The service industry dominates our economy and everyday life. According to economic census figures from 2007, more than 80 percent of the U.S. gross domestic product derives from service industries.[1] Similar statistics can be found in other developed countries as well.
Despite the significance of services, however, the topic of service innovation leaves many executives scratching their heads. As noted innovation expert Henry Chesbrough lamented just a few years ago: There is a “problem of innovation in services.” He says, “Without tangible products to prototype and focus on, how can we determine whether we’re designing what customers want?”[2]
Chesbrough is correct: there is a problem with service innovation. However, the problem does not lie in the intangible nature of services as he surmised. Rather, the problem lies in the undue focus on the intangible nature of services. Ironically, the problem of innovation in services is the undue focus on the service itself. When service is the focal point for service innovation, it leads to the misguided belief that a distinct innovation approach is required for intangible services versus tangible goods. Even more troublesome, an undue focus on service has caused service innovation to fall into the trap that has plagued product innovation for decades – capturing requirements on the solution rather than customer needs.
True service innovation begins with the recognition that services are solutions to customer needs. They are a means to an end, not an end in themselves. A patient doesn’t need a doctor, a physical exam, or a prescription. What he or she needs is a diagnosis and treatment for an illness. The emergence of the CVS Minute Clinic, WebMD and self diagnostics such as home pregnancy tests are witness to this fact.
So long as service innovation remains fixated on particular services, innovation will be constrained. Why? Because the focus will be on the means instead of the end. What is the point of improving a current service when you are still not sure what customers are trying to achieve? How likely are you to come up with entirely new service offerings when the anchor point is a current service?
Rather, the appropriate focal point for service innovation is the job the customer is trying to get done. Ultimately, a customer is hiring a product or service to help him or her get that job done. We “hire” a nutrition plan to prepare healthy meals. We “hire” a search engine to locate information. We “hire” a real estate agent to buy or sell a home. A focus on the customer job means that customer value is not limited or determined by preconceived notions about the solution. Rather, customer value can be defined in a manner that guides improvements to current services and creates entirely new services.
Once the focus is placed on the customer job, the goal of innovation changes. The primary goal of service innovation is no longer to innovate service. Rather, the primary goal is to help customers get a specific job done better or to help them get more jobs done. It is only a secondary goal to provide an essentially intangible service to help customers in this way.
My new book on this topic contains numerous case studies and examples of how service innovation can benefit by looking at the jobs customers are trying to get done – and looking at ways to meet those needs.
[1] U.S. Census Bureau, 2007 Economic Census. Available at http://factfinder.census.gov/servlet/IBQTable?_bm=y&-geo_id=&-ds_name=EC0700CADV1&-_lang=en.
[2] Henry Chesbrough, “Toward a New Science of Services,” Harvard Business Review 83, no. 2 (February 2005), 43–44.