation between these characteristics and service description.

Referring back to the descriptive section, it becomes visible that professional and
installation services are clearly labour intensive services. Mass and shop services on the
other hand make use of capital as well as labour intensive services.

Regarding standardization or custom made, professional service firms are clearly custom
made, installation services are positioned more in the middle, leaning to custom made.
Mass services make primary use of standardized services, while shop services are
positioned in the middle category while leaning to standardization.

Finally, professional services make extensive use of high skilled employees; installation
services are in the middle but did not chose the option low skilled at all. Mass service
firms are equally divided and make use of low as well as high skilled employees. Shop
services make mainly use of high skilled employees however; some positioned themselves
in the position of mainly low skilled employees.

Page80 van 91
6. Conclusion and recommendations

Where do ideas for innovation in service firms come from?

Ideas are mainly generated by the general management of service firms. Second
conversations with customers and internal brainstorms are the most important activities
in order to generate ideas and to further develop them. Particularly, professional,
installation and shop service firms indicated conversations with customers as important
during idea generation and further development of innovations. Third, R&D and
marketing professions are contributively idea generators within every type of service firm.
Fourth, conversations with suppliers are contributively within service firms particularly
serving B2C of B2B/B2C customers. Fifth, small service firms cooperate the most with
other parties in order to generate ideas. Sixth, overall participation in industry
organizations, training and education seem to play almost no role. Seventh, Purchase,
HRM and financial departments are never mentioned as idea generating departments.

How are ideas for innovation in service firms transformed into marketable and valuable
offers, and which characteristics of service firms, service type, innovation type, and
customer served vary in relation to the management of innovation in service firms?
Innovation starts with the decision whether to work out an idea. Within small service
firms, decision-making is mainly the role of general management, sometimes by
marketing and R&D, in some cases R&D receives a central role. Within large service firms
responsibility shifts towards business unit managers mainly supported by marketing and
sometimes supported by R&D and line management. In case a service firm delivers to
customers (B2C and B2C/B2B) suppliers are additionally involved within the decision-
making process, in case of business to business delivery the role of the supplier decreases.

With regard to resources, most service firms make primarily use of flexible intern
innovation budgets. There are some firms with fixed budgets, marketing budgets or
contribution of suppliers as well, however these are a minority. Nevertheless, in case of
the fixed budgets it is worth mentioning that 66% of the full service firms assigned a fixed
budget against 17% of the other firms. In case of grant possibilities, one service firm used
a national grant. European, regional or local grants are not mentioned. A minority of
service firms, working on process and recombinatorial innovations received financial
resources from a source not included in our survey.

Financial resources are principally expended to own staff, IT services and external advice.
While zooming in on these expenditures it becomes visible that most resources are spend
on technological developments or application. Particularly mass services are active within
this category and spend almost 50% of their innovation budgets on technological
developments or applications. Furthermore knowledge development, concept design and
marketing programs are important elements. Training and coaching is most likely within
firms who worked on marketing innovations and least during recombinatorial innovation.
Within this formal category firms spend more on competence development, which is less

Page81 van 91
visible in other innovation categories. Compared to large firms, small firms spend less on
organizational development.

Within most service firms, innovation is part of an ongoing program. With exception of
some installation firms, most service firm do not assign a special innovation theme or
formulate and present goals in regard to their innovation activities. General management
is principally responsible in relation to innovation within service firms, closely followed by
business development and business unit managers. The larger the firm, the more
important the role of the business unit manager becomes. At the launch phase, business
unit managers are often assisted by marketing managers. Purchase managers are not
mentioned as a responsible profession at all.

The role of top management within the innovation process is big within all service firms.
All selected criteria received a high score. In particular, regular involvement and frequent
flows of information concerning progress are important items with regard to top
management involvement.

While concentrating on the role of customers, it becomes visible that improvement of

ideas, evaluation, idea testing and market introduction the most important stages.
Customer roles during actual development differ, both large and small service firms
incorporate their customers within their design stage. However, only large firms assign a
big role. Customers are not involved during the mobilization and allocation of financial
resources.

Business development, sales, R&D and back office staff are most of the times involved
within an innovation team. With exception of marketing innovations in which the R&D
department is never involved. Purchase departments are only involved within the
innovation teams of mass services. HRM and finance are mostly incorporated within
innovation trajectories of B2C firms, while they are not incorporated in firms serving other
customer types. Back-office service staff is chiefly involved within mass services, front-
office service staff is primarily involved within full service firms. Principally, innovation
teams within large service firms experience pressure of time during their innovation
activities. Furthermore, innovation teams are harmed by standard operating procedures.
In regard to available resources the least resources are available during recombinative
trajectories. However, most innovation teams are capable to impact the approach of the
innovation process and able to set their own priorities.

Concentrating on the test and launch phase of an innovation process, we can conclude
that generally taken, employees are well informed and able to provide feedback before
the actual launch of the innovation. However, there are some improvement possibilities
concerning product/service innovations. Referring to test results, service shops indicated
enough motivation for improvement based on their results, mass service indicated the
least improvement triggers. Finally, in relation to protection 53% of the innovations are
protected this number seems high, however it incorporates a large amount of short-time
to the market and secrecy.

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Relation between management of innovation in service firms, service characteristics
and firm characteristics

In the end, the primary goal of this report was to design a service typology based on
management, service characteristics and firm characteristics. We have seen all kind of
differences between the different contextual characteristics of service firms (size, service
description, innovation, service percentage of annual turnover and customers served).
Within the last section of this report we zoom in on the characteristics of services in its
essence one more time to see whether there are variations visible on the service
characteristics level.

Based on the results of the chi-square tests presented in the analysis section (Figure 18)
indicating significant differences on capital intensive-labour intensive, standardization-
customization and low skilled-high skilled. We can write the following conclusions:
Professional and installation services are mainly labour intensive while mass and shop
services use both labour and capital intensive. Professionals deliver customized services
while mass firms on the other extreme deliver standardized services. Installation and shop
firms make use of both service types while installation services focus more on
customization and shop services focus primarily on standardization. Professionals make
principal use of high skilled employees, Installation firms make use of high and middle
skilled employees, mass services make use of a mix and shops make use of two extremes;
high or low skilled employees. And that is exactly were found the crux, service typologies
have never before been interpreted from the educational level of employees. While
incorporating these characteristic in a model, the following picture can be drawn.

low skilled High skilled

Standardized
Labour intensive
Installation
Professional
Cutomized
Shop

Mass

Shop

Standardized
Captial intensive
Customized

Figure 19: Low skilled/High skilled Service archetype, Nieuwenhuis, Vos, Flikkema and Spaargaren, 2010

Although, it was not possible to build a strong framework, due to a lack of data, we did
find some evidence that the often cited framework of Silvestro et al. (1992) does not
cover the whole service sector. Aiming at professional services, our results perfectly fit
within Silvestro’s model, customized labour intensive service requiring high skilled
employees. Pointing attention to mass firms, the standardization aspects fits the current
model, the high labour intensity on the other hand does not. Mass services incorporated
in our research make use of both capital as well as labour intensive activities. With regard
to service shops we make us of the description of Verma (1998), since Silvestro et al. only
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indicate a midd position without going in to detail. According to Verma (1998) service
shops are characterized by low labour intensity and high customization. A service shop is
able to provide varied customized services to its customers. Our service shop firms do not
fit within this picture. Based on our data we can describe two types of service shops, high
skilled service shops and low skilled service shops. While focusing on the examples of
Verma (1998), auto and other repair services and hospitals these two types match the
visible pattern. Within hospitals it is more likely to find large amounts of high skilled
employees compared to repair centres. Furthermore, we tried to prove that a new type of
service firm, is (re)entering the service management research field; “installation services”.
We used the definition of Flikkema et al. (2010), installation services are characterized by
customized services. Employees are low, middle or highly educated, although the
customization is high, customers play a passive role during the service delivery process.
This description fits within our model with exception of the educational levels. Installation
firms never selected the low skilled option. Based on the proven service characteristic
difference it is possible, although very small, to draw a distinction between professional
and installation services, based on education level and standardization.

Finally, although the sample was too small to indicate real differences between the
innovation types. This research provides evidence that it makes sense to use an additional
innovation category, i.e., recombinatorial innovation. Further study is needed to fully test
the final underlying assumption of our research outcomes; that the innovation processes
of service firms is contingent upon their service characteristics and educational level of
employees, which in their turn can be divided in archetypes; perhaps included with
professional, installation, mass and shop services and type of innovation; process,
product/service, recombinatorial and marketing innovation.

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7. Limitations
Some limitations of the research will be addressed within this section of the report. First,
two organizations have been involved in contacting firms directly related to innovation
which may have created variance in the data. However, this cannot be checked with the
data, although we believe that this is a likely scenario. Furthermore, the firm size variables
may have been discriminated between the data since Syntens concentrates only on
medium and small size firms. Second, there may be some limitations due to “success
approach”, i.e., we only asked for successful innovations. Success and fail factors cannot
be determined. Furthermore, we have asked for implemented innovations, which may
cause a “halo effect bias” (Thorndike, 1920). Third, the dropout rates in relation to the
survey are quiet large. The web survey used within this research might have been to
specified which resulted in a long list, respondents needed at least 30 minutes to
complete the questionnaire. Fourth, the survey might not be suitable for small service
firms, since some questions are really specific and detailed and incorporate items not
included in a small firm. Fifth, although this research provides valuable information for
directions of thought, the data available within our sample was too limited to build very
strong statements. The Pearson Chi-square, statistics for example do not accomplish the
basic requirements necessary to make the tests trustworthy. Sixth, we concentrated on
the Dutch service industry and tried to create an a-typical sample, representative for the
Dutch service industry as a whole. Unfortunately, the number of respondents was too
limited to draw valuable conclusion related to the service sectors. In order to overcome
this problem, we used the size of the service firms.

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8. Appendix

a. Web survey

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